KC Fed: Manufacturers report slowed activity, less optimism in August

Tenth District manufacturing activity slowed in August, and producers were somewhat less optimistic than in previous months. Price indexes in the survey were mostly unchanged. This is according to a report released August 26 by the Federal Reserve Bank of Kansas City.

The net percentage of firms reporting month-over-month increases in production in August was 0, down from 14 in July and 3 in June (Tables 1 & 2, Chart). The slowdown in production occurred among both durable and nondurable goods producing plants, with the exception of aircraft and electronic equipment producers, who reported some improvements. Other month-over-month indicators also fell. The shipments, new orders, and employment indexes dropped into negative territory, and the order backlog index slipped from -2 to -16. The new orders for exports index was essentially flat, while supplier delivery times increased modestly. The raw materials inventory index rose from -1 to 6, and the finished goods inventory index also inched higher.

Year-over-year factory indexes decreased after a strong rebound last month, but remained in positive territory. The production index fell from 25 to 18, and the shipments, new orders, and order backlog indexes also slowed. The capital expenditure index dropped from 4 to -9, and the new orders for exports index also eased somewhat. In contrast, the employment index edged higher from -10 to -8, its highest level since mid-2008. The raw materials inventory index rose from -9 to -5, but the finished goods inventory index decreased for the second straight month.

Future factory activity indexes mostly fell in August, but remained suggestive of modest future growth. The future production index dropped from 23 to 10, and the future shipments, new orders, and order backlog indexes also decreased. In contrast, the future capital expenditures index was largely unchanged, while the future new orders for exports index rose modestly. The future employment index also inched higher after four straight months of decreases. Both inventory indexes increased slightly.

Most price indexes showed little change from the previous survey. The month-over-month finished goods price index rose from -9 to -4, while the raw materials price index remained unchanged. Both year-over-year price indexes were generally stable as well. The future raw materials price index edged higher from 26 to 30, while the future finished goods price index slowed slightly from 9 to 7, as only a small number of firms plan to pass recent cost increases through to customers.

 

Table1       Summary of Tenth District Manufacturing Conditions, August 2010   August vs. July (percent)1 August vs. Year Ago (percent)1 Expected in Six Months (percent)1 Plant Level Indicators Increase No Change Decrease Diff Index2 SA Index3 Increase No Change Decrease Diff Index2 Increase No Change Decrease Diff Index2 SA Index3   Production 31 40 27 4 0 46 23 28 18 39 30 28 10 10 Volume of shipments 31 37 30 1 -6 48 21 29 18 37 31 28 9 9 Volume of new orders 28 35 35 -7 -13 47 20 31 16 37 36 22 15 16 Backlog of orders 19 44 32 -12 -16 32 34 28 3 31 37 26 5 4 Number of employees 18 62 16 1 -2 26 37 34 -8 28 47 21 6 2 Average employee workweek 15 67 16 0 -6 30 48 20 9 19 58 19 0 -2 Prices received for finished product 9 76 12 -2 -4 28 46 21 7 24 58 13 10 7 Prices paid for raw materials 27 65 6 21 14 61 27 9 51 45 46 5 40 30 Capital expenditures   25 38 34 -9 20 54 22 -2 -4 New orders for exports 9 74 6 2 -1 21 60 8 12 12 71 3 9 7 Supplier delivery time 10 82 5 5 3 18 66 13 4 12 78 4 8 6 Inventories:            Materials 22 60 16 6 6 25 43 30 -5 21 53 20 0 -6      Finished goods 19 56 20 0 2 21 43 29 -8 18 55 18 0 0 1Percentage may not add to 100 due to rounding. 2Diffusion Index. The diffusion index is calculated as the percentage of total respondents reporting increases minus the percentage reporting declines. 3Seasonally Adjusted Diffusion Index. The month vs. month and expected-in-six-months diffusion indexes are seasonally adjusted using Census X-12. Note: The August survey included 132 responses from plants in Colorado, Kansas, Nebraska, Oklahoma, Wyoming, northern New Mexico, and western Missouri.

Table2 Historical Manufacturing Survey Indexes   Aug'09 Sep'09 Oct'09 Nov'09 Dec'09 Jan'10 Feb'10 Mar'10 Apr'10 May'10 Jun'10 Jul'10 Aug'10 Versus a Month Ago (seasonally adjusted)   Production -5 12 5 15 7 13 19 18 24 5 3 14 0 Volume of shipments -13 8 0 8 3 9 14 17 27 -3 1 12 -6 Volume of new orders -8 7 7 10 0 9 11 12 15 -2 0 9 -13 Backlog of orders -17 -10 -1 0 -4 0 -5 7 11 -3 -9 -2 -16 Number of employees -10 -3 -4 0 -1 2 -4 3 5 1 -1 5 -2 Average employee workweek -9 8 -3 4 0 4 -3 1 6 9 -2 1 -6 Prices received for finished product -12 -6 -6 1 -1 0 0 5 5 -1 -14 -9 -4 Prices paid for raw materials 0 9 12 21 22 42 45 42 53 37 14 14 14 Capital expenditures n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a New orders for exports 0 2 3 2 5 6 0 4 5 0 3 0 -1 Supplier delivery time 0 3 3 11 8 8 12 11 10 15 5 0 3 Inventories:      Materials -20 -15 -4 -6 -12 -7 -1 3 -7 6 -4 -1 6 Inventories:      Finished goods -10 -7 2 -6 -1 0 0 -7 -9 6 1 0 2 Versus a Year Ago (not seasonally adjusted)   Production -60 -46 -40 -31 -30 -10 -9 -1 14 16 9 25 18 Volume of shipments -57 -43 -40 -28 -31 -10 -11 -5 15 13 6 25 18 Volume of new orders -57 -43 -37 -16 -25 -11 -8 -3 19 23 6 23 16 Backlog of orders -52 -48 -44 -24 -32 -14 -19 -13 -3 0 -5 6 3 Number of employees -66 -56 -47 -49 -48 -39 -29 -31 -18 -18 -12 -10 -8 Average employee workweek -50 -40 -33 -28 -32 -20 -11 -10 -1 8 -4 5 9 Prices received for finished product -27 -14 -14 -12 -10 -1 -4 7 7 9 9 7 7 Prices paid for raw materials -17 -9 -5 -12 6 25 38 55 58 63 53 50 51 Capital expenditures -23 -24 -25 -26 -31 -14 -15 -8 -5 -5 -5 4 -9 New orders for exports -16 -7 -6 -8 0 6 7 2 7 8 7 14 12 Supplier delivery time -8 1 -2 -3 0 -1 2 10 8 10 0 3 4 Inventories:      Materials -37 -37 -37 -34 -35 -18 -20 -17 -12 -14 -14 -9 -5 Inventories:      Finished goods -25 -17 -14 -24 -12 -14 -14 -11 -9 -8 -4 -5 -8 Expected in Six Months (seasonally adjusted)   Production 19 17 24 32 17 35 24 33 22 32 21 23 10 Volume of shipments 12 12 18 31 15 35 32 36 21 33 24 22 9 Volume of new orders 19 17 26 23 17 25 25 27 28 31 23 23 16 Backlog of orders 7 0 13 16 7 12 5 16 9 16 12 11 4 Number of employees -7 1 4 8 2 9 18 20 18 14 9 1 2 Average employee workweek 0 5 5 16 8 7 13 10 4 13 2 0 -2 Prices received for finished product -3 1 0 5 8 12 15 19 17 17 11 9 7 Prices paid for raw materials 23 20 28 32 31 60 59 55 61 45 40 26 30 Capital expenditures -2 -8 -5 -1 0 14 3 5 11 5 -4 -3 -4 New orders for exports 6 7 10 9 11 13 12 5 11 7 5 5 7 Supplier delivery time -2 4 -1 6 10 6 6 9 15 9 0 8 6 Inventories:      Materials -13 -12 -6 -3 -2 3 6 4 3 -10 -10 -8 -6 Inventories:      Finished goods -15 -11 -7 -5 2 2 1 -4 0 -6 -11 -4 0