Kansas City Fed: Manufacturing is Growing Slowly

By August 25, 2011Economy

The Kansas City Federal Reserve Bank found that manufacturing activity in its region expanded slowly in August, with its composite index of current indicators unchanged from July at +3. According to the Kansas City Fed Vice President and Economist Chad Wilkerson, “Factory activity in our region continues to be buoyed by strong growth among agriculture and energy-related manufacturers.” In addition, durable goods production fared better than nondurables.

Despite the positive overall numbers, there were some areas that were clearly contracting. Indices for production, shipments and the average workweek were all negative. The volume of new orders improved from -5 in July to +1 in August, suggesting growth which was just barely above even for the month.

In terms of future expectations, manufacturers remain positive – much like we have seen in other similar surveys – but with greatly reduced optimism. The composite index for expected conditions in six months dropped from 30 in February and 15 in July to 9 in August. Still, even with slower growth expected, respondents had positive forecasts for new orders, production, shipments, employment and capital expenditures. This is a good sign.

Pricing pressures remain, and will continue to stay, elevated. The index for prices paid for raw materials in six months is 53, indicating the intensity that manufacturers continue to feel in terms of higher costs.  This figure was 81 in March, reflecting some easing, but evidently not enough.

This survey contrasts with many of the recent regional surveys, which found manufacturers contracting in August. Nonetheless, it is consistent with those reports as it reflects larger economic weaknesses in production, employment and optimism.

Chad Moutray is chief economist, National Association of Manufacturers.

Chad Moutray

Chad Moutray

Chad Moutray is chief economist for the National Association of Manufacturers (NAM), where he serves as the NAM’s economic forecaster and spokesperson on economic issues. He frequently comments on current economic conditions for manufacturers through professional presentations and media interviews. He has appeared on Bloomberg, CNBC, C-SPAN, Fox Business and Fox News, among other news outlets.
Chad Moutray

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