Manufacturing Activity in the Midwest Goes in Opposite Directions

By December 29, 2011Economy

Two regional surveys released this morning go in opposite directions, with manufacturing activity in the Chicago region expanding strongly while Kansas City’s contracted in December.

First, manufacturing activity in the Midwest was virtually unchanged in December, according to the latest ISM-Chicago report. Manufacturers continue to expand strongly in the region, with the Chicago Business Barometer down from 62.6 in November to 62.5 in December. Numbers over 50 suggest expansion, so these figures represent robust growth overall.

While these figures are overwhelmingly positive, the growth rate did ease somewhat on some of the measures. For instance, the index for new orders dropped from 70.2 to 68.0, and production decreased from 67.3 to 66.2. Similar drops were observed with employment and inventories.

Meanwhile, the Kansas City Federal Reserve Bank observed a weakening of manufacturing activity in its region in December. The composite index fell from +4 in November to -4 in December. Production and shipments both shifted from neutral to contraction, with the index for new orders being slightly more negative. Employment and inventory measures also weakened. Pricing pressures regained some strength.

Chad Wilkerson, an economist and vice president at the Kansas City Fed, observed this weakening in manufacturing activity. He added, “But plant managers continue to expect solid growth in the months ahead and are planning to increase employment and capital spending accordingly.” Indeed, much like we have seen in earlier regional surveys, including those from Dallas and Richmond a couple days ago, manufacturers are upbeat about the next six months. Measures of new orders, production, employment and capital spending suggest stronger growth moving into 2012.

Overall, these numbers have moved in opposite directions, but the outlook for the coming years remains upbeat.

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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