Manufacturing Activity Slows in Kansas City Region

By March 29, 2012Economy

The Kansas City Federal Reserve Bank observed a slower pace of growth in manufacturing activity in its region in March. The composite index fell from 13 in February to 9 in March.

Activity remains below its level from one year ago, when the composite index was 25. Despite the easing of growth, this figure suggests that manufacturers have expanded for three consecutive months, or every month since August 2009 except for December 2011.

Other components of current activity were mixed. The index for production dropped from 20 to 13 and was probably responsible for the reduced sentiment in the larger figure. On the other hand, other measures – such as new orders, shipments and employment improved. For instance, new orders rose from 8 to 17 for the month. Also, new orders for exports went from contracting in February to being unchanged in March – a somewhat positive development.

Pricing pressures remain elevated, but the current raw material price variable eased slightly, with the prices paid index decreasing from 36 to 33. This number suggests solid growth in energy and raw material costs, and it is clear that manufacturers anticipate prices to accelerate in the future. The expected prices paid index for six months from now jumped from 54 to 65. Much of this current reading stems from higher gasoline prices, as the Fed bank noted in its press release.

Moving forward, manufacturing in the Kansas City region should grow strongly. While many of the forward-looking measures dipped a little this month, various measures of production activity remain solid across-the-board, including new orders, shipments, employment, exports and capital spending.

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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