Manufacturing Activity Improves in Kansas City

By May 24, 2012Economy

The Federal Reserve Bank of Kansas City said that manufacturing activity bounced back in May, after slowing in March and April. The composite index had fallen from 13 in February to 9 and 3 in March and April, and it rose to 9 in May.

This is a positive sign, as it suggests a renewal in production and new orders after some spring weaknesses. The index for new orders, for instance, shifted from a contraction (-8) to modest growth (10) for the month.  New export orders picked up slightly.

With that said, employment has not yet picked up to reflect the rebound in manufacturing activity in the other figures. The pace of job growth slowed from 12 to 8, with the average workweek still contracting. The workweek index increased from -10 to -2.

The more-optimistic current sentiment also carried through to expectations about the next six months. The forward-looking composite index rose from 12 to 17, with a number of key activity measures showing strong growth predicted for the second half of this year. As an example, expected shipments jumped from 22 to 40, mirroring numbers for production, new orders, employment and capital expenditures. Pricing pressures, which have eased over the past few months, are expected to pick up moving forward.

Overall, it appears that the regional surveys of manufacturing activity are split, with some reporting improvements and others noting weaknesses in the current environment. Kansas City appears to be rebounding like New York, while Philadelphia and Richmond have observed a slowing of growth. Chicago has seen flat growth in its most recent figure. Next week, we will get a sense of what is happening in Texas. 

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) and the Director of the Center for Manufacturing Research for The Manufacturing Institute, 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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