Kansas City Fed Reports Reduced New Orders for Manufacturers in its Region

By June 28, 2012Economy

Manufacturers in its region reported slower growth in activity in June, according to the Kansas City Federal Reserve Bank. The composite index of business activity fell from 9 in May to 3 in June. (It has gone 9-3-9-3 over the past four months.) The largest drag on growth for the month was new orders, which dipped into contraction territory, moving from 10 to -7. This includes new export orders, and overall, it is a sign of weakness, with possible implications for production in future months.

With that said, current production and shipments data continue to expand, albeit at a slower rate. The production index, for instance, fell from 17 to 12. Employment growth also eased in June, and the average workweek for workers declined. Pricing pressures also lessened.

Expectations for six months from now remain upbeat, but the level of optimism has diminished. The forward-looking composite index dropped from 17 to 8, and the production index fell from 40 to 22. This suggests that manufacturers are cautiously optimistic about future activity, but recent events have lessened this to a certain degree. Interestingly, even as employment levels are expected to increase, respondents also said that the average workweek should decrease a little moving ahead.

According to Chad Wilkerson, vice president and economist at the Kansas City Fed, “Many firms noted concerns about economic conditions in Europe, but only a few had experienced sizeable direct negative impacts to date, and Tenth District factories as a whole still expect moderate growth heading forward.”

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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