The Kansas City Federal Reserve Bank provided some mixed news on the state of manufacturing in its region. On the one hand, the composite index in its monthly manufacturing survey has been positive each month so far in 2012, with mostly slow growth being observed. The index rose from 3 in June to 5 in July. Its high for the year was 13 in February, suggesting an easing in the pace of growth since then.
Yet, some of the components reflect the struggles seen in other regions. For instance, new orders and shipments have contracted for the second month in a row. Some of this was due to slower worldwide growth as reflected in reduced exports. The index for new export orders dropped from -7 to -13. Pricing pressures, after declining in the past two months, began to rise in July. Employers, though, have continued to add workers even as slower activity has reduced the average workweek for existing employees.
Even with sluggish growth this month, manufacturers remain cautiously optimistic about the next six months. Various measures of forward-looking manufacturing activity suggest that businesses anticipate increased production, employment, and capital investments in the second half of this year. The level of positivity is lower than it was two months ago, though. Prices are also expected to go up, even as they have eased recently.
Chad Moutray is chief economist, National Association of Manufacturers.