The Kansas City Federal Reserve Bank said that manufacturing activity continues to improve in its region. The composite index of general business conditions edged up from 6 in October to 7 in November. While that figure was not up significantly, it represented the fifth straight month of expansion for the district. The recent progress was led by strength in sales, with the new orders index up from 3 to 15. Production growth was also relatively healthy, albeit with a somewhat slower pace than the month before (down from 14 to 11).
There were still some areas of weakness, however. The pace of shipments declined, down from 14 to 3, with one-third of respondents saying that their shipments were lower in November than in October. At the same time, growth in sales was limited to domestic markets, with new export orders falling in the month (down from 9 to -4).
Meanwhile, on the employment front, hiring (up from -2 to 6) and the average workweek (up from 2 to 5) were both positive, but growing more slowly than other indicators. Indeed, 65 percent of those taking the survey said that their employment levels were flat in November.
In the sample comments, one individual noted, “New regulations and laws are causing costs to increase, creating uncertainty and holding back the creation of jobs, particularly Dodd Frank and health care.” For those who are looking for workers, another respondent added, “It is very difficult to find people. We cannot get people to work even basic jobs, and it is even harder to find skilled positions.”
Looking ahead, manufacturers in the Kansas City Fed region continue to reflect optimism for the next six months. The forward-looking composite index rose from 8 to 12, and the expected measures for production (up from 19 to 21), shipments (up from 15 to 27), and new orders (up from 14 to 16) were higher. Pricing pressures are anticipated to ease a bit from last month. On a positive side, the pace of hiring is expected to accelerate (up from 3 to 20), with 28 percent of respondents saying that they plan to add workers in the coming months. Still, 6 out of 10 of them plan to make no changes to employment.
Chad Moutray is the chief economist, National Association of Manufacturers.
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