Manufacturing activity in the district continued to decline, according to the latest survey from the Kansas City Federal Reserve Bank. The composite index of general business activity increased from -9 in August to -8 in September, and it has contracted for seven straight months. Much of that weakness stems from lower crude oil prices and the strong U.S. dollar, with several sample comments noting business difficulties with these issues.
One positive was some stabilization in production index (up from -16 to 1), which expanded (barely) in September for only the second time so far this year. Other measures reflected some easing in the pace of decline, even as growth in activity remained negative, including new orders (up from -9 to -8), shipments (up from -15 to -4), employment (up from -4 to -3) and exports (up from -4 to -3). Exports have contracted in every month year-to-date, reflecting dollar and global economic headwinds.
These challenges have also dampened enthusiasm for the next six months, with the forward-looking composite index decreasing from zero in August to -12 in September. That is the first negative number for that figure since July 2009, and it indicates a substantial decline in the outlook after measuring 21 just ten months ago in November. Underlying data regarding the coming months were also down across-the-board. For instance, one-quarter of respondents expect demand to increase in the next six months, but this was offset by one-third anticipating declining new orders.
Chad Moutray is the chief economist, National Association of Manufacturers.