The Kansas City Federal Reserve Bank said that manufacturing activity in its district has declined for 12 straight months. The composite index of general business conditions fell from -9 in January to -12 in February, its lowest level since April 2009. Reduced crude oil prices, the strong dollar and weaknesses abroad have pressured the sector’s performance. The data were negative across-the-board, including new orders (up from -27 to -15), production (unchanged at -8), shipments (down from -7 to -11), exports (down from 1 to -6), employment (down from -7 to -20) and the average employee workweek (down from -7 to -14). Half of all respondents said that they experienced no change in new orders for the month, with 30 percent noting declining sales. As such, it should not be a surprise that manufacturers in the region remained anxious.
With that said, manufacturing leaders in the Kansas City Fed area were cautiously positive in their outlook for the next six months, but not overwhelmingly so. The forward-looking composite index edged down from 5 to 4. At the same time, new orders (up from 13 to 15), production (up from 14 to 16) and shipments (up from 18 to 20) are expected to increase at decent rates in the months ahead, which should provide some encouragement. Yet, other indicators reflect ongoing softness in the market. For instance, the labor market is anticipated to remain weak, including hiring (down from 5 to 3) and the average workweek (up from -8 to 1), and capital spending is seen declining (down from -1 to -9). Exports (down from 2 to -1) are also predicted to be slightly negative over the next six months.
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