The Kansas City Federal Reserve Bank said that manufacturing activity expanded for the sixth straight month even as it pulled back once again from March’s six-year high. The composite index of general business conditions edged higher, up from 7 in April to 8 in May. In general, manufacturers report notable improvements in activity relative to this time last year, despite some easing in activity in many measures in this latest survey. Along those lines, the underlying data points were mixed in May. Growth for new orders (up from 8 to 9), employment (up from 9 to 11) and the average workweek (up from -4 to 1) accelerated slightly for the month; whereas, shipments (down from 11 to 3) and production (down from 12 to -1) each softened. It was the first contraction in output since August. On an encouraging note, exports (unchanged at 4) grew for the fourth consecutive month.
Meanwhile, manufacturers continued to be optimistic about the next six months. The forward-looking composite index rose from 17 to 30. That was not far from the level seen in March (32), which was the highest reading in the survey’s history. More than half of respondents expect sales, production and shipments to be higher moving forward, with 36 percent and 33 percent seeing more hiring and capital spending, respectively. At the same time, business leaders in the Kansas City Fed’s district also see pricing pressures (down from 45 to 37) remaining quite elevated relative to just a few months ago, despite some softening from the quickest pace in just over four years in March’s report (59).