The Kansas City Federal Reserve Bank said that manufacturing activity expanded for the seventh straight month and continued to expand at a modest pace in June. The composite index of general business conditions increased from 8 in May to 11 in June, its highest reading since March’s six-year high (20). In general, manufacturers report notable improvements in activity relative to this time last year, even as sentiment has pulled back somewhat from stronger numbers at the beginning of 2017. Encouragingly, several of the key indices in May shifted strongly higher, including shipments (up from 3 to 23), production (up from -1 to 23), employment (up from 11 to 15) and the average workweek (up from 1 to 7). A couple of the sample comments cited difficulties in hiring new workers. On the other hand, new orders (down from 9 to 4) and export orders (down from 4 to 3) slowed a little in this report but remained positive indicators.
Meanwhile, manufacturers continued to be optimistic about the next six months, albeit with some easing from the prior survey. The forward-looking composite index declined from 30 to 25. At least half of those completing the survey expect sales, production and shipments to be higher moving forward, with 38 percent and 30 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 (up from 37 to 49) remaining quite elevated, with that measure at a three-month high.