The Kansas City Federal Reserve Bank said that manufacturing activity pulled back somewhat in November but “remained solid,” according to the latest survey data. The composite index of general business conditions declined from 23 in October, a level not seen since March 2011, to 16 in November. Even with some easing, manufacturers in the district are more upbeat today than one year ago, when the headline index was zero. In November, most of the key measures softened a little, while continuing to indicate healthy expansions overall. This included new orders (down from 27 to 22), production (down from 20 to 15), shipments (down from 25 to 20), employment (down from 21 to 16) and the average workweek (down from 12 to 7). On the hiring front, the sample comments once again cited challenges in attracting talent. In terms of downsides in the current data, exports (down from 8 to -2) contracted for the first time in four months, and raw material prices (down from 25 to 24) remained elevated.
Meanwhile, manufacturers were optimistic about the next six months, albeit with some weakening in confidence from the prior survey, much like the current data. The forward-looking composite index decreased from 32 to 27. Still, more than 60 percent of respondents expect production and shipments to increase in the coming months, with roughly half forecasting rising new orders and employment and 39 predicting additional capital spending. Beyond those measures, 68 percent of business leaders also predict a pickup in raw material costs over the next six months, consistent with the acceleration in input prices seen in other measures. The raw material costs index was the highest in November since December 2012.