The Kansas City Federal Reserve Bank said that manufacturing activity remained strong at year’s end despite a pullback in sentiment in December. The composite index of general business conditions has declined from 23 in October, a level not seen since March 2011, to 16 in November to 14 in December.
Even with some easing, manufacturers continue to report relatively strong expansions in activity overall, including accelerations in this report for production (up from 15 to 21), employment (up from 16 to 19), the average workweek (up from 7 to 10) and exports (up from 8 to 16). At the same time, there were modest gains for new orders (down from 22 to 7) and shipments (down from 20 to 8), even with some decelerations in those measures.
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 27 to 22. Still, at least half of the respondents expect new orders, production and shipments to increase in the coming months, with 49 percent and 45 percent predicting more hiring and capital spending, respectively.
Those figures illustrate robust growth anticipated for 2018 in the economic outlook, something that is highlighted in the sample comments. On the downside, 62 percent of business leaders predict a pickup in raw material costs over the next six months, consistent with the acceleration in input prices seen in other measures.