The Kansas City Federal Reserve Bank said that manufacturing activity started the new year on a strong note, with sentiment picking up in January. The composite index of general business conditions increased from 13 in December to 16 in January. (Note that these figures reflect a new seasonal adjustment update for all past data points.) Growth in new orders (up from 11 to 14), production (unchanged at 16), shipments (up from 10 to 14), employment (up from 16 to 18) and exports (up from 4 to 6) continued to be encouraging, with solid expansions for most of those key indicators. At the same time, the average employee workweek (down from 10 to 2) slowed a little but remained positive.
Meanwhile, manufacturers were optimistic about the next six months, with roughly half of respondents expecting increased new orders, production, shipments and employment in the coming months. In addition, 24 percent and 44 percent of those completing the survey anticipate higher levels of export sales and capital spending. The forward-looking composite index rose from 23 to 29. On the downside, 61 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.