US: Kansas City Fed Manufacturing Index

Fri Nov 18 10:00:00 CST 2016

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The details are better than the headline for a Kansas City report that points to a third month of improvement for the region's factory sector. The composite index barely managed to keep in the plus column, at only 1 for November, but new orders are at a respectable 6 this month and with production at 9 and shipments at 7. Employment also managed to hold in the plus column, but like the composite only at 1. Negatives include inventories where draws however may reflect the strength in production and less any lack of confidence in the outlook. The workweek is also negative as are backlog orders. Selling prices are also negative despite a spike in input costs. There are more pluses than minuses in this report which falls in line with the modest strength of the Empire State report but falls well short of the strength in the Philly Fed.

The Kansas City Fed index offers a monthly assessment of change in the region's manufacturing sector. Positive readings indicate monthly growth and negative readings monthly contraction. Readings at zero indicate no change. The headline number is the composite index, an average of the production, new orders, employment, delivery time, and raw materials inventory indexes.

Investors track economic data like the Kansas City Survey of Manufacturers to understand the economic backdrop for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers a moderate growth environment that will not generate inflationary pressures. The survey gives a detailed look at Tenth District's manufacturing sector, how busy it is and where it is headed. Some of the survey indexes also provide insight on inflation pressuresâ€including prices paid, prices received, wages & benefits, and capacity utilization. The equity market is also sensitive to this report because it is an early clue on the nation's manufacturing sector, reported in advance of the ISM manufacturing index and often in advance of the NAPM-Chicago index.