US: Kansas City Fed Manufacturing Index

Thu Apr 27 10:00:00 CDT 2017

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Level 7 20

The pace of growth slowed in the Kansas City manufacturing sector from March's unusually strong 20 to an April reading of 7. New orders are at 8 this month with backlog orders at 7, positives that compare however with March's 35 and 21 levels. A special plus for April orders is a small gain to 4 for exports. Employment slowed but only by 4 points to 9. Price data show sharp acceleration for inputs and easing and no more than moderate traction for selling prices.

March was the strongest month for this report since early in the expansion, 6 years ago, which makes April's numbers look weak by comparison. But readings over zero nevertheless point to month-to-month growth and with new orders and backlog orders both in the high single digits, general strength for this report appears to be assured in the months ahead.

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.