US: Kansas City Fed Manufacturing Index

Thu Jun 22 10:00:00 CDT 2017

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Level 11 8

Kansas City's manufacturing composite index, at a very solid 11 in June, masks however trouble for orders. New orders slowed 5 points in the month to 4 which is the lowest reading since August last year. And backlog orders fell into contraction, to minus 6 from May's plus 12 for the lowest reading since November last year.

Current production, however, is very strong, at 23 this month which is also the rate for shipments. Employment, at 15, is another strength. Other indications are flat including inventories and selling prices.

June's orders are a concern and will pull down production and perhaps employment in the coming months. If orders don't snap back in July, the outlook for the Kansas City manufacturing sector could turn lower.

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.