Like other advance indications, the Kansas City Fed is pointing to January strength for the factory sector. The index came in at a very solid 9 in December, unchanged from a revised November. Orders are a standout in the December report, at 20 for new orders and a 15-point monthly surge and at 14 for backlogs and a 10-point rise. The gain in backlogs is a plus for employment which is already respectable at an index of 6. Production is at 20 and the workweek is up 6 points to 9, both also pointing to the need for labor. Price data, unlike in other reports, do not show increasing pressure and a negative in the report is continued weakness in export orders, at minus 5 to indicate that order strength is entirely concentrated in the domestic economy. Still, this report in sum, especially the order readings, is positive.
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.