US: Kansas City Fed Manufacturing Index

Thu Sep 28 10:00:00 CDT 2017

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Level 17 16

There's no visible impact from Hurricane Harvey on the Kansas City manufacturing region where the September index is 1 point higher at 17. Shipments are up 2 points to 25 which is a robust reading and hiring, up 4 points at an index of 18, has been very active this month. But new orders, at 10, are down 15 points but may begin to pick back up on replacement demand for equipment and vehicles damaged by Harvey. Input costs remain very high at 24 but don't show much new acceleration from August's 21 level. A welcome sign of price traction comes from selling prices which are up 5 points to 13. Factory inventories in the region are building at a steady and healthy rate, at least based on this sample. Yet there is one telling sign of possible hurricane impact as delivery times have slowed sharply this month but the effect may prove temporary. In sum, this report along with other regional reports are pointing to year-end strength for the factory sector.

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.