US: Kansas City Fed Manufacturing Index

Thu Oct 26 10:00:00 CDT 2017

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Level 23 17

The regional surveys have been very strong all year and are beginning to heat up some more. Kansas City's manufacturing composite is up 6 points this month to a 6-1/2 year best of 23. New orders lead the report at 27 followed by an enormous build in backlog orders which are up 16 points in the month to 23. The backlog build and also a large jump in finished inventories could reflect hurricane-related delivery delays. Delivery delays are extending into this month but no more severely than September.

Employment is at 21 and shipments at 25. Price data are steady with inputs showing sharp pressure and selling prices constructive traction.

Transportation issues are skewing some of the supply chain numbers but behind everything is robust strength in new orders. This week's durable goods report offered confirmation that the factory sector is enjoying a pivot higher.

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.