US: Kansas City Fed Manufacturing Index

Fri Dec 22 10:00:00 CST 2017

Actual Previous
Level 14 16

Manufacturing activity in the Kansas City Fed's district proved very strong this month, at a December composite score of 14 and showing outsized strength for production and slower but more sustainable growth for new orders and backlogs. Capacity measures continue to show pressure with hiring very strong and prices, both for inputs and final goods, on the rise. And delivery times are lengthening sharply. Respondents in the regional factory reports like Kansas City have been reporting about as much strength as they can handle without overheating, a contrast to actual data on the national factory sector where strength is more moderate.

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.