US: Kansas City Fed Manufacturing Index

Thu May 24 10:00:00 CDT 2018

Consensus Consensus Range Actual Previous
Level 22 20 to 25 29 26

Like other regional surveys, the Kansas City manufacturing index is very strong, up 3 points to 29 to easily beat Econoday's consensus for 22. Growth in both orders and backlog orders remains substantial as does growth in employment and production with stress appearing in the workweek which rose 14 points to 24. And a hint of tariff-related pressure comes from raw material inventories which rose 2 points to 19. Prices are elevated though selling prices did ease slightly. Indications are increasingly pointing to a possible breakout for the factory sector which looks to be one of 2018's central strengths.

Market Consensus Before Announcement
A modest fall back to 22 is the May consensus for the Kansas City manufacturing index which jumped 9 points in April to 26. Both new orders and backlog orders were unusually strong in April which points to gains for production and employment in the May report.

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.