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Following is the text from the Kansas City Fed’s Manufacturing Survey.
Growth in Tenth District manufacturing activity remained modest in July, and producers were slightly more optimistic than a month ago. Most price indexes increased after falling somewhat last month and more firms plan to pass these increases along. Several respondents commented on rising materials prices, particularly for agricultural commodities affected by recent weather conditions.
The month-over-month composite index was 5 in July, up from 3 in June but down from 9 in May. The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. Manufacturing growth increased at most nondurable goods-producing plants, while growth was flat to slightly negative for durable goods production. Other month-over-month indexes were mixed in July. The production index fell further from 12 to 2, and the shipments index dipped into negative territory. The new orders for export index dropped from -7 to -13, almost matching the all-time low of -14 in early 2009. However, the new orders index edged up from -7 to -4, and the employment and order backlog indexes also improved over last month. Both inventory indexes rose considerably.
The majority of year-over-year factory indexes eased somewhat. The composite year-over-year index edged down from 24 to 20, and the shipments, new orders, and order backlog indexes also fell. The employment index dropped for the third straight month but remained positive, and the new orders for exports index decreased marginally. In contrast, the capital expenditures index increased from 21 to 23, and both inventory indexes also rose.
Future factory indexes rebounded slightly after falling last month. The future composite index climbed from 8 to 13, and future new orders and order backlog indexes also rose after decreasing in June. The future employment index edged higher from 13 to 16, while the future production, shipments, and employee workweek indexes were unchanged. The future capital expenditures index increased from 17 to 20, and the future new orders for exports index improved slightly. The future raw materials inventory index rose from -11 to -1, and the future finished goods inventory index moved into positive territory.
Most price indexes climbed higher after moderating the past few months. The month-over-month finished goods price index moved out of negative territory, and the raw materials price index increased from 7 to 18. While the year-over-year raw materials price index continued to fall, the finished goods price index rose from 19 to 35. The future raw materials price index increased from 40 to 50, and the future finished goods price index jumped from 12 to 25, indicating more firms plan to pass recent cost increases through to customers. Several contacts indicated that rising prices of agricultural commodities were likely to translate into higher selling prices.
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