Following is the text from the Kansas City Fed’s Manufacturing Survey.
Tenth District manufacturing activity fell modestly after last month’s rebound, although producers’ expectations for future activity continued to increase. Some firms commented on production delays due to power outages, flooding, and shipment interruptions from recent regional storms. Most price indexes posted minimal changes in June.
The month-over-month composite index was -5 in June, down from 2 in May but equal to -5 in April and March (Tables 1 & 2, Chart). The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. Production fell at both durable and non-durable goods-producing plants, with food and machinery manufacturing particularly weak. Other month-over-month indexes showed mixed results. The production index dropped from 5 to -17, its lowest level since March 2009, and the shipments and new orders indexes also fell markedly. The order backlog and employment indexes increased somewhat but still remain slightly below zero. Both inventory indexes edged higher after falling in May.
The majority of year-over-year factory indexes improved over last month. The composite year-over-year index increased from 0 to 3, and the production, shipments, and new orders indexes also rose. The order backlog index edged up from -15 to -10, and the employment index posted a positive reading for the first time in two months. The new orders for exports index increased from -7 to -1, and the capital expenditures index improved for the second straight month. The raw materials inventory index inched higher from -7 to -6, and the finished goods inventory index also recorded a slight gain.
Most future factory indexes increased further in June. The future composite index edged higher from 11 to 12, and the future production, shipments, and new orders indexes also improved. The future order backlog index climbed from 9 to 14, and the future new orders for exports index posted its highest level in two years. In contrast, the future employment index was relatively unchanged, and the future capital expenditures index moderated somewhat. The raw materials inventory index fell from 1 to -2, while the finished goods inventory index increased slightly.
Most price indexes recorded minimal changes from the previous month. The month-over-month raw materials price index rose from -3 to 3, and the finished goods price index increased marginally. The year-over-year raw materials price index was unchanged, while the finished goods price index posted a slight gain. The future raw materials price index inched higher from 43 to 46, but the future finished goods price index eased somewhat, indicating fewer firms plan to pass recent cost increases through to customers.
“We are automating production and minimizing hiring due to increased costs related to employment.”
“The financial impact of increased health care costs on our employees will cause significant stress and will put pressure on our company to absorb more of the costs, which would need to be passed on to customers.”
“Several of our licensees had their businesses damaged or destroyed by recent storms.”
“Power outages have reduced production output and created increased costs.”
“Violent electrical storms created production outages resulting in delayed or lost sales of approximately five production days.”
“A wet spring has slowed construction in the midwest.”
“A tornado hit our Oklahoma City plant, causing roof damage.”
“Business continues to be slow. No improvement in sight.”
“The Fed is pushing on the gas and the ACA and Dodd-Frank are pushing on the brakes. ACA is tremendously detrimental to medium-sized companies.”
SOURCE: Federal Reserve Bank of Kansas City
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