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Kansas City Fed’s Manufacturing Survey for September (Text)

Following is the text from the Kansas City Fed’s Manufacturing Survey.

Growth in Tenth District manufacturing activity moderated somewhat in September but remained positive. Producers’ expectations for future activity increased markedly, while several manufacturers commented on rising labor shortages and wage pressures. Price indexes decreased slightly or were largely unchanged.

The month-over-month composite index was 2 in September, down from 8 in August and 6 in July (Tables 1 & 2, Chart). The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. The production index decreased at both durable and non-durable goods-producing plants, with the exception of machinery and computer equipment factories which posted slight gains. Most other month-over-month indexes also fell. The production index plunged from 21 to 4, and the shipments, new orders, and order backlog indexes also decreased. The employment index eased after rising last month, and the new orders for exports index fell back into negative territory. The raw materials inventory index stayed flat at 0, while the finished goods inventory index decreased modestly.

Year-over-year factory indexes were mixed in September. The composite year-over-year index inched lower from 11 to 10, and the new orders, employment, and new orders for exports indexes also fell somewhat. In contrast, the production index rose from 10 to 15, and the shipments and order backlog indexes increased slightly. The capital expenditures index edged up from 15 to 16, matching its highest level in six months. The raw materials inventory index eased from 9 to 7, while the finished goods inventory index was unchanged.

Most future factory indexes improved considerably from the previous month. The future composite index jumped from 9 to 18, its highest level since March 2012, and the future production, shipments, and new orders indexes also reached 18-month highs. The future order backlog index climbed from 6 to 14, and the future employment index rose for the second straight month. The future capital expenditures index edged up from 13 to 17, while the future new orders for exports index eased slightly. The future raw materials inventory index increased from 0 to 3, while the future finished goods inventory index remained stable.

Most price indexes moderated slightly or were basically unchanged. The month-over-month finished goods price index edged lower from 5 to 4, and the raw materials price index also fell. The year-over-year raw materials price index decreased to its lowest level in over 3 years, while the finished goods price index was generally flat. The future raw materials price index fell from 45 to 36, and the future finished goods price index eased after rising the past few months, indicating fewer firms plan to pass recent cost increases through to customers.

SELECTED COMMENTS

“General labor is very difficult to find in order to fill our manufacturing positions. Educated workers are even harder to find.”

“Our starting wage has dropped because we are having to train people that come to us with no experience or skill.”

“We keep hearing the economy is getting better, but we have not seen an improvement.”

“Our automotive business has done well this year, however our other business including aerospace has been flat. We are seeing some upward price pressure on our raw materials.”

“The biggest issues we are facing are medical insurance, workers compensation insurance, and increased government regulation.”

“We are closing our facility and moving most of the product to our Mexico plant.”

“Demand for compressors to transfer natural gas continues to be strong.”

“Have difficulty in hiring engineers and accountants.”

“Our industry has lost labor force to the oil and gas industry, which is not really paying more hourly but is giving a lot more overtime.”

SOURCE: Federal Reserve Bank of Kansas City



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