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

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

Growth in Tenth District manufacturing activity improved moderately in October, while producers’ expectations for future activity eased somewhat but remained at solid levels. Several producers noted negative business impacts from the government shutdown, particularly related to delays in government inspections and approval processes, lack of data availability, and overall customer uncertainty. Price indexes were mixed, with a general increase in materials prices and little overall change in selling prices.

The month-over-month composite index was 6 in October, up from 2 in September but down from 8 in August. The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. The production index increased further at durable goods plants, while production of nondurable goods products fell, particularly for chemicals and plastics. Other month-over-month indexes posted mixed results. The production index jumped from 4 to 14, and the shipments and new orders for exports indexes also increased. In contrast, the order backlog index was unchanged, and the new orders and employment indexes eased for the second straight month. The raw materials inventory index rose from 0 to 12, and the finished goods inventory index also moved higher.

The majority of year-over-year factory indexes fell in October. The composite year-over-year index edged down from 10 to 7, and the production, shipments, new orders, and order backlog indexes also decreased. The employment index fell after recording its highest level of the year in September, and the capital expenditures index eased from 16 to 7. Both inventory indexes decreased but remained positive.

Most future factory indexes eased somewhat after rising markedly last month. The future composite index fell from 18 to 8, and the future production, shipments, and new orders indexes also decreased. The future employment index moved from 14 to 3, its lowest level since January, while the future capital expenditures index was unchanged. The future raw materials inventory index was basically unchanged, while the future finished goods inventory index declined into negative territory.

Price indexes were mixed, although raw materials prices increased across all time periods. The month-over-month finished goods price index edged up from 4 to 10, and the raw materials price index also rose. The year-over-year raw materials price index increased from 38 to 48, while the finished goods price index moderated slightly. The future raw materials price index moved higher from 36 to 45, while the future finished goods price index eased somewhat, indicating fewer firms plan to pass recent cost increases through to customers.

SELECTED COMMENTS

“General labor is still very hard to find. Help wanted signs are up everywhere around us. Starting wage ranges anywhere from $9.50 to $12.50 an hour and still no applicants.”

“Orders for compressor packages to transport natural gas continues at a record pace. A significant number of packages are destined for the shale formations in Pennsylvania and Ohio.”

“As an agricultural equipment manufacturer, we reduced our production schedule this week and are looking for ways to reduce hours, inventory, and capital expenditures.”

“We are not able to get labeling information as all the websites are down. Any labels in process are on hold.”

“The USDA Market Information that is the basis for supplier prices to us was not available. A small portion of our sales go to military base grocery stores, which have halted.”

“We are receiving more notices of impending price increases. Previously most increases have been pass-through of commodities and transportation costs. Recently, prices are increasing due to increased labor costs and taking advantage of increased demand. ”

“We have experienced military shipment approval delays, stoppage of aircraft registration, and the inability to communicate with the government for critical timing of shipments.”

“We are struggling to find help and we are losing employees to the oil and gas businesses due to their ability to pay significantly higher wages.”

“The government shutdown has affected our business both in terms of direct production on government contracts as well as ancillary services/support provided by the government needed for international business. These services include issuance of visas for foreign customers and processing of legalization documents required on letter of credit draws.”

SOURCE: Federal Reserve Bank of Kansas City



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Alex Tanzi in Washington at 
atanzi@bloomberg.net

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Marco Babic at  mbabic@bloomberg.net



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