Kansas City Fed’s Manufacturing Survey for May (Text)Alex Tanzi
Following is the text from the Kansas City Fed’s Manufacturing Survey.
GROWTH IN TENTH DISTRICT MANUFACTURING ACTIVITY EXPANDED SOLIDLYFederal Reserve Bank of Kansas City Releases May Manufacturing SurveyThe Federal Reserve Bank of Kansas City released the May Manufacturing Surveytoday. According to Chad Wilkerson, vice president and economist at theFederal Reserve Bank of Kansas City, the survey revealed that growth in TenthDistrict manufacturing activity expanded solidly, and producers’ expectationsfor future factory activity remained at healthy levels.“This was the third straight month of solid growth at factories in the region,following some weather-related weakness in previous months”, said Wilkerson.“More factories than in recent surveys were also able to raise sellingprices.“A summary of the May survey is attached. Results from past surveys and releasedates for future surveys can be found atwww.kansascityfed.org/research/indicatorsdata/mfg.The Federal Reserve Bank of Kansas City serves the Tenth Federal ReserveDistrict, encompassing the western third of Missouri; all of Kansas, Colorado,Nebraska, Oklahoma and Wyoming; and the northern half of New Mexico. As partof the nation’s central bank, the Bank participates in setting nationalmonetary policy, supervising and regulating numerous commercial banks and bankholding companies, and providing financial services to depositoryinstitutions. More information is available online at www.kansascityfed.org.###
Tenth District manufacturing activity expanded solidly in May, and producers’expectations for future factory activity remained at healthy levels. Mostprice indexes increased somewhat, particularly current selling prices.The month-over-month composite index was 10 in May, up from 7 in April andequal to 10 in March (Tables 1 & 2, Chart). The composite index is an averageof the production, new orders, employment, supplier delivery time, and rawmaterials inventory indexes. Manufacturing activity improved slightly at mostdurable goods-producing plants, particularly for machinery and constructionmaterials, but remained mostly flat for non-durable products. Othermonth-over-month indexes were mixed. The production index inched higher from12 to 14, and the new orders and employment indexes also rose. In contrast,the shipments index fell from 14 to 5, and the order backlog and new ordersfor exports indexes also decreased. The raw materials inventory indexincreased from -1 to 11, and the finished goods inventory index also edged up.Year-over-year factory indexes were also mixed. The composite year-over-yearindex recorded little change, while the production, shipments, and employmentindexes rose to their highest levels in over a year. The capital expendituresindex rebounded after falling last month, but the new orders and order backlogindexes decreased modestly. Both inventory indexes fell after rising lastmonth.Future factory indexes slowed somewhat in May but remained at healthy levels.The future composite index dropped from 21 to 13, and the future production,shipments, and new orders indexes also eased. The future order backlog indexdecreased from 20 to 9, and the future employment index also edged down. Thefuture capital expenditures index remained solid following a strong rebound inApril. The future finished goods inventory index rose from 0 to 2, while thefuture raw materials inventory index was unchanged.Most price indexes increased for the second straight month. Themonth-over-month raw materials price index moved from 21 to 28, and thefinished goods price index jumped from 2 to 14, its highest level in nearlythree years. The year-over-year raw materials index increased from 59 to 65,and the finished goods price index also increased. The future raw materialsprice index rose from 46 to 53, while the future finished goods price indexwas basically unchanged, indicating the same number of firms plan to passrecent cost increases through to customers.SELECTED COMMENTS“In order to meet our labor needs, we are going to spend more capital ontraining materials and programs to train our workers in-house.“”We are having trouble finding employees willing to do blue-collar work,particularly CDL drivers and laborers. It is also hard for us to compete withthe wages paid in the oil and gas industry.“”We are getting qualified candidates who are coming from an area that has amuch higher cost of living, and are expecting a wage that is unreasonable forthe Midwest.“”We ship to many countries. The health of the local economies directly affectsour exports to them. More trade agreements would be helpful.“”Export business is down 14 percent year-to-date without the loss of accounts.Smaller orders are being placed with lower inventory on hand.“”We use temporary labor in the factory during times of increased demand. Ithas been difficult to get good temps because the labor market has improved. Wealso have trouble keeping good temps because they are often finding permanentpositions faster than in the past year.“”Export sales are depressed in all countries, due to drought and commodityprices. Russian and Ukrainian sales have ceased due to the political turmoil.“”Demand is high for semiconductors at the current time. This is related toeconomic recovery and new electronics in the marketplace.“”Russia has been our primary export customer but all of our pending projectsfor the country are currently on hold because of the issues between ourgovernments.”
SOURCE: Federal Reserve Bank of Kansas City *T For Related News and Information: