Kansas City Fed Reports Slower Pace of Manufacturing Growth

Manufacturing activity grew at a slower pace in the Tenth District in July, with the month-over-month composite index stepping down to 9 in July from 11 in June. Meanwhile, expectations for future activity inched up 1 point to 20. The month-over-month activity slowdown was due to declines in food manufacturing offsetting gains in electrical equipment manufacturing. At the same time, all indices except exports were positive, as the index for new orders for exports moved from 0 to -1. The Tenth Federal Reserve District encompasses the western third of Missouri; all of Kansas, Colorado, Nebraska, Oklahoma and Wyoming; and the northern half of New Mexico.

The production index declined from 19 to 17, while the shipments index stayed the same at 20. Meanwhile, new orders stepped down, decreasing from 13 to 10, while the employment index fell from 10 to 2. The backlog of orders index slipped from 4 to 2. At the same time, the pace of growth for prices paid and prices received softened, moving down from 68 to 52 and from 33 to 28, respectively. However, the indices for prices paid and prices received both grew over the year, advancing to 92 and 72, respectively.

In July, survey respondents were asked special questions about profit margin changes and changes in demand expectations. Nearly 27% of firms reported an increase in profit margins from the start of the year, 16% reported no change and 57% reported a decrease. When asked about demand for their products for the remainder of the year, one-third of firms expect no change, 49% expect higher demand and 18% predict lower demand.