Thursday, January 24, 2013

Kansas City Fed: Regional Manufacturing Contracted Modestly in January

by Bill McBride on 1/24/2013 11:00:00 AM

From the Kansas City Fed: Tenth District Manufacturing Survey Contracted Modestly

The Federal Reserve Bank of Kansas City released the January Manufacturing Survey today. According to Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City, the survey revealed that Tenth District manufacturing activity contracted modestly again in January, but factories’ production expectations remained relatively optimistic for the months ahead.

“Regional factory activity has now edged down for four straight months, as fiscal policy uncertainty continues to weigh on firms’ plans, said Wilkerson. On the positive side, expectations for new orders rose quite a bit in January, but hiring and capital spending plans were only modestly positive.”

The month-over-month composite index was -2 in January, largely unchanged from readings of -1 in December and -3 in November. The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. Manufacturing activity declined at most durable goods-producing plants, while nondurable producers noted a slight increase overall. Most other month-over-month indexes were below zero but higher than in December. The production index inched higher from -5 to -3, and the shipments, new orders, and order backlog indexes also rose somewhat but stayed in negative territory. In contrast, the employment index fell from -1 to -8, its lowest level since mid-2009, and the new orders for exports index also declined.
emphasis added
This follows contraction in the Richmond Fed survey earlier this week:
In January, the seasonally adjusted composite index of manufacturing activity — our broadest measure of manufacturing — lost seventeen points to settle at −12 from December's reading of 5. Among the index's components, shipments fell seventeen points to −11, the gauge for new orders moved down twenty-seven points to end at −17, and the jobs index slipped two points to −5.
The NY Fed (Empire state) and Philly Fed surveys showed contraction last week.

However, the Markit Flash PMI was positive for January: Strongest manufacturing expansion since March 2011
The expansion of the U.S. manufacturing sector gained further momentum at the start of 2013, with the Markit Flash U.S. Manufacturing Purchasing Managers’ Index™ (PMI™) rising to 56.1 in January. Up from 54.0 in December, the ‘flash’ PMI reading, which is based on around 85% of usual monthly replies, signalled.

Manufacturing employment also rose strongly during January, with new jobs being created at the fastest rate for nine months. Firms generally linked job creation to fuller order books.
The Markit Flash PMI is the opposite of the regional surveys. Go figure.