Thursday, January 28, 2016

Kansas City Fed: Regional Manufacturing Activity Declined Further in January

by Bill McBride on 1/28/2016 11:00:00 AM

From the Kansas City Fed: Tenth District Manufacturing Activity Fell Again

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 fell again in January.

We saw another moderate drop in regional factory activity in January, marking the eleventh straight month of slight to moderate declines,” said Wilkerson. “However, firms remained optimistic that conditions would improve slightly in coming months.”
The month-over-month composite index was -9 in January, unchanged from -9 in December but down from -1 in November.
The employment index was largely unchanged at -15. ...

Most future factory indexes were somewhat lower, but on net positive overall. The future composite index was basically unchanged at 5, while the shipments, employment, and new orders for exports indexes increased somewhat.
emphasis added
This was the last of the regional Fed surveys for January. Four our of five of the regional surveys indicated contraction in January, especially in the Dallas region (oil prices).

Here is a graph comparing the regional Fed surveys and the ISM manufacturing index:

Fed Manufacturing Surveys and ISM PMI Click on graph for larger image.

The New York and Philly Fed surveys are averaged together (yellow, through January), and five Fed surveys are averaged (blue, through January) including New York, Philly, Richmond, Dallas and Kansas City. The Institute for Supply Management (ISM) PMI (red) is through December (right axis).

It seems likely the ISM index will be weak in January, and will probably show contraction again.  The early consensus is the ISM index will decline to 47.9% from 48.2% in December (below 50 is contraction).