Thursday, December 17, 2020

Philly Fed Manufacturing "growth was less widespread" in December, Kansas City Fed "Activity Expanded Further"

by Calculated Risk on 12/17/2020 11:05:00 AM

From the Philly Fed: December 2020 Manufacturing Business Outlook Survey

Manufacturing activity in the region continued to grow, but growth was less widespread, according to firms responding to the December Manufacturing Business Outlook Survey. The survey’s current indicators for general activity, new orders, and shipments remained positive for the seventh consecutive month but fell notably from their readings in November. Some future indexes also moderated this month but continue to indicate that firms expect growth over the next six months.

The diffusion index for current activity fell 15 points to 11.1 in December, its lowest positive reading following its fall to long-term lows in April and May... On balance, fewer firms reported increases in manufacturing employment this month. The current employment index has remained positive for six consecutive months but decreased 19 points to 8.5 in December.
emphasis added
This was lower than the consensus forecast.

And from the Kansas City Fed: Tenth District Manufacturing Activity Expanded Further
The Federal Reserve Bank of Kansas City released the December 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 expanded further in December. Manufacturing activity was still below year ago levels, but expectations for future activity were positive.

“Regional factories reported another month of solid growth, but activity continues to lag preCOVID levels,” said Wilkerson. “The recent wave of COVID-19 has negatively affected manufacturers, but many firms still indicated significant capital spending plans for the coming year.”
...
The month-over-month composite index was 14 in December, up from 11 in November and 13 in October
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 (blue, through December), and five Fed surveys are averaged (yellow, through November) including New York, Philly, Richmond, Dallas and Kansas City. The Institute for Supply Management (ISM) PMI (red) is through November (right axis).

These early reports suggest the ISM manufacturing index will show expansion in December, but will likely decrease from the November level.