Survey of Tenth District Manufacturing 


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News Release
Federal Reserve Bank of Kansas City
Kansas City, Missouri 64198
Phone (816) 881-2683
Fax (816) 881-2569


FOR RELEASE Monday, July 11, 2005
EMBARGOED FOR 11:00 A.M. EST
FOR RELEASE MONDAY, JULY 11, 2005
EMBARGOED FOR 11:00 A.M. ET

Manufacturing activity in the Tenth Federal Reserve District expanded solidly in June. The year-over-year production index edged higher, and expectations for future factory activity remained relatively strong.

A summary of the June survey is attached to this press release.

The Tenth Federal Reserve District encompasses Colorado, Kansas, Nebraska, Oklahoma, Wyoming, northern New Mexico, and western Missouri.

For more information about the monthly manufacturing survey, contact Chad Wilkerson, Economic Research Department, (816)881-2869. The June manufacturing survey, as well as background information and results from past surveys, can be found on the Federal Reserve Bank of Kansas City's Website, http://www.kansascityfed.org.

Survey of Tenth District Manufacturing
by Chad R. Wilkerson

Manufacturing activity in the Tenth Federal Reserve District expanded solidly in June. The year-over-year production index edged higher, and expectations for future factory activity remained relatively strong. The year-over-year price indexes also edged higher after falling in May, while the six-month-ahead price indexes continued to ease. Most month-over-month indexes in the survey rose in June, but the monthly data are not seasonally adjusted, so caution must be taken in basing analyses on month-to-month comparisons.

The net percentage of firms reporting year-over-year increases in production rose to 39 in June, up from 35 in May and from 32 in April (Tables 1 & 2). A sizable net percentage of both durable- and nondurable-goods-producing plants reported year-over-year production growth. While sample sizes make it more difficult to draw firm conclusions about individual states, the data available suggest that production was well above year-ago levels in all district states.

Most other year-over-year indexes of factory activity remained solid or rose slightly in June. The new orders index edged down from 46 to a still-high 44, while the shipments index rose from 39 to 50, its highest reading since last December. The employment and capital spending indexes also increased modestly, and the workweek index posted a more sizable gain. The inventory indexes were largely unchanged after falling fairly sharply in May.

The year-over-year price indexes remained high in June. The raw materials price index was virtually unchanged, edging up from 70 to 71. This index peaked at 86 in March. The finished goods price index also rose slightly in June, from 46 to 49. This level was below readings in the fifties during the first four months of the year but still quite high by historical standards.

Plant managers’ expectations for future factory activity were generally unchanged in June after falling somewhat in May. The six-month-ahead production index edged up from 31 to 32. While still relatively high, the readings on the future production index in May and June were the lowest readings of the past two years. The future capital spending index also edged higher, from 22 to 24, and was about in the middle of its range over the past year. The future shipments, new orders, and employment indexes all fell slightly. Similar to the production index, the future shipments and new orders indexes posted their lowest readings of the last two years but were still well above zero, at 29 and 28, respectively. The future price indexes both continued to fall, suggesting that manufacturing price pressures could ease somewhat by the end of the year. The future raw materials price index dropped from 48 to 41 and was down considerably from a recent peak of 63 in March. Also, the future finished goods price index fell from 31 to 25, down from an all-time high of 42 in February. Still, both future price indexes remain elevated by historical standards, and many firms plan to continue raising prices in the months ahead.

Table1      
Summary of Tenth District Manufacturing Conditions, June 2005
  June vs. May
(percent, not seasonally adjusted)		 June vs. Year Ago
(percent)		 Expected in Six Months
(percent, not seasonally adjusted)
Plant Level Indicators
Increase No
Change		 Decrease Index*
Increase No
Change		 Decrease Index*
Increase No
Change		 Decrease Index*
 
Production
41 35 22 19
56 26 17 39
48 34 16 32
Volume of shipments
48 29 21 27
64 20 14 50
47 33 18 29
Volume of new orders
41 38 19 22
57 29 13 44
42 42 14 28
Backlog of orders
25 45 27 -2
41 38 17 24
18 57 20 -2
Number of employees
26 60 13 13
47 28 23 24
33 45 19 14
Average employee workweek
26 61 11 15
38 45 14 24
19 63 16 3
Prices received for finished product
14 76 8 6
58 31 9 49
37 50 12 25
Prices paid for raw materials
35 50 14 21
80 9 9 71
53 34 12 41
Capital expenditures  
42 39 15 27
36 48 12 24
New orders for exports
8 73 3 5
16 60 9 7
13 67 6 7
Supplier delivery time
13 78 4 9
25 64 7 18
13 76 7 6
Inventories:      
     Materials
25 51 22 3
37 40 20 17
23 52 22 1
     Finished goods
18 51 27 -9
29 47 19 10
18 56 21 -3


* The diffusion index is calculated by subtracting the percentage of total respondents reporting decreases in a given indicator from the percentage of those reporting increases. Index values greater than zero generally suggest expansion, while values less than zero indicate contraction. When index values are closer to 100, the increases among respondents are more widespread. When index values are closer to -100, decreases are more widespread.
Note: The June survey included 96 responses from plants in Colorado, Kansas, Nebraska, Oklahoma, Wyoming, northern New Mexico, and western Missouri.

Table2
Historical Manufacturing Survey Indexes
  Jun'04 Jul'04 Aug'04 Sep'04 Oct'04 Nov'04 Dec'04 Jan'05 Feb'05 Mar'05 Apr'05 May'05 Jun'05
Versus a Month Ago
(not seasonally adjusted)		  
Production 26 20 15 20 20 6 2 18 32 44 20 9 19
Volume of shipments 25 14 25 23 3 4 -1 11 25 40 22 18 27
Volume of new orders 23 21 15 19 18 8 -1 22 26 38 29 18 22
Backlog of orders 4 13 -6 7 3 -3 -7 9 8 13 13 10 -2
Number of employees 16 11 12 13 22 4 5 -4 15 14 11 6 13
Average employee workweek 16 21 17 6 12 5 -5 2 8 10 1 11 15
Prices received for finished product 9 16 14 16 15 9 12 18 20 21 22 10 6
Prices paid for raw materials 54 47 52 46 53 43 35 46 49 53 38 27 21
Capital expenditures n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a
New orders for exports 1 1 -6 0 3 5 6 1 6 10 5 1 5
Supplier delivery time 6 16 17 22 13 10 10 14 9 12 8 14 9
Inventories:      Materials -2 1 13 11 12 5 -5 5 8 11 21 2 3
Inventories:      Finished goods 0 4 11 6 17 1 -2 7 11 7 11 -4 -9

Versus a Year Ago		  
Production 51 46 50 48 41 44 50 37 43 44 32 35 39
Volume of shipments 46 49 55 51 42 47 53 47 42 34 24 39 50
Volume of new orders 47 51 52 50 42 44 52 45 45 42 31 46 44
Backlog of orders 28 37 27 31 23 30 29 34 31 26 28 29 24
Number of employees 22 15 25 27 25 28 30 18 15 18 20 21 24
Average employee workweek 37 30 29 28 21 17 23 29 15 11 12 10 24
Prices received for finished product 34 42 37 38 41 40 40 55 54 51 59 46 49
Prices paid for raw materials 71 82 73 72 77 74 76 81 83 86 79 70 71
Capital expenditures 23 17 16 30 19 21 18 20 26 30 29 21 27
New orders for exports 2 5 8 7 6 8 12 11 18 16 14 6 7
Supplier delivery time 22 30 24 35 23 19 18 24 22 26 23 28 18
Inventories:      Materials 9 6 17 19 20 18 10 25 15 24 33 17 17
Inventories:      Finished goods 1 -3 9 13 12 16 15 25 17 17 25 13 10

Expected in Six Months
(not seasonally adjusted)		  
Production 48 40 39 39 39 38 41 46 48 33 41 31 32
Volume of shipments 44 36 40 38 35 43 41 44 50 33 42 32 29
Volume of new orders 47 36 39 38 37 44 43 41 41 42 40 31 28
Backlog of orders 29 16 9 17 20 26 28 24 18 19 22 19 -2
Number of employees 16 15 30 23 26 23 21 16 23 14 11 16 14
Average employee workweek 13 18 14 8 8 6 15 21 10 4 9 12 3
Prices received for finished product 28 31 20 30 30 36 34 36 42 35 39 31 25
Prices paid for raw materials 49 61 55 54 59 59 56 60 61 63 56 48 41
Capital expenditures 23 18 19 25 25 24 20 23 24 30 25 22 24
New orders for exports 7 5 14 10 13 13 12 23 22 7 12 15 7
Supplier delivery time 1 11 14 14 16 8 5 9 6 9 13 7 6
Inventories:      Materials -6 -2 11 -5 4 -1 -1 5 1 7 7 3 1
Inventories:      Finished goods 2 0 9 4 0 1 -8 5 1 5 -2 -2 -3



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