Tenth District Manufacturing Expands in February

Written by Sandy Williams

Tenth District manufacturing expanded in February achieving its highest index reading since June 2011, said the Federal Reserve Bank of Kansas City. The month over month composite manufacturing index was at 14 in February after registering 9 in January and December.

New orders, order backlog and employment indexes were higher in February, while production and shipments, although still solid, eased from January levels. The finished goods inventory index jumped from -4 to 5 and the raw materials inventory index posted at 11, compared to -3 in January.

New export orders made gains this month with the index rising from -5 in January to 9 in February.

The price indexes were mostly unchanged in February with the finished goods index registering 1 from zero in January. The index for prices paid for raw materials gained 2 points to register 26.

Looking ahead six months, manufacturers are strongly optimistic. The future composite index rose from 27 to 29, its highest reading since 2001. The indexes for future production, shipments and new orders retreated slightly from 12 month highs in January and the future employment index was unchanged at 30. Inventories for both raw materials and finished goods are expected to rise during the next six months. Survey respondents are expecting to increase future capital expenditures.

The Tenth District is served by the Federal Reserve Bank of Kansas City and includes the western third of Missouri; all of Kansas, Colorado, Nebraska, Oklahoma and Wyoming; and the northern half of New Mexico.

Comments by survey respondents included:

  • “Highest order levels seen since 2010.”
  • “Overall, our business has significantly rebounded after the election in November. It was simply like a switch was flipped. Many customers are hopeful of less regulation under this Administration. Our backlog in most shops is now out to June and includes a growth in foreign business.”
  • “There are still too many unknowns related to future import costs. Such as, would raw/unfinished items needing further processing be treated differently than if importing a completely finished product?”
  • “Since December our industry has had significant increases in activity and January invoicing was the highest in over three years with more backlog of work than in recent memory.”
  • “The year started off great and has slowed down. It could be in part to the warm weather in the Midwest. Farm economy is coming into play for us.” 
  • “During this strong economic cycle, our pricing power may enable us to pass the increased costs onto consumers. As the business cycle weakens, we may lose the pricing power and see an accelerated erosion of profits due to the increased cost of imports.” “Our growth plans have been put on hold until we have more confidence in the market long term.”

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