KC Fed Manufacturing Falls Into Contraction

The composite index from the Kansas City Fed’s manufacturing survey was a reading of -3 in December. This is down from November’s +7, and the below zero reading indicates economic contraction in the manufacturing sector. This negative reading follows five consecutive months of expansion.

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Selected comments:

  • “November and December have been more seasonal than they have for the last several years – only 18 days in November hurt us. We are hoping 20 business days in December will help, but UPS not picking up on the 31st won’t help.”
  • “We are increasing our inventories because of announced January 1st increases in raw materials. There are no reasons given for the increase.”
  • “It has been a strong 4th quarter and we have orders coming in for January. Labor is available but the quality of the work force is very discouraging. Basic skills are in short supply.”
  • “Our distributors still do not want to carry inventory. They feel things may be improving in Washington but it is too soon to tell.”
  • “We think things are looking up past the first quarter, but time will tell. There is still too much uncertainty and burden from increasing costs of compliance with ballooning federal regulations.”
  • “We are closing this plant and moving most of the production to our Mexico plant due to low sales and lower cost to do business in Mexico.”
  • “Uncertainty in Washington in all matters continues to plague our economy and strangles meaningful sustainable growth.”

The Kansas City Fed’s manufacturing survey is now the only one of the leading U.S. business surveys that indicates economic contraction in the manufacturing sector.

Surveys 600x508 KC Fed Manufacturing Falls Into Contraction

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