US Kansas City Fed Mfg Activity Mar: 26 (est 26; prev 24) - As with other reports, demand booming - more here

 US Kansas City Fed Mfg Activity Mar: 26 (est 26; prev 24)



Strong regional reports continue with KC Fed mfg rising to 26 right on estimates and up from 24 in prior month bringing the index to pre-pandemic conditions. There was growth in shipments, new orders, and backlogs as well as the same supply chain and price issues we've seen from the other districts, although employment did decelerate. From the report:

"Tenth District manufacturing activity grew solidly compared to a month ago and a year ago with positive expectations for future activity. Prices paid for raw materials remained very high, and the index continued to hover near historically high levels. Finished goods prices also increased further from a month ago and a year ago. Moving forward, district firms expected prices for both raw materials and finished goods to rise more over the next six months."

Getting more granular,

"The growth in district manufacturing activity was driven by durable goods plants for primary metals, machinery, transportation equipment, furniture, and miscellaneous manufacturing. Month-over-month indexes for shipments, new orders, and order backlog expanded at a faster pace in March and supplier delivery time was very high as well. Growth in production and employment remained positive, but slightly slower than in recent months. Materials inventories were positive while finished goods inventories dipped further from a month ago. Year-over-year factory indexes rose in March, and business conditions are now comparable to levels at the start of the pandemic last year. The year-over-year composite index increased from 8 to 16, but new orders for exports and finished goods inventories continued to lag year-ago levels. The future composite index expanded slightly from 34 to 35 with an uptick in employment expectations."

On the special question, a theme I'm going to start talking about is surfacing, margin pressures, was evident.  As a side note, nice to see travel and in-person working picking up.  

"This month contacts were asked special questions about materials price increases and the impact of the vaccination rollout on business conditions. While 8% of firms said they can fully pass price increases through to customers, 49% of firms recorded that they could pass through a majority of price increases (Chart 2). Another 32% of firms reported the ability to pass through only a minority of price increases through to the customer, and 11% percent were unable to pass through price increases at all. Regarding the pandemic, 42% of firms said the current pace of vaccinations and trajectory of the pandemic had not changed their business plans. On the other hand, a quarter of firms said the state of COVID-19 cases and vaccinations caused them to relax COVID cautionary measures in the workplace and increase business travel (Chart 3). 21% of firms also reported an increase in demand for products and 17% were hiring more workers as a result. Another 12% of contacts indicated they are considering bringing employees back to the office sooner than expected due to the drop in COVID-19 cases and vaccination progress and 9% of firms already brought employees back."


On the comments, basically all about supply issues - deliveries, materials, and labor. These are good problems to have, and I actually think it is serving as a throttle on what might be a bit of an uncontrolled expansion without them.

To see more content, including summaries of some of today's economic reports and my nightly Summary go to https://sethiassociates.blogspot.com

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