Regional manufacturing remains sluggish, KC Fed reports

03/28/2013 3:47 PM

05/20/2014 10:41 AM

Manufacturing in the region picked up slightly in March, but concerns about the economy and health care costs continued to weigh on business, the Federal Reserve Bank of Kansas City reported Thursday.

Data collected by the Kansas City Fed in its monthly survey of factory activity in a seven-state region showed that business fell at a slower rate in March compared with the previous month. The Fed’s month-over-month composite index of factory orders showed a reading of minus 5 in March, up from minus 10 in February, but down from January’s minus 2 reading.

The Fed’s index measures production, new orders, employment, supplier delivery time and raw material costs in the Kansas City Fed’s region, which includes Kansas and the northern third of Missouri. The other states in the region are Nebraska, Colorado, Wyoming, Oklahoma and the northern part of New Mexico.

The survey attributed March’s slight improvement to companies in the food and chemical industries. But for many other businesses in the region, overall activity “still remains sluggish,” said Chad Wilkerson, a vice president and economist at the Kansas City Fed.

As with previous surveys, factory managers said customers continue to hold back on placing orders because of worries about the global economy and uncertainty over bottom-line health care costs.

“Our customers continue to buy as required, (but) they are not stocking anything,” one business manager commented in the survey.

Said another: “I see no potential increase in normal business until the economy improves.”

Hiring activity this year has also suffered, according to another survey respondent.

“Until the final rules of our cost for health care are known, we are not hiring,” the manager said. “The increased cost of unemployment benefits has also kept us from hiring.”

Despite the weakness in March, Wilkerson said the outlook for future months was “notably more positive” than in previous months, especially for export business.


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