April is the ‘worst’ for manufacturers in the region, report says

Manufacturers are suffering “their worst month in quite some time,” according to the Federal Reserve Bank of Kansas City.

The regional bank’s survey of manufacturing across seven states this month found that activity declined even as expectations improved somewhat. An index generated from the responses fell to -7, its lowest level since May 2009, toward the end of the last recession. It had been -4 in March.

“Regional factories had their worst month in quite some time as exports continued to drop and conditions worsened among producers of oil- and gas-related goods,” Fed economist Chad Wilkerson said in the report. “However, a positive development was a decline in supplier delivery times, which had been rising due to West Coast port disruptions.”

Surveyors register companies’ experience and outlook on production, new orders, employment, supplier delivery time and raw materials inventory.

The report covers western Missouri, all of Kansas, Nebraska, Colorado, Oklahoma, Wyoming and northern New Mexico.

Here are some of the comments gathered in the surveys:

▪ “We are experiencing more volatility on revenue monthly. One month may be much higher than previous month or year, and then the next month may be much lower, etc.”

▪ “The durable goods sector just isn't very good, impacted mightily by the price of oil. We are reducing headcount and spending where possible in an effort to withstand this phase of the economy for however long it lasts.”

▪ “Competition for business is fierce, especially with the low cost labor and better logistics from Mexico. We are finding more and more customers moving manufacturing operations to Mexico.”

▪ “Raw material suppliers have announced large increases in price, however, they keep moving the effective dates back. These announced increases are not supported by actual cost increases. Their sales are down so we are not taking the announced increases are seriously. If they do go into effect, our larger inventories will be a cushion.”

▪ “West coast port disputes have us out of stock on key items. No information available on when we will receive products. We will look at reducing our employee count next month if we do not receive goods in April.”

▪ “We import dry bulk cement from Asia and Europe so the strong dollar has given us more buying power. We also export the same type products to Canada where the strong dollar has hurt our margins and made it harder to compete.”

▪ “The strong dollar is good in that it’s driving down commodity prices, but bad because it is making us less competitive globally. We're making fewer products but making more money on them. It has been bad for our employees because we have less work (and fewer employees). Overall, it’s a negative for us.”

▪ “The stronger dollar is undoubtedly creating more opportunity for foreign manufacturers. The impact has only begun to be felt in our bookings.”

This story was originally published April 23, 2015 at 10:29 AM with the headline "April is the ‘worst’ for manufacturers in the region, report says."