KANSAS CITY FED MANUFACTURING PLUNGES, CONTRACTION ACCELERATES
The headline index plunged to -10 from last month's -2 reading.
Economists were expecting a rise to -1.
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The drop was led by volume of new orders, which fell to -25 from -2 last month.
Production fell to -11 from -3.
Volume of shipments fell to -12 from -3.
Number of employees collapsed to -8 from +2.
In other words, the pace of contraction in new orders, production, and shipments surged between January and February, while employment went from expansion into sharp contraction.
Here's the scoop, from the Kansas City Fed:
Tenth District manufacturing activity contracted further in February, and factories’ expectations weakened somewhat. Some contacts noted disruptions in shipments due to bad weather, and many firms expressed concern about possible direct and indirect impacts on orders should federal spending cuts occur with sequestration. Most price indexes were little changed.
Below is what respondents to the survey are saying:
“We were closed 1-1/2 days last week due to weather, and that may well happen again today and tomorrow. That is putting us behind last year – otherwise, we would probably show a slight increase. We have enough outbound freight on our loading dock to be even with last year, but truck lines aren’t running.”
“Very concerned about the reduction in military spending which will likely happen. This could force us to reduce planned capital spending.”
“The uncertainty is holding back capital purchases from many of our fleet customers.”
“Sequestration is causing customers to delay and/or push back orders.”
“Customers are still being cautious about capital spending.”
“We are not sure what the effects of sequestration will be, so as a result, we are delaying nearly all spending and hiring plans.”
“Small business aircraft demand has not fully recovered, although it has improved from the depths of the crisis.”
“Infrastructure spending has historically been a large driver of demand for heavy building materials, and it looks to be stuck at low levels on a long-term basis.”
“We are still struggling to regain ground on overall sales. We are adding more customers but the volume of those sales isn’t overcoming the reduced sales to existing customers.”
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ORIGINAL: Minutes away from the last big data point of the day: the Kansas City Fed's February survey of regional manufacturing activity.
Economists expect the headline index to rise to -1 from last month's -2 reading, indicating a continued contraction in regional manufacturing activity, but at a less rapid pace.
(Last month, economists expected the index to break into positive territory.)
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