Manufacturing activity in the US Mid-Atlantic and Midwest regions has unexpectedly worsened this month, as revealed by recent surveys from the Federal Reserve Banks of Philadelphia and Kansas City. The Manufacturing Business Outlook Survey's headline gauge for activity plummeted to minus 16.4 in December, a significant drop from minus 5.5 in November.
A survey collected by Bloomberg suggested a potential return to growth territory at 2.8. Around 33% of firms participating in the December 9-16 survey reported decreases in general activity, up from 23% the previous month, while only 16% experienced increases. The metrics measuring new orders and shipments both turned negative, registering minus 4.3 and minus 1.9, respectively.
Current order levels are at the lowest point since May, according to the regional Fed. The employment gauge witnessed a slight dip of two points, settling at 6.6 for December. Additionally, the index for prices paid saw an increase, whereas the index for prices received approximately halved. Six months into the future, expectations for overall activity dropped by roughly 26 points, landing at 30.7 this month.
The new orders component for future activity fell to 51.6 from 66.2, and shipments declined to 49.7 from 52.1, though both remained above their historical averages. Employment outlooks were about two points lower compared to the previous month. In Kansas City, the composite manufacturing index decreased to minus 4 in December from minus 2 in November, with forecasts suggesting the contraction would improve to minus 1, based on a Bloomberg survey.
Non-durable goods manufacturing remained effectively unchanged, while the durable goods sector showed a slight decline, primarily attributed to decreases in wood, mineral, and primary metal manufacturing. Megan Williams, an associate economist at the Kansas City Fed, commented, "Regional factory activity fell slightly this month, although it is down substantially again from this time last year.
However, employment grew modestly, and firms' outlook for production and new orders is optimistic." The production index dropped to minus 5 from minus 4, while shipments fell significantly to minus 13 from a previously stable reading in November. The new orders index decreased to minus 17 this month from minus 9 in November, as per the Kansas City Fed's data.
Both price gauges rose, with raw material costs increasing at a faster rate than selling prices. Looking ahead, the seasonally adjusted composite index improved to 18 in December from 11 in November, with the future production index registering an increase to 39 from 24. Orders and shipments both ascended to a level of 35..