by Calculated Risk on 6/30/2011 11:14:00 AM

From the Kansas City Fed: Manufacturing Sector Shows Rebound After Last Month's Slowdown

The Federal Reserve Bank of Kansas City released the June Manufacturing Survey today. According to Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City, the survey revealed that growth in Tenth District manufacturing activity rebounded solidly in June after a brief slowdown last month, and producers remained generally optimistic about future activity.

“Factories in the region basically resumed their solid pace of growth from earlier in the year, following some disruptions in May,” said Wilkerson. “Also, hiring plans remain fairly solid for the second half of the year.”
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The month-over-month composite index was 14 in June, up from 1 in May and equal to 14 in April. ... Most other month-over-month indicators also improved in June. The production index jumped from -2 to 22, and the shipments, new orders, and order backlog indexes also posted solid gains. The employment index increased from 9 to 17, and the new orders for exports index also edged higher.

This was a solid rebound from May.

Earlier, the Chicago PMI indicated a rebound in June with the index at 61.1 (SA), up from 56.6 in May. New orders were up sharply from 53.5 to 61.2, although employment was down a little to 60.8 from 58.7 (above 50 is expansion).

This is the last of the regional Fed surveys for June. The regional surveys provide a hint about the ISM manufacturing index - and the regional surveys were fairly weak this month as the following graph shows.

Click on graph for larger image in graph gallery.

The New York and Philly Fed surveys are averaged together (dashed green, through June), and five Fed surveys are averaged (blue, through June) including New York, Philly, Richmond, Dallas and Kansas City. The Institute for Supply Management (ISM) PMI (red) is through May (right axis).

The regional surveys suggest the ISM manufacturing index will fall to the low 50s or so in June. After the NY and Philly Fed surveys were released, it seems that a reading below 50 was possible (and could still happen).

However the more recent surveys (Richmond, Dallas, Kansas City and Chicago PMI) all showed expansion in June. The ISM index for June will be released tomorrow, July 1st, and expectations are for a decrease to 51.7 from 53.5 in May.