The second regional Fed release this morning came from the Kansas City Fed. Whereas the Philly Fed handily beat expectations, the 10th District’s headline reading matched expectations with a 2 point decline to 11. Similar to the Philly Fed report, expectations for six months in the future were also slightly lower this month.
Breadth across categories was on the weak side with more than half of the categories falling from October to November. While many of these indices fell from last month, they are still consistent with growth, just at a slower rate than October. The indices for expectations were also broadly lower across categories.
One of the most dramatic declines of the various categories of the report concerns shipments. While still consistent with overall growth in shipments, the November reading did mark a significant deceleration as the index fell 19 points to 3. That decline was in the 6th percentile of all monthly changes, and the new level is in the bottom third of the historic range after sitting in the top decile last month. Despite that weakness in shipments, production and new orders have held up much better, albeit they also fell this month. Not all new orders have held up though. New orders for exports were notably weak as the index showed a contractionary reading in the bottom decline of all readings.
There is some evidence that supply chain issues could have played a role in that decline in shipments. The index for supplier delivery times gauges how long it takes for products to be delivered. Higher readings indicate longer lead times and vice versa. The current conditions index experienced a sizeable increase of 8 points to a reading of 15 this month. That is the highest reading since the huge spike higher in the spring, and the month over month increase was in the top decile of all monthly moves for the index. An even more notable move came from the index for expectations. This index nearly doubled coming in at a record high of 30. Only June of 2006 has seen a larger one month increase—18 points versus 14 today—in this index. In other words, while current lead times were in fact longer, reporting firms seem to see bigger issues on the horizon and could be related to the number of rising COVID cases in the region.
Whereas employment metrics were a bright spot for the Philadelphia Fed, in Kansas City’s district hiring decelerated to a barely expansionary reading of 1. Expectations for future hiring were also lower. The index for average workweek did provide a bit of a silver lining though as it rose to its highest reading since September of last year. Click here to view Bespoke’s premium membership options for our best research available.
