The Federal Reserve Bank of Kansas City, like other district FRBs (New York, Philadelphia, Richmond and Dallas), tracks its region’s manufacturing activity by surveying a number of important indicators such as general activity, production, shipments, orders, employment and prices for raw materials and finished products.
The latest results are indicating that the manufacturing activity fell to a contraction level of -4 in December with virtually every component measure turning negative while prices paid for raw materials increased notably to 28.
It's important to note that although this data-set has a history that only runs as far back as mid-2001, the composite index never fell below 10 during the "recovery" that followed the tech-wreck of the early aughts.
Today, we see the composite index not only remaining depressed but actually turning notably negative, clearly indicating the internal weakness of our current economic expansion and possibly presenting a strong signal of recession to come.
The following chart plots the seasonally adjusted Composite index since 2001 with the solid red line indicating the threshold between expansion and contraction.
