Manufacturing activity in the Great Plains region has continued to sputter in February, according to a survey by the Federal Reserve Bank of Kansas City. The survey area includes Nebraska.
The composite index clocked in at minus 12 in February — its lowest reading since 2009. It’s down from minus 9 in January. A number below zero indicates a shrinking sector; a number above equals growth.
The K.C. Fed index, which includes data on employment, prices paid for raw materials, new orders to be filled and other indicators of the health of the manufacturing sector, has been in contraction territory since last February.
“We are starting off to a very slow year,” one survey participant told the Kansas City Fed. “Shipments are down 22 percent compared to last year. Margins are decreasing.”
A continuing sharp decline in oil prices is pinching oil-related manufacturers. The survey district includes energy-heavy Oklahoma and Wyoming but not Iowa.
Crude oil prices are down more than 16 percent so far this year. Since last February, prices are down nearly 50 percent.
“Energy-related firms generally had a negative outlook,” said Chad Wilkerson, a vice president and economist at the Fed.
Said one firm in the survey: “Anything energy related shows no signs of life. ... We are operating at a low level and are planning to exist at that level for the foreseeable future.”
Only the Dallas Fed’s manufacturing survey has logged a longer and poorer run than the Kansas City Fed’s, according to analysts at Econoday. That survey’s region could be considered even more exposed to the cratering price of crude oil.
Low commodity prices also put the screws to manufacturers: Farmers making less money are less likely to make a big outlay for new equipment, for instance.
The declines bode ill for workers: The K.C. survey’s employment index dropped to minus 26 from minus 15 — its lowest level in almost six years. That means companies are shedding workers at a greater clip.
Other regional Feds also have recently reported weakening measures of manufacturing activities, raising broad concerns about the strength of the U.S. economy.
Still, K.C. Fed survey participants expressed some optimism that future manufacturing activity would increase.