US DATA
The Kansas City Fed's manufacturing composite index fell to -4 in December from -2 prior (and -1 expected), continuing to point to stagnant ongoing manufacturing activity in the region. The report notes that "most month-over-month indexes were negative".
- Regional Fed surveys have been increasingly difficult to read in the last couple of months - potentially due to respondents' reactions to the November 5 election results - and Kansas City's is no exception.
- For instance, the survey saw a 29-month high in the 6-month outlook (18, up from 11 in November and 7 in September) in what appears to be an increasing divergence with current conditions (see below). That optimism came, for example, as new orders fell from -9 to -17. So while expectations for everything from production to new orders to capex and employment are expected to rise in the coming months, the upbeat view is at unusually large odds from the current conditions.
- As we saw in the Philly Fed survey earlier, optimism faded in December after a large (post-election) leap in November, more closely corresponding with current conditions.
On the inflation front, "price increases accelerated from last month, and raw materials prices continue to increase at a faster pace than finished product prices."
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