Kansas City Fed Manufacturing Composite Buckles

Growth in the Kansas City manufacturing composite buckled in December but held steady at a subdued level in January. The index is down 1 point this month to 5 from a revised 6 in December with most details holding in the plus column.

Details not showing strength, however, are key ones. New orders slowed by 6 points in the month to nearly dead flat at plus 1. Export orders are the weakness here, in the minus column at 10 for a second month of contraction in a row. And the sample is working down backlogs noticeably, to minus 13 from December's plus 9.

Lower backlogs won't be a plus for hiring which is steady and moderate at 7. Production is showing only marginal growth while shipments, at 6 for a 3 point gain, keep moving out the door.

Price data show rising pressure on costs but easing traction for selling prices. Inventory builds are slowing while delivery times, in a sign of demand strength, are on the rise.

Regional diffusion indexes had been running at strong levels the past two years and some still are like the Philly Fed. But others have clearly slowed with the orders decline in this report something to keep an eye on.