US DATA: KC Fed Manufacturing Survey Shows Further Tariff Stagflation Effects

The Kansas City Fed's Tenth District Manufacturing survey showed a deterioration of activity in April after March's surprising 15-month high. The month-over-month composite index fell to -4 in April from -2 prior (-6 was expected).  While the composite index remains basically at the same negative level it's been since late 2022, the continued dip in the 6-month outlook (to 6 from 10 prior and the 4th consecutive decline) was notable albeit still positive.

• Price pressures were pronounced: while current prices paid remained at 42.0 (still a joint 31-month high), the 6-month outlook rose 14 points to 71, a 36-month high. Regional manufacturers reported much higher current prices received however (up 14 points to 29, a 32-month high), with the 6-month outlook rising 20 points to to 59, a 34-month high.
• The pullback in activity echoed other regional Fed manufacturing surveys which saw further deterioration between March and April amid tariff news (Philly, Richmond; however, NY improved).
• Per the KC report, "The production index ticked down from 1 to -5 while the new orders index was mostly unchanged. Most year-over-year indexes were negative, with the exception of the supplier delivery time and inventory indexes. The capital expenditures index fell into negative territory after increasing slightly last month. The future composite index eased from 10 to 6 in April as expectations for production, shipments, and new orders all decreased."
• In a special question in the survey, " contacts were asked special questions about business uncertainty and demand expectations": 86% reported more or much more uncertainty compared with the start of the year, with 53% lowering their expectations for demand at least somewhat.