News Release Federal Reserve Bank of Kansas City Kansas City, Missouri 64198 Phone (816) 881-2683 Fax (816) 881-2569 FOR RELEASE Thursday, February 22, 2007 EMBARGOED FOR 11:00 A.M. EST EMBARGOED FOR 11:00 A.M. EST Tenth District manufacturing activity growth rebounded strongly in February, and expectations for future factory hiring and capital spending rose as well. The majority of price indexes in the survey increased moderately for the second straight month, due largely to rising food prices. A summary of the February survey is attached to this press release. Results from past surveys and release dates for future surveys can be found at: http://www.kc.frb.org/mfgsurv/mfgmain.htm. For further information about the survey, contact Tim Todd, Public Affairs Department, (816) 881-2308. The Tenth Federal Reserve District encompasses Colorado, Kansas, Nebraska, Oklahoma, Wyoming, northern New Mexico, and western Missouri.

Survey of Tenth District Manufacturing Tenth District manufacturing activity growth rebounded strongly in February, and expectations for future factory hiring and capital spending rose as well. The majority of price indexes in the survey increased moderately for the second straight month, due largely to rising food prices. The net percentage of firms reporting month-over-month increases in production in February was 18, up from 5 in January and 7 in December (Tables 1 & 2, Chart). Production accelerated at most types of factories, but especially among producers of machinery and high-tech equipment. The overall year-over-year production index also increased from 19 to 31, and the future production index remained steady after a slight decrease last month. Although sample sizes make it difficult to draw firm conclusions about individual states, the data available suggest that production remained well above year-ago levels in all district states. Like production, the majority of other month-over-month indexes increased significantly. The new order index jumped from 9 to 20, and the shipments index also increased for the second straight month. Growth in the order backlog index expanded for the first time in four months, rising from -4 to 9. In addition, the employment, new orders for exports, and supplier delivery time indexes all recorded solid gains. The raw materials inventory index increased to its highest level in six months, while the finished goods inventory index remained unchanged. Most other year-over-year indexes increased over last month. The shipments and new order indexes both rebounded strongly after reaching their lowest levels in over three years. The order backlog index climbed from 7 to 23, and the employment index reached its highest level since the survey began in 1995. The capital expenditures index edged up from 13 to 17, and the new orders for exports and supplier delivery time indexes remained relatively unchanged. The raw materials inventory index declined slightly, while the finished goods inventory index increased for the third straight month. Other indexes for future factory activity increased or remained fairly stable. The future capital expenditures index reached its highest level in over two years, and the employment and order backlog indexes increased as well. The future shipments index edged up after a decline last month, and the new orders index rose from 21 to 23. On the other hand, the future supplier delivery time index edged down from 11 to 8, and the new orders for exports index fell for the second straight month. Both future inventory indexes decreased slightly. Most price indexes in the survey edged up slightly but generally remain lower than peaks reached over the past few years. The month-over-month raw materials price index rose from 11 to 15, and the finished goods price index also increased marginally for the third straight month. The future raw materials and finished goods price indexes also recorded slight gains following strong increases in January. On the other hand, both year-over-year price indexes decreased moderately.

Table1       Summary of Tenth District Manufacturing Conditions, February 2007   February vs. January (percent)1 February vs. Year Ago (percent)1 Expected in Six Months (percent)1 Plant Level Indicators Increase No Change Decrease Diff Index2 SA Index3 Increase No Change Decrease Diff Index2 Increase No Change Decrease Diff Index2 SA Index3   Production 39 38 22 17 18 54 22 23 31 51 29 18 33 25 Volume of shipments 44 29 25 18 20 55 21 23 32 49 28 22 26 21 Volume of new orders 37 42 18 19 20 55 23 19 36 46 30 20 25 23 Backlog of orders 29 48 19 10 9 43 32 20 23 35 39 21 14 13 Number of employees 25 60 13 12 13 51 31 16 35 35 53 10 25 25 Average employee workweek 19 64 14 4 7 29 53 16 13 27 56 14 13 12 Prices received for finished product 20 75 3 16 15 57 37 4 52 39 55 3 35 36 Prices paid for raw materials 38 55 4 33 37 75 16 7 67 55 35 8 47 52 Capital expenditures   32 50 15 17 34 55 6 27 30 New orders for exports 10 75 5 4 7 21 61 8 12 11 75 5 5 4 Supplier delivery time 9 88 1 7 11 19 69 9 9 8 84 3 4 8 Inventories:            Materials 34 46 19 15 13 43 39 15 27 19 53 25 -6 -5      Finished goods 20 53 22 -1 -7 36 48 10 25 16 58 20 -3 -5 1Percentage may not add to 100 due to rounding. 2Diffusion Index. The diffusion index is calculated as the percentage of total respondents reporting increases minus the percentage reporting declines. 3Seasonally Adjusted Diffusion Index. The month vs. month and expected-in-six-months diffusion indexes are seasonally adjusted using Census X-12. Note: The February survey included 104 responses from plants in Colorado, Kansas, Nebraska, Oklahoma, Wyoming, northern New Mexico, and western Missouri.

Table2 Historical Manufacturing Survey Indexes   Feb'06 Mar'06 Apr'06 May'06 Jun'06 Jul'06 Aug'06 Sep'06 Oct'06 Nov'06 Dec'06 Jan'07 Feb'07 Versus a Month Ago (seasonally adjusted)   Production 12 22 16 31 22 13 16 10 10 8 7 5 18 Volume of shipments 0 9 8 27 19 9 15 6 10 10 8 16 20 Volume of new orders 12 19 23 27 20 8 20 14 12 2 13 9 20 Backlog of orders 11 3 8 8 10 7 3 10 -5 -13 -4 -4 9 Number of employees 13 14 17 15 20 10 -1 13 8 16 15 8 13 Average employee workweek 3 8 12 10 6 3 6 3 5 4 4 -4 7 Prices received for finished product 16 14 17 17 24 20 17 15 12 10 7 11 15 Prices paid for raw materials 38 35 48 53 54 49 45 38 27 27 30 35 37 Capital expenditures n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a New orders for exports 4 6 6 7 5 4 4 2 4 0 9 -1 7 Supplier delivery time 8 10 14 12 15 16 8 0 7 2 1 3 11 Inventories:      Materials 14 11 12 14 18 9 8 14 8 9 4 8 13 Inventories:      Finished goods 14 11 10 5 16 3 1 6 -1 -3 -3 -7 -7 Versus a Year Ago (not seasonally adjusted)   Production 37 39 39 54 47 35 33 33 35 35 25 19 31 Volume of shipments 31 33 33 43 42 37 32 37 34 38 34 23 32 Volume of new orders 30 35 43 46 40 34 34 33 39 28 35 26 36 Backlog of orders 16 24 28 24 29 27 22 22 19 15 19 7 23 Number of employees 24 24 24 25 28 27 17 14 25 29 27 25 35 Average employee workweek 13 19 15 17 14 20 10 2 14 13 9 10 13 Prices received for finished product 52 54 58 57 60 58 52 66 65 57 56 57 52 Prices paid for raw materials 70 78 83 80 83 82 74 79 80 76 67 71 67 Capital expenditures 22 30 25 35 25 20 23 21 20 22 28 13 17 New orders for exports 9 17 16 14 14 16 16 7 15 11 16 11 12 Supplier delivery time 10 13 16 15 29 26 14 11 11 9 4 8 9 Inventories:      Materials 27 24 24 27 35 17 21 22 14 22 23 31 27 Inventories:      Finished goods 22 19 14 21 25 4 15 14 10 0 7 11 25 Expected in Six Months (seasonally adjusted)   Production 41 42 36 34 24 35 28 26 23 18 29 25 25 Volume of shipments 44 34 31 36 17 44 30 30 23 24 31 20 21 Volume of new orders 38 30 31 40 9 34 23 26 14 20 21 21 23 Backlog of orders 16 9 14 16 0 22 13 9 4 6 14 8 13 Number of employees 16 23 23 19 18 29 12 13 6 7 19 18 25 Average employee workweek 16 7 3 5 0 4 9 1 0 4 2 9 12 Prices received for finished product 33 35 34 35 38 36 24 31 33 27 17 32 36 Prices paid for raw materials 58 58 66 64 69 61 57 49 48 46 31 50 52 Capital expenditures 18 19 16 11 10 22 22 24 23 16 24 20 30 New orders for exports 9 12 12 11 11 13 10 10 8 15 15 10 4 Supplier delivery time 5 8 3 0 19 10 8 2 4 9 11 11 8 Inventories:      Materials 15 3 3 5 10 8 2 2 -1 -2 2 -4 -5 Inventories:      Finished goods 10 3 2 5 6 3 -2 3 -2 -11 1 -2 -5

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