Kansas City Fed Service Firm Gauge Contracts by Most Since 2016

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Service industries in the Federal Reserve Bank of Kansas City’s district contracted in October by the most since February 2016, suggesting economic weakness is beginning to widen in some parts of the country.

The slump reflects a sales drop “driven by lower retail, auto, transportation, restaurants, and tourism activity,” according to the report. The indexes for employment, employee hours, and inventories declined into negative territory as well.

The composite index of service activity dropped 21 points to minus-5. A gauge of general revenue and sales also fell to the lowest level since February 2016. A measure of capital expenditures slowed by 24 points -- the largest since the survey started in January 2014. The Kansas City Fed’s district encompasses Kansas, Colorado, Nebraska, Oklahoma, Wyoming, western Missouri and northern New Mexico.

Almost half of firms said they had difficulty hiring workers over the past three months because of a lack of qualified applicants. One firm said that they interviewed 20 people, hired 8 but none showed up for work. “Amazing isn’t it,” said a contact, who answered questions for the survey on the condition of anonymity.

To contact the reporter on this story: Alex Tanzi in Washington at atanzi@bloomberg.net

To contact the editor responsible for this story: Sarah McGregor at smcgregor5@bloomberg.net

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