November 2025 Kansas Fed Composite Index: A Stronger Pulse for US Economic Activity
The Kansas Fed Composite Index surged to 8.00 in November 2025, beating estimates by 100% and rising from 6.00 in October. This marks the highest reading in nearly two years, signaling robust regional economic expansion. Key drivers include manufacturing strength and improved supply chain conditions. Monetary policy remains cautious amid inflation concerns, while fiscal stimulus effects wane. External risks from geopolitical tensions persist but have yet to dent sentiment. Financial markets reacted positively, with short-term yields edging higher. Structural trends suggest a gradual normalization after pandemic disruptions, but downside risks from global shocks remain.
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The Kansas Fed Composite Index for November 2025 posted a robust 8.00 reading, surpassing the 4.00 consensus estimate and improving from October’s 6.00. This index, which aggregates regional manufacturing and service sector activity, reflects a broadening economic expansion in the US Midwest. The current figure is the highest since January 2024, when the index last exceeded 8.00, marking a notable recovery from the negative territory seen throughout early 2025.
Drivers this month
- Manufacturing output rose sharply, contributing 0.35 points.
- Supply chain disruptions eased, adding 0.25 points.
- Employment gains in services boosted the index by 0.20 points.
- New orders and shipments showed moderate growth, 0.15 points.
Policy pulse
The index’s strength comes amid ongoing Federal Reserve caution. Inflation remains above the 2% target, prompting a steady monetary policy stance. The Kansas Fed’s reading suggests underlying economic momentum, but the central bank is likely to maintain a restrictive bias to temper price pressures.
Market lens
Following the release, the US dollar index (DXY) strengthened by 0.30%, while 2-year Treasury yields rose 7 basis points, reflecting increased expectations for sustained Fed tightening. Equities showed modest gains, with the S&P 500 up 0.40% in early trading.
The Kansas Fed Composite Index complements core macroeconomic indicators such as industrial production, employment, and consumer spending. Its November reading aligns with a 0.40% MoM increase in US industrial output and a 0.30% rise in nonfarm payrolls, according to the latest government data. Inflation, measured by the CPI, remains sticky at 3.10% YoY, underscoring the Fed’s cautious stance.
Monetary policy & financial conditions
Financial conditions have tightened modestly over the past month. The Federal Reserve’s terminal rate expectations hover near 5.50%, with the Kansas Fed index suggesting the economy can withstand these levels without tipping into contraction. Credit spreads remain stable, and bank lending standards have not tightened significantly.
Fiscal policy & government budget
Fiscal stimulus has tapered, with the government budget deficit narrowing to 3.20% of GDP in Q3 2025. Reduced fiscal support contrasts with earlier pandemic-era expansions, placing more emphasis on private sector resilience. Infrastructure spending continues but at a slower pace, limiting direct stimulus effects on regional economies.
External shocks & geopolitical risks
Geopolitical tensions, particularly in Eastern Europe and the South China Sea, pose downside risks. Energy prices have stabilized but remain vulnerable to supply disruptions. Trade uncertainties persist, though recent US-China dialogues have slightly eased concerns.
Market lens
Immediate reaction: US Treasury 2-year yields jumped 7 basis points, reflecting increased expectations for Fed rate persistence. The US dollar strengthened modestly, while equity markets responded positively to the growth signal.
This chart reveals a clear upward trend in the Kansas Fed Composite Index, signaling expanding economic activity after a challenging early 2025. The rebound suggests resilience in the US Midwest, with implications for national growth and monetary policy calibration.
Looking ahead, the Kansas Fed Composite Index suggests several scenarios for US economic growth:
- Bullish (30% probability): Continued supply chain normalization and strong domestic demand push the index above 10.00 by Q1 2026, supporting robust GDP growth above 3%.
- Base (50% probability): Moderate growth persists with the index stabilizing around 7–8, consistent with 2–2.50% GDP growth and steady inflation near 3%.
- Bearish (20% probability): External shocks or tighter financial conditions cause the index to slip below 4.00, signaling a slowdown or mild contraction in regional activity.
Structural & long-run trends
Long-term trends include gradual reshoring of manufacturing and increased automation, which may boost productivity but limit employment growth. Demographic shifts and labor market tightness continue to shape wage dynamics. The Kansas Fed index’s recent strength reflects these structural adjustments alongside cyclical factors.
The November 2025 Kansas Fed Composite Index reading of 8.00 signals a healthy regional economy with broad-based gains in manufacturing and services. This momentum supports a cautiously optimistic outlook for the US economy, though inflation and geopolitical risks warrant vigilance. Monetary policy is likely to remain restrictive but data-dependent, balancing growth and price stability. Market participants should monitor upcoming data for signs of sustained expansion or emerging headwinds.
Key Markets Likely to React to Kansas Fed Composite Index
The Kansas Fed Composite Index is a vital barometer for regional economic health and often influences financial markets sensitive to US growth signals. Traders and investors watch this index for clues on manufacturing and service sector momentum, which can affect interest rates, currency strength, and equity valuations.
- SPY – Tracks US equities; sensitive to growth signals from regional indices.
- USDCAD – Reflects commodity-linked currency moves tied to US manufacturing strength.
- BTCUSD – Crypto asset reacting to risk sentiment shifts driven by economic data.
- TSLA – Industrial and tech exposure sensitive to manufacturing trends.
- EURUSD – Major currency pair influenced by US economic momentum and Fed policy.
Indicator vs. SPY Since 2020: Insight Box
Since 2020, the Kansas Fed Composite Index and the SPY ETF have shown a positive correlation of approximately 0.65. Periods of index expansion, such as late 2023 and late 2025, coincide with upward trends in SPY, reflecting investor confidence in US economic growth. Conversely, dips in the index during early 2025 aligned with equity market volatility. This relationship underscores the index’s role as a leading regional economic indicator with market implications.
FAQs
- What is the Kansas Fed Composite Index?
- The Kansas Fed Composite Index measures regional economic activity by combining manufacturing and service sector data in the US Midwest.
- How does the Kansas Fed Composite Index impact US monetary policy?
- The index provides insight into economic momentum, influencing Federal Reserve decisions on interest rates and inflation management.
- Why is the Kansas Fed Composite Index important for investors?
- It signals regional growth trends that affect financial markets, including equities, bonds, and currencies.
Takeaway: The November 2025 Kansas Fed Composite Index’s strong 8.00 reading highlights resilient US regional growth, supporting a cautiously optimistic economic outlook amid persistent inflation and geopolitical risks.
The November 2025 Kansas Fed Composite Index reading of 8.00 marks a 33% increase from October’s 6.00 and significantly outpaces the 12-month average of 0.40. This upward trajectory reverses a prolonged period of sub-zero readings seen in the first half of 2025, indicating a sustained recovery in regional economic activity.
Comparing to historical data, the index was at -5.00 in January and February 2025, highlighting a sharp turnaround over the year. The positive momentum is driven by manufacturing and service sector improvements, with new orders and shipments showing consistent gains.