Manufacturing Data Shows Evidence Of Oil-Related Contraction

Manufacturing data from the Dallas Fed, along with that of the Kansas City Fed, have been offering the most striking evidence of oil-related contraction. Dallas' general activity index came in at an extremely negative score of minus 34.6 for the January report which is the lowest reading since the beginning of the recovery in 2009.

New orders are falling deeper into contraction as are unfilled orders. Hours worked are now in the negative column as is employment. And finally falling into contraction -- and in a big way -- is the production index which had through last year, despite long weakness in orders, held in positive ground, but not anymore with the reading at minus 10.2 for a nearly 23 point monthly plunge. Price data in this report remain well into the minus column, at nearly double-digit monthly declines.

Manufacturing reports this month have been mixed, with this and Empire State pointing to another buckling but not the most closely followed report, the Philly Fed which is pointing to stability for the sector. Watch for the Richmond Fed report tomorrow and the Kansas City report on Thursday.

Recent History Of This Indicator:
The Dallas Fed general activity index has been buried in deep contraction and, along with the Kansas City Fed report, have been suffering the greatest effects from the collapse in oil. The Econoday median is calling for a 13th straight month of contraction, at a steep minus 14.0 for January vs December's minus 20.1. Production has held in the plus column for this report but the outlook for continued strength is not supported by new orders which have been in contraction for 14 months.