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Monday, October 28, 2019

Dallas Fed Manufacturing Activity Unexpectedly Slows

Texas manufacturing activity unexpectedly slowed in October, with the general business activity index falling 6.6 points to minus 5.1, well below the consensus forecast of 1.2. The production index managed to remain in expansion territory, falling 9.4 points to 4.5, but orders dove into contraction for the first time in three years, with new orders falling 11.3 points to minus 4.2, unfilled orders down 7.4 points to minus 9.4, and the growth rate of orders down 10.3 points to minus 5.9.

Shipments fell 8.7 points to 6.0, while capacity utilization retreated 9.4 points to 3.6, a three-year low. Delivery times fell 6.5 points to minus 4.2.

Employment, which rose sharply in the previous month, retreated with a 7.8 point decline to 11.0, while hours worked fell 1 point to 4.7.

On the inflation front, growth of input costs and output prices increased, with the index for prices paid for raw materials rising 2.5 points to 22.8, a 10-month high, while prices received for finished goods rose 3.8 points to 4.8. The wages and benefits index rose 4.8 points to 22.2.

One bright note for the current conditions part of the survey was a rise of 2.5 points in capital expenditures to 13.6.

But despite the general decline seen in current conditions, expectations regarding future business conditions were more optimistic in October. The index of future general business activity returned to positive territory, rising 9.2 points to 2.4. The index of future company outlook rose 12.9 points to 15.3, its highest level in six months.

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