Dallas Fed index plunges

Texas factory activity declined sharply in March, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, plummeted from 16.4 to -35.3, suggesting a notable contraction in output since last month.

Other measures of manufacturing activity also point to a sudden decline in March. The new orders index dropped to -41.3, its lowest reading since March 2009 during the Great Recession. Similarly, the growth rate of orders index fell to -44.9. The capacity utilization and shipments indexes fell to -33.4 and -33.8, respectively, also the lowest readings since the Great Recession. Capital expenditures declined sharply, with the index dropping from 6.9 to -34.3.

Perceptions of broader business conditions turned quite pessimistic in March. The general business activity index plunged from 1.2 to -70.0, and the company outlook index fell from 3.6 to -65.6. Both March readings are the lowest since the survey began in June 2004. The index measuring uncertainty regarding companies’ outlooks surged from 11.0 to 62.6.

Labor market measures indicate employment declines and shorter workweeks this month. The employment index fell to -23.0 from its near-zero reading in February. Three percent of firms noted net hiring, while 26 percent noted net layoffs. The hours worked index dropped to -22.4.

Prices declined in March, and wage growth slowed. The raw materials prices index fell from 12.8 to -5.9. After hovering around zero for the past four months, the finished goods prices index dropped to -9.2. Meanwhile, the wages and benefits index remained positive but retreated 17 points to 5.5.

Expectations regarding future business conditions turned negative in March. The indexes of future general business activity and future company outlook dropped significantly to -39.5 and -37.7, respectively. Other indexes for future manufacturing activity also fell sharply into solidly negative territory.