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GIGANTIC MISS: Dallas Fed Manufacturing Index Plunges Into Negative Territory

Matthew Boesler
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flickr / david.nahas

The Dallas Fed's monthly survey of regional manufacturing activity is out.

The headline index plunged to -15.6. Economists expected +5.0 after last month's +7.4 reading.

The index was dragged lower by the prices paid for raw materials sub-component, which fell to 2.5 from 19.1.

Elsewhere, the biggest weakness was seen in the new orders sub-component, which fell to -4.9 from 8.7, the shipments sub-component, which fell to -0.4 from 10.6, and the production sub-component, which fell to -0.5 from 9.9.

Below is the full text from the release:

Texas factory activity was flat in April, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, fell from 9.9 to -0.5. The near-zero reading indicates output was little changed from March levels.

Ebbing growth in manufacturing activity was reflected in other survey measures as well. The capacity utilization index came in at 2.7, down from 5.5, and the shipments index fell to zero after rising to 10.6 in March. The new orders index fell nearly 14 points to -4.9, posting its first negative reading this year.

Perceptions of broader business conditions worsened in April. The general business activity index plummeted from 7.4 to -15.6, reaching its lowest level since July 2012. The company outlook index turned negative as well, declining from 9.6 to -2.2.

Labor market indicators remained mixed. The employment index has been in positive territory so far in 2013 and moved up to 6.3 in April. Twenty percent of firms reported hiring new workers compared with 14 percent reporting layoffs. The hours worked index pushed further negative, from -2.4 to -6.5.

Price pressures abated in April. The raw materials price index dropped from 19.1 to 2.5, posting its lowest reading since last July. The finished goods price index dipped to -3 after posting positive readings throughout the first quarter. Thewages and benefits index edged down from 18.5 to 17.7, although the great majority of manufacturers continued to note no change in compensation costs. Looking ahead, 34 percent of respondents anticipate further increases in raw materials prices over the next six months, while 21 percent expect higher finished goods prices.

Expectations regarding future business conditions fell markedly in April. The index of future general business activity fell 22 points to -6.7, its first negative reading in five months. The index of future company outlook also plunged, dropping from 21.6 to 6. Indexes for future manufacturing activity fell slightly this month.

The Dallas Fed conducts the Texas Manufacturing Outlook Survey monthly to obtain a timely assessment of the state’s factory activity. Data were collected April 16–24, and 94 Texas manufacturers responded to the survey. Firms are asked whether output, employment, orders, prices and other indicators increased, decreased or remained unchanged over the previous month.

Survey responses are used to calculate an index for each indicator. Each index is calculated by subtracting the percentage of respondents reporting a decrease from the percentage reporting an increase. When the share of firms reporting an increase exceeds the share reporting a decrease, the index will be greater than zero, suggesting the indicator has increased over the prior month. If the share of firms reporting a decrease exceeds the share reporting an increase, the index will be below zero, suggesting the indicator has decreased over the prior month. An index will be zero when the number of firms reporting an increase is equal to the number of firms reporting a decrease. Data have been seasonally adjusted as necessary.

The table below shows a breakdown of the various sub-components of the headline index:

Dallas Fed manufacturing sub-components

Dallas Fed

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