US: Dallas Fed Mfg Survey


Mon Jan 26 09:30:00 CST 2015

Consensus Consensus Range Actual Previous Revised
Bus Activity Index 4.0 -5.0 to 7.3 -4.4 4.1 3.5
Production Index 0.7 15.8 16.4

Highlights
Texas factory activity was flat in January. The production index, a key measure of state manufacturing conditions, came in at 0.7, indicating output was essentially unchanged from December. Zero is the breakeven point between growth and contraction with zero indicating that activity was unchanged.

Other survey measures also reflected sluggish activity during the month. The capacity utilization index fell to 5.1, its lowest reading in five months. The shipments index plunged from 20.8 to 6, due to a much higher share of respondents noting a decline in shipments in January than in December. The new orders index moved down from 2.7 to minus 7.7, registering its first negative reading since April 2013.

Perceptions of broader business conditions worsened this month, with both the general business activity index and the company outlook index dropping below zero for the first time in 20 months. The general business activity index dropped to minus4.4, and the company outlook index fell 13 points, coming in at minus3.8.

Labor market indicators reflected unchanged workweeks but continued employment increases. The employment index was 9.0 in January, slightly below last month's level but close to its average reading over the past two years. Twenty percent of firms reported net hiring compared with 11 percent reporting net layoffs. The hours worked index edged down from 0.7 to minus 0.1, indicating no change in hours worked in January. Wage pressures eased, while input and selling prices declined in January.

Indexes reflecting future business conditions fell notably in January. The index of future general business activity plummeted from 13 to minus 6.4. The index of future company outlook plunged from 21.8 to 2.5, its lowest reading in more than two years. Indexes for future manufacturing activity also declined this month but remained in positive territory.

Market Consensus Before Announcement
The Dallas Fed general business activity index fell in December from 10.5 to 4.1. The company outlook index was almost unchanged at 8.4, with 21 percent of respondents noting an improved outlook. The production index, a key measure of state manufacturing conditions, rose strongly from 6 to 15.8, indicating output grew at a faster pace in December.

Definition
The Dallas Fed conducts this monthly survey of manufacturers in Texas regarding their operations in the state. Participants from across the state represent a variety of industries. In the latter half of the month, the questions for the manufacturing survey are electronically transmitted to respondents and answers are collected over a few days. About 100 manufacturers regularly participate in the Dallas Fed survey, which began collecting data in mid-2004. Participants are asked whether various indicators have increased, decreased or remained unchanged. Answers cover changes over the previous month and expectations for activity six months into the future. The breakeven point for each index is zero with positive numbers indicating growth and negative numbers reflecting decline.

Description
Investors track economic data like the Dallas Fed Manufacturing Survey to understand the economic backdrop for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers a moderate growth environment that will not generate inflationary pressures. The Dallas Survey gives a detailed look at Texas' manufacturing sector, how busy it is and where it is headed. Since manufacturing is a major sector of the economy, this report can have a big influence on the markets. Some of the survey indexes also provide insight on inflation pressures -- including prices paid, prices received, wages & benefits, and capacity utilization. The Federal Reserve closely watches this report because when inflation signals are flashing, policymakers can reset the direction of interest rates. As a consequence, the bond market can be highly sensitive to this report. The equity market is also sensitive to this report because it is an early clue on the nation's manufacturing sector, reported in advance of the ISM manufacturing index and often in advance of the NAPM-Chicago index.