|General Activity Index||15.0||14.5 to 18.5||16.8||16.9|
The strongest growth of the economic expansion continues apace for the Dallas manufacturing report where the general activity index held steady at a higher-than-expected 16.8 and with production growing very solidly at 15.4. Shipments, in distinction to production, are up 3 points to 9.5. New orders improved to 11.5 with employment steady at a constructive 8.5. Costs are rising but at a slightly lower rate while selling prices, in confirmation of strong demand, are showing solid traction. Wage pressures are tangible but steady. Six-month sentiment readings are solidly positive but down from post-election peaks.
Delivery times, which in last week's Empire State and Philly Fed reports showed significant delays consistent with strong activity, also slowed in this report but only marginally. Times, at 1.4 in April, compare with 10.1 and 5.8 for March and February. Still, given the strength of production and shipments, increasing delivery delays for the May report wouldn't be a big surprise. Manufacturing production at the national level stumbled in March's heavy weather but the uninterrupted gains in the regional reports, including this one which is getting a special lift from improved oil prices, are pointing to a major April rebound.
Market Consensus Before Announcement
The Dallas Fed general activity index has emerged from 2-1/2 years of deep contraction with surging strength that points to recovery for the energy sector. At a consensus 15.0 in April, forecasters see the general activity index holding at a very strong rate of growth.
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.
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.