US: Dallas Fed Mfg Survey

January 30, 2017 09:30 CST

Actual Previous Revised
Production Index 11.9 13.8 14.8
General Activity Index 22.1 15.5 17.7

The Dallas Fed joins other regional reports pointing to strength for the nation's factory sector. The production index did slow but remains in the double digits, at 11.9 in January vs a revised 14.8 for December. And new orders are on the rise, at 15.7 vs December's 10.1 for the strongest showing since April 2014.

Unfilled orders, at a modest looking 5.2, are the strongest since June 2012. Employment is another positive, at 6.1 vs minus 3.4 for the best showing since December 2015. And the general activity index underscores the strength, at 22.1 vs an upward revised 17.7 and the best reading since all the way back at the beginning of the cycle in April 2010. Price data show slightly increasing pressures while inventories, reflecting the production strength, are on the decline.

This report offers a special look at the oil patch, underscoring that 2-1/2 tough years following the price collapse for oil are finally behind the sector.

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.