US: Dallas Fed Mfg Survey

Mon Nov 27 09:30:00 CST 2017

Consensus Consensus Range Actual Previous
General Activity Index 24.5 20.0 to 28.0 19.4 27.6
Production Index 15.1 25.6

The pace of Dallas factory growth, as in most other regions this month, eased back in November. The Dallas general activity index is at 19.4 this month vs an outsized 27.6 in October. All key readings are now at more sustainable levels: production at 15.1 vs October's 25.6, shipments 16.7 vs 20.9, employment 6.3 vs 16.7. Input price pressures and selling price traction are both holding steady but wages cooled, down 8 points to 14.2 and slightly below the average for this reading. But hinting at capacity pressures on employment and production in the coming months are new orders which, despite a 4.8 point dip, are still at a very strong 20.0.

Indications from the regional reports have been at or near record highs all year as have signs of strains in these reports including elevated employment readings and lengthening delivery times. Actual factory data out of Washington are only now beginning to show the acceleration first signaled by the various diffusion reports.

Market Consensus Before Announcement
Hurricane Harvey proved to have little effect on the Dallas Fed general activity index which has remained throughout. New orders have been especially positive and layoffs unusually low. Econoday's consensus for November's general activity index is 24.5.

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.