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US: Dallas Fed Manufacturing Survey
| Consensus | Consensus Range | Actual | Previous | |
| General Activity Index | 7.0 | 7.0 to 9.0 | 13.4 | 9.8 |
| Production Index | 15.8 | 29.5 |
Highlights
Business conditions in the Texas manufacturing sector improve in October though current production slows. The general business activity index rises to 13.4 in October from 9.8 in September, topping the expected 7.0 figure.
Current production growth slips with the production index at 15.8 in October versus 29.5 in September. This index remains above the series average, and the result indicates slower but still solid expansion.
Other measures of manufacturing activity also show slower growth. The capacity utilization index is down 10 points to 13.7, and the shipments index drops 16 points to 8.4. The new orders index plunges to 9.3 from 30.7. Note these indexes all remain positive, indicating growth from the prior month, just at a less robust pace.
News is not good on the inflation front where the index of prices paid for inputs is up again to 55.3 from 52.2, well above its series average of 28.1. This is extremely worrisome and presumably has much to do with the slowing overall pace of growth. Prices received are at 29.9 versus 27.7 in September. That suggests firms have some pricing power but not enough to offset these input price problems -- mostly flowing from rising costs for energy and other commodities. With the US expected to strike heavily against Iran after Nov. 3, these price pressures appear unikely to improve soon.
Market Consensus Before Announcement
Manufacturing is seen continuing its slow expansion with the Dallas Fed index at 7 for October versus 9.8 in September.
Definition
The Dallas Fed Manufacturing Survey tracks factory activity in Texas on a monthly basis. Firms are asked whether output, employment, orders, prices and other indicators increased, decreased or remained unchanged over the previous month. Responses are aggregated into balance indexes where positive values generally indicate growth while negative values generally indicate contraction. About 100 manufacturers regularly participate in the survey.
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.