This is the 17th month in a row of contraction for Dallas Fed’s manufacturing survey as the headline print plunged to -20.8 from -13.9 (missing expectations of a hopeful bounce to -8.0 by 6 standard deviations). Despite the unequivocally good rebound in oil prices, sentiment in Dallas remains dismal with new orders crashing as even ‘hope’ has now given way to realism as the 6-month outlook tumbles back into negative territory.
This is a 6 standard deviation miss…
It appears higher oil prices are not helping…
Texas factory activity declined in May after two months of increases, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, fell from 5.8 to -13.1, hitting its lowest reading in a year.
Other measures of current manufacturing activity also reflected contraction this month. The new orders index fell more than 20 points to -14.9 after pushing into positive territory last month. The growth rate of orders index has been negative since late 2014 and fell to -14.7 in May after climbing to near zero in April. The capacity utilization and shipments indexes returned to negative territory after two months of positive readings, coming in at yearlong lows of -11.0 and -11.5, respectively.
Perceptions of broader business conditions were more pessimistic this month. The general business activity index declined from -13.9 to -20.8, and the company outlook index fell 10 points to -16.1.
Latest readings on employment and workweek length indicated a fifth consecutive month of contraction in May. The employment index moved down three points to -6.7. Sixteen percent of firms noted net hiring, and 22 percent noted net layoffs in May. The hours worked index posted a double-digit decline from its April reading, coming in at -11.8.
Charts: Bloomberg
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