Dallas Federal Reserve Reports Relatively Weak Manufacturing Data for August

| August 30, 2010

The Dallas Federal Reserve reported the results of its manufacturing survey for August, with its production index indicating a third straight month of negligible growth.

“Texas factory activity was unchanged in August, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, came in at zero, posting a third consecutive month of little to no growth.

Most other indexes for current activity remained negative in August. The new orders index stayed at –9, implying incoming orders continue to fall. The capacity utilization and shipments indexes pushed deeper into negative territory, suggesting further contraction of business.

The general business activity index was negative for the third month in a row, but advanced in August as the share of respondents reporting improved activity rose from 10 to 15 percent. The company outlook index climbed back into positive territory after being negative for two months, as 23 percent of manufacturers said their outlook improved in August, compared with 13 percent in July.

The employment index turned negative for the first time in six months, largely due to the share of firms reporting layoffs rising from 15 percent in July to 23 percent in August, and hours worked contracted again.”

The following chart from Calculated Risk that we first posted last week now includes all regional manufacturing survey data for August.

The blue line, representing the average of all regional surveys for August, continues to suggest that the national PMI data to be reported on Wednesday will likely show a moderate decline, though it should also remain above the 50 level. However, regardless of the exact reading, the developing downtrend in the PMI from earlier this year will almost certainly be reconfirmed and shown to be gaining downward momentum.

Category: Commentary, Market Update

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