Monday, January 28, 2013

Dallas Fed: Regional Manufacturing Activity "Strengthens" in January

by Bill McBride on 1/28/2013 11:38:00 AM

From the Dallas Fed: Texas Manufacturing Activity Strengthens in January

Texas factory activity rose sharply in January, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, rose from 3.5 to 12.9, which is consistent with faster growth.

Other measures of current manufacturing activity also indicated stronger growth in January. The new orders index jumped 13 points to 12.2, its highest reading since March 2011. The capacity utilization index shot up from 2.1 to 14.0, implying utilization rates increased faster than last month. The shipments index rose 9 points to 21.9, indicating shipments quickened in January.

Perceptions of broader business conditions were more positive in January. The general business activity index increased from 2.5 to 5.5, its best reading since March. The company outlook index also rose sharply to 12.6, largely due to a drop in the share of firms reporting a worsened outlook from 10 percent in December to 6 percent in January.

Labor market indicators reflected a sharp increase in hiring but flat workweeks.
This was the strongest regional manufacturing report for January and above expectations of a reading of 4.0 for the general business activity index.

Here is a graph comparing the regional Fed surveys and the ISM manufacturing index:

Fed Manufacturing Surveys and ISM PMI Click on graph for larger image.

The New York and Philly Fed surveys are averaged together (dashed green, through January), and five Fed surveys are averaged (blue, through January) including New York, Philly, Richmond, Dallas and Kansas City. The Institute for Supply Management (ISM) PMI (red) is through December (right axis).

The average of the five regional surveys turned negative again.

The ISM index for January will be released Friday, Feb 1st, and these surveys suggest another weak reading - and probably indicating contraction (below 50). Note: The Markit Flash index was surprisingly strong in January.

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