The general business activity index in the Dallas Fed’s Texas Manufacturing Outlook Survey rose to 1.0 in January after -5.1 in December (the report included annual revisions). Although a return to a positive reading is a welcome development, the level indicates activity is sluggish. Survey respondents reported concerns about prices in terms of input costs related to the changes in trade policy.
The survey’s index for uncertainty has only been in place since January 2018, but the level increased to 15.6 in January from 9.2 in December and indicates that businesses in the District’s factory sector have been uneasy extent since the threat of higher tariffs and lower exports became a reality around mid-2018.
The Dallas report is the last of the regional District Bank surveys of manufacturing. It has been a mixed bag, but the bottom line appears to be that by-and-large, manufacturing activity has fallen sharply in the last month or two and can generally be described as mediocre, at best.
Of the ISM equivalent indexes from the District Banks, only the Dallas Fed calculation signals any upside for the ISM Manufacturing Index when it is reported at 10:00 ET on Friday, February 1. However, the 53.6 in January from the 53.1 in December is small. In terms of magnitude it aligns with the mild changes signaled by the Philadelphia, Richmond, and Kansas City Feds. At this time I would not forecast more than a negligible change in the December ISM Manufacturing Index from the 54.1 in December and to the downside.
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