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First Cut: Dallas Fed manufacturing general business conditions expand modestly in the present, future looks a bit brighter

The Dallas Fed’s manufacturing general business conditions index slipped to 8.3 in March from 13.1 in February, continuing to expand modestly after resetting to a slower pace at the end of 2018. The future business conditions index showed that the outlook is a bit brighter at 19.7 in March from February, probably reflected reduced uncertainty. The uncertainty index dipped to 3.4 in March from 4.1 in the prior months, continuing to fade after the recent spike higher.

The index is not computed from components but the subindexes followed the tone of the headline number. New orders were lower (2.4 in March after 6.9 in February) while order backlogs were about unchanged (0.5 after 0.7). Shipments faded (5.8 after 10.7) while delivery times were up (4.1 after-1.3) and inventories rose above neutral (1.7 after -2.5). Employment picked up the pace slightly (13.1 after 12.6) even as the average workweek expanded more quickly (4.6 after 1.8). Signs of wage growth reflected renewed upward momentum (30.1 after 28.9) and was the highest since 32.9 in October 2018.

Prices paid ticked down a bit to 20.4 in March from 21.8 in February. Energy costs are not boosting other commodity prices increases. However, prices received rose to 6.9 after 5.2. There remains some pricing power for the factory sector.

The Dallas-ISM equivalent index — calculated from the five subindexes closest to the ISM Manufacturing Index components — was up somewhat to 53.3 in March after 52.6 in February and was on trend for the past five months. The Dallas-ISM equivalent index has a weaker correlation to the ISM Manufacturing Index than the other District Bank regional surveys (0.734). However, its general business conditions index does tend to follow the ISM number well (0.810). Overall, the numbers suggest a mild increase in the ISM Manufacturing Index from the 54.2 in February when it is reported on Monday, April 1 at 10:00 ET.

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