The Dallas Fed’s Texas Manufacturing Outlook Survey managed to surprise with a positive in the general business conditions index at 2.7 in August after three months of negative readings. However, the index for expectations six months from now fell to 1.4 in August from 6.0 in July, in anticipation of at best lackluster expansion in the near future. The index measuring manufacturing business uncertainty was up to 18.6 in August after receding to 9.7 in July from 21.6 in June.
In spite of the increase, the detail indexes reflect month-to-month volatility and little evidence that brief upswings in activity will turn into sustained momentum higher.
The index for new orders rose to 9.3 in August after 5.5 in July and was the highest since 9.8 in April. The timing suggests that manufacturers are seeing flashes of order activity when the new cycle hints at a respite in the vagaries of trade policy. Order backlogs were only partially replenished at -0.2 in August after -2.8 in July.
The shipments index was up to 17.6 in August after 10.2 in July, suggesting that orders are being filled quickly and moved out. Delivery times rose to 1.3 in August after -4.8 in July. Recent movement has centered about near neutral with little variation that indicates goods are moving neither too fast nor too slow. Finished goods inventories remained in contraction for a fifth month in a row and were fairly steady at -9.5 after -10.6 in the prior month. Manufacturing businesses are being careful not to accumulate stocks while recession fears are elevated.
Prices paid saw less upward pressure in August at 9.8 after 17.0 in July and probably reflected the softening in energy costs. Prices received were at -2.6 in August from -1.7 in the prior month and showed that business continued to have little pricing power.
The Dallas-ISM equivalent index was up to 52.5 in August after 51.5 in the prior two months. The calculation uses the five components most like those in the ISM Manufacturing Index. The slightly higher reading is due to the gains in new orders and production. However, the Dallas index isn’t the best correlation with the national number. I would put more weight on the reports out of Philadelphia (which declined in August from July) and Richmond (which hasn’t been released yet) as a signpost for the ISM Manufacturing Index when it is released at 10:00 ET on Tuesday, September 3. Still, any indication that sluggishness in manufacturing isn’t monolithic is welcome.
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