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First Cut: Dallas Fed manufacturing general business conditions remain narrowly positive in September

The general business conditions index in the Dallas Fed’s Texas Manufacturing Outlook Survey for September slipped to 1.5 from 2.7 in the prior month. It remained narrowly positive while the index for future business conditions fell into negative territory at -6.8 in September after 1.4 in August and was the lowest since -25.0 in January 2016. The uncertainty index improved to 13.3 in September from 18.6 in August. However, that might be read that manufacturing businesses in the Dallas District are less uncertain that conditions are going to be worse.

The details of the survey were generally more downbeat, but largely remained expansionary. New orders were down while remaining modestly positive (7.1 in September after 9.3 in August) and production also kept its modest pace (13.9 after 17.9), as did shipments (14.7 after 17.6). Delivery times expanded slightly, although these remained near enough to neutral to suggest they were neither too fast nor too slow (2.3 after 1.3). Inventories contracted for a sixth month in a row, if less so (-6.2 in September after -9.5 in August).

Employment regained its upward trajectory (18.8 in September after 5.5 in August) and was its firmest pace since 23.8 in October 2018. Wages (17.4 after 27.3), however, rose at the lowest pace since 15.1 in November 2017. The expansion of the workweek was more-or-less on trend with recent months (5.7 after 4.0).

Prices paid for raw materials rose sharply (20.3 in September after 9.8 in August) and were at the fastest pace since 20.6 in February. Some of this may be due to higher energy prices, but some is also from other input costs likely related to tariffs. Finished goods prices returned to rising after two months of contraction (1.0 after -2.6).

The Dallas-ISM equivalent index for September was up to 53.6 from 52.5 in August. Although the correlation between the Richmond and Philadelphia equivalent indexes and the ISM Manufacturing Index is better, that for Dallas is solid. At this stage, four of the five regional District Bank surveys suggest that the September ISM index could rise from the 49.1 in August when the numbers are released at 10:00 ET on Tuesday, October 1.


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