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Economy in Brief

Dallas Fed Factory Sector Activity Index Weakens
by Carol Stone  December 28, 2015

The Federal Reserve Bank of Dallas reported that its general activity index of factory sector activity weakened for December to -20.1% from -4.9% in November. The latest reading is still marginally firmer than the May low of -20.8%. The current weakness was most evident in the pace of new orders and in prices. The growth rate of new orders was declining at 14.3% more of respondents than it was increasing and compared to -7.3% in November. Prices received for finished goods fell in December at 15.9% more companies than at those experiencing an increase in prices received, weaker than November's -12.1% balance.

However, some aspects of manufacturing activity improved in the December survey. Production improved at 13.4% more companies than those showing a decline versus just a 5.2% balance in November. Employment had a modest improvement, with 12.8% more companies adding employees instead of cutting them, compared with 11.6% in November. Wages and benefits and hours worked also had gains, remaining distinctly in positive territory.

Despite the positive moves in some measures of manufacturing, the outlook for overall business activity in the next six months fell into negative territory in December, the first such reading below zero since April. This latest general activity index was -1.4% compared to +7.3% in November. All of the major six-months expectations readings were positive, but lower than in November. Production is expected to increase at a net of 29.8% of companies, compared to 34.1% in November. The slowing of employment growth is more distinct, with 18.5% more respondents looking for their employment to increase than expect to cut it, down from 24.6% in November. New orders are expected to grow more rapidly at a net of 16.4% of companies, compared to 24.3% in November.

The diffusion indexes are calculated as the percentage of total respondents reporting increases minus the percentage reporting declines. Respondents this month totaled 116 manufacturing companies in Texas; they are asked whether output, employment, orders, prices and other indicators increased, decreased or remained unchanged over the previous month; the survey data were collected December 14-22. The data can be found in Haver's SURVEYS database.

Dallas Federal Reserve Manufacturing Survey (SA, Percent Balance) Dec Nov Oct Dec '14 2015 2014 2013
General Business Activity Versus One Month Ago -20.1 -4.9 -12.7 3.5 -12.0 8.3 2.2
   Production 13.4 5.2 4.8 16.4 -0.6 14.6 9.8
   Growth Rate of New Orders -14.3 -7.3 -7.7 -4.0 -12.5 4.7 0.1
   Number of Employees 12.8 11.6 0.3 10.0 1.2 11.5 5.6
   Prices Received for Finished Goods -15.9 -12.1 -9.5 4.2 -8.8 8.3 2.9
Business Activity in Six Months -1.4 7.3 4.1 13.0 3.8 17.4 11.0
   Production 29.8 34.1 34.3 33.1 31.1 42.7 37.1
   Future New Orders Growth Rate 16.4 24.3 19.6 26.2 20.5 31.5 25.0
   Number of Employees 18.5 24.6 19.1 20.2 15.3 28.6 23.1
   Wages & Benefits 29.7 33.6 33.3 38.0 33.1 43.0 38.2
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