Dallas Fed Factory Sector Activity Index Remains Depressed

The Federal Reserve Bank of Dallas reported that its general activity index of factory sector activity remained negative during June. The index of general business conditions at -18.3 compared to -20.8 in May. The figure has been negative since 2015. The rate of decline has slowed, however, since January's -34.6. Production levels continued on balance to decline, suggested by a reading of -7.0, little changed from -6.4 posted one year ago. Growth in new orders also deteriorated; the reading of -18.6 was the weakest level of the economic expansion. Hiring activity also was under pressure. The employment index of -11.5 was the weakest reading since November 2009. Pricing power continued to suffer due to this continued weakness in business activity. The finished goods prices index eased to -5.2, although improved versus the weakest reading of the cycle (-15.5) six months ago.

Prospects for business activity look to have improved. The reading for six months from now rose to 2.6, its third positive figure this year, although it was down from 17.4 averaged two years ago. The production reading tread water at 27.1, as it has since the beginning of last year. Optimism about the outlook for new orders also was restrained as the index level of 20.3 was in the range of the last 18 months. Caution also showed up in employment prospects where the six month ahead figure of 12.2 mirrored the sideways path of the other future activity readings. Wages & benefits are expected to improve little as a result, and the reading of 31.6 was well below the 43.1 high averaged in 2014.

The diffusion indexes are calculated as the percentage of total respondents reporting increases minus the percentage reporting declines. The data can be found in Haver's SURVEYS database.

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