Dallas Fed Manufacturing: 13th Consecutive Decline

Bottom Line: Manufacturing activity of Texas based businesses shrank for the 13th consecutive month, the lowest level since April 2009. So far the regional surveys indicate weaker activity (this, Empire and Philly), suggesting a modest negative surprise is possible for ISM Manufacturing due on February 1 (market consensus is 48.5% compared to 48.2% last month). Chicago PMI on Friday will be an important final indicator before ISM. The Dallas Fed Index FELL by 13.0 points in January to -34.6%, compared with market expectations for a smaller decline to -14.5%. This index is in negative territory and suggests that manufacturing activity in the Texas region contracted sharply. On an ISM-weighted basis, the index contracted moderately, indicating that the details were less negative than the headline figure. Production decreased moderately by 10.2%, the first decline in 4 months. New Orders fell moderately by 9.2%, the 2nd consecutive decline. Shipments dropped moderately by 11.0%, the first decline in 5 months. Unfilled Orders fell sharply while Inventories dropped, their 6th consecutive decline. Employment declined moderately by 4.2% while Average Workweek fell sharply. This portends weaker factory job creation in the upcoming January payroll employment report. Prices Paid decelerated moderately. The 6-Month Outlook deteriorated as business executives were less optimistic about the factory sector's prospects.