Dallas Fed Manufacturing: 14th Consecutive Decline

Bottom Line: Manufacturing activity of Texas based businesses shrank for the 14th consecutive month. So far the score for the regional surveys is 4 to 2 in favor of weaker activity (this, Chicago, Philly and Richmond over Empire and Kansas City), suggesting a modest negative surprise is possible for ISM Manufacturing due tomorrow (market consensus is 48.5% compared to 48.2% last month). The Dallas Fed Index ROSE by 2.8 points in February to -31.8%, compared with market expectations for a decline to -30.0%. This index is in negative territory and suggests that manufacturing activity in the Texas region contracted sharply. On an ISM-weighted basis, the index also contracted, indicating that the details were negative as the headline figure. Production declined moderately by 8.5%, the 2nd consecutive decline. New Orders fell sharply by 17.6%, the 3rd decline in the past 4 months. Shipments dropped modestly by 1.1%, the 2nd consecutive decline. Unfilled Orders fell moderately while Inventories dropped, their 7th consecutive decline. Employment declined sharply by 11.1% for 2nd straight month while Average Workweek fell moderately. This portends weaker factory job creation in the upcoming February payroll employment report. Prices Paid declined moderately for the 8th consecutive month. The 6-Month Outlook declined as business executives were less optimistic about the factory sector's prospects.