Dallas Fed Manufacturing: 17th Consecutive Decline

Bottom Line: Manufacturing activity of Texas based businesses shrank for the 17th consecutive time, more than market expectations. So far the score for the regional surveys is 5 to 1 in favor of weaker activity (this, Chicago, Empire, Richmond and Kansas City over Philly), suggesting a modest negative surprise (below 50 print) is possible for ISM Manufacturing tomorrow (market consensus is 50.3% compared to 50.8% last month). The Dallas Fed Index FELL by 6.9 points in May to -20.8%, compared with market expectations for a decline by 8.0%. 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 also negative as the headline figure. Production decreased moderately by 13.1%, the first decline in the past 3 months. New Orders fell moderately by 14.9%, the 5th decline in the past 6 months. Shipments dropped moderately by 11.5%, the 3rd decline in the past 6 months. Unfilled Orders fell moderately while Inventories dropped, their 10th consecutive decline. Employment declined moderately by 6.7% for the 5th straight month while Average Workweek fell sharply. This portends weaker factory job creation in the upcoming May payroll employment report. Prices Paid increased moderately. The 6-Month Outlook deteriorated.