Anyone betting that manufacturing will continue to lead the US economic recovery might think twice after reading comments from survey respondents in Dallas Fed’s April Texas manufacturing outlook.
Similar to Philly Fed’s gauge last week, Dallas headline number tanked, to 8.1 from 24.1 in March. The Philly survey’s headline number fell to 18.5 from 43.4 in March, but unlike the Dallas survey, Philly doesn’t include respondent comments in its report.
Down in Texas there’s a fair measure of cautious optimism among survey respondents, and plenty of concern about high costs and soft demand. Here’s one from a plastics and rubber products manufacturer that sounds pretty good:
“We are very encouraged by the breadth of activity with our cross section of customers in the Dallas–Fort Worth area. It is not just a few companies with increased requirements for plastic parts, but pretty much all of our diverse customer base.”
Now here’s one from the other end of the spectrum, a furniture/related product manufacturer: “Our industry has hit another brick wall. Rapidly increasing costs and fuel costs have shocked the consumer away from any nonmandatory spending. They normally adjust, but it may take several months.”
This one from a fabricated metal product maker speaks volumes on why companies have returned to a high level of profitability, and don’t show much inclination to ramp up hiring:
“The rate of improvement and the actual improvement in volume of products shipped is only forecasted to achieve production levels that are 50 percent of 2007 levels. We have 25 percent fewer manufacturing plants and 40 percent fewer people than in 2007. As a result of previous investments in efficiency improvements (technical systems and automation), we can produce the same amount of products as we did in 2007 with vastly less cost.”
Still looking for hiring to gain momentum? Don’t hold your breath.
Both Philly and Dallas showed a steep drop in new orders — Philly fell to 18.8 from 40.3; Dallas to 4.3 from 13.6 — which is a sharp contrast to the NY Fed’s Empire State survey from a week earlier, where new orders rose to 22.34 from 5.8. NY also saw a moderate rise on the headline index, thanks to that new-order strength.
Richmond Fed releases its April business activity survey tomorrow, and while these regional manufacturing reports are interesting, they’re typically upstaged by the ISM monthly report. That gauge is due a week from today.