Dallas Fed Manufacturing Index Lower in August

The Dallas Fed Manufacturing index today released their figures for the month of August which showed a significant slump for the current month. This can be seen as a report that reflects the economy of the state of Texas, as Texas is a major influencing factor on the entire US economy. This is due to the state’s enormity, not just in size but also in agriculture/cattle, energy and also in technology and some other corporate businesses, Dell have their headquarters situated there.

The index today posted a 6.2% slump for the month of August against the anticipation of a 3.9% fall and the previous 1.3% drop it posted for last month, some business leaders told the Dallas Fed in July that they struggled to find qualified workers, including entry-level candidates who could do basic math.

"Department of Labor rules and regulations are slowing growth and reducing hiring due to increased management time spent on compliance and higher costs of labor," a survey respondent said in this month's report.

An increase in the rate of delivery times was reported for the month and there was also a drop in inventory stock, which will further result in subdued future production. Input prices were also seen growing at a faster rate for the month as it grew by 14.1% from 7.6%, while prices received reported their most sluggish decline since December 2014 as the report showed a very slow decline rate. The number of employees fell on the month and hours worked also declined, but wages and benefits increased at a faster pace.

There was a slowing in the future prospects index looking at the outlook 6 months into the future with the headline index at 7.0 from 18.4 previously. The anticipated growth in employment gained strength, however, with a stronger reading for wages and benefits at 38.1 from 30.0 previously, which was the highest reading for 11 months. Expectations for orders and production also remained strong for the month. The data will tend to reinforce expectations of rising wages costs and inflationary pressures with rising costs also liable to be a factor in discouraging higher employment.

A fabricated-metal industry worker reportedly expected the price of crude oil to recover but the shortage of skilled workers to drive wages up. "The recovery will be hampered by a shortage of skilled workers driving wages up," the person said. The downturn in oil prices that started in 2014 hurt many oil-rich communities in Texas. Overall factory output picked up in August; the production index rose to 4.5 after a near-zero print in July. A rebound in new orders showed that demand improved, and the growth rate of orders index turned positive for the first time in two years.

"A good indication of business outlook is how many calls we get from truckers looking for freight business," a respondent in primary metal manufacturing said. "On one day we received four calls. It was probably more calls than orders we received for the day."