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Tuesday, October 27, 2015 11:44 AM


Regional Fed Reports Five for Five in Contraction; Texas Region Worsening, Richmond Negative Again


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Dallas Regional Activity Dives Deeper Into Contraction

Yesterday the Dallas Fed general activity index slipped further into contraction to -12.7, well below the Bloomberg Consensus Estimate of -6.0, and also lower than the lowest guess of -7.0.

Look no farther than to the Dallas Fed manufacturing survey for evidence on how severely low oil prices are affecting the energy sector. Contraction for the general activity index deepened to minus 12.7 in the October report from September's minus 9.5. This is the 10th negative reading in a row. New orders are now negative for a 12th month in a row, at minus 7.6, while unfilled orders are on a similar streak, at minus 3.1. Production is positive for a second straight month, at plus 4.8 in a reading that, however, is very likely to return to the negative column given how low orders are. Hiring is flat with price readings, especially for finished goods, in contraction. This report joins those from Empire State, Philly Fed, and Kansas City which are all pointing to another month of contraction underway for the nation's factory sector.
Richmond Makes it Five for Five

Today's Richmond Fed report makes it five for five in contraction, albeit just barely, at -1. Bloomberg Econoday reports ...
The Richmond Fed makes it five for five, that is five regional Fed reports all showing negative headlines for October. The Richmond Fed index did improve, however, to minus 1 from September's minus 5. New orders came in at zero following the prior month's steep contraction of minus 12. But backlog orders, at minus 7, are down for a third month which is not a plus for future shipments or employment. Shipments in October fell to minus 4 from minus 3 which is also a third month of contraction. Hiring is still positive, unchanged at plus 3, but continued growth here is uncertain. Price data are mute with prices received showing slight contraction as they are in other reports. This morning's report on durable goods orders showed another month of broad weakness in September and this report, together with the other regional reports, point to another weak month for the factory sector in October.
Durable Goods Weaker Than Expected

Rounding out the manufacturing weakness, earlier today I reported Cracks in the Economy Widen as Durable Goods Orders Sink. Here are some additional charts.

Durable Goods New Orders



Durable Goods New Orders Excluding Transportation



Transportation, especially large aircraft orders can skew the numbers. The above chart separates out those orders, providing a different perspective.

Mike "Mish" Shedlock

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