Dallas Fed Big Miss, Prints at 11.5 On Expectations Of 18.4, Survey Respondent: "All Of Our Raw Material Costs Are At Record Highs"

Tyler Durden's picture

The Dallas Fed diffusion index is out, coming at a disappointing 11.5 on expectations of 18.4, with the market completely ignoring it. After all good diffusion index data is to be bought even if it confirms surging inflation, and bad diffusion index data is to be avoided. And while the component data is pretty bad (projected wages and benefits 6 months ahead plunge by 12 points as do Capital Expenditures, as firms refuse to spend any more organic cash on growth, offset by expectations of lower input costs, which remains TBD), the true nuts and bolts of the index can be gleaned from the respondent surve, presented below, although the most relevant one is here: "Prices are high,
which makes for lower volume. The supply of cattle is limited. The cost
of grain for livestock is unusually high because of high corn prices,
partly attributable  to ethanol subsidies.
All of our raw material costs are at record highs. The cost of diesel also hurts us. A weak dollar is not good for us."
No surprise there.

Comments from Survey Respondents
These comments were selected from respondents' completed surveys and have been edited for publication.

Plastics and Rubber Products Manufacturing
We've seen a drop
off of new orders and particularly repeat orders, perhaps related to
the expiration of stimulus funds in the general economy.

Nonmetallic Mineral Product Manufacturing
Two factors have
resulted in an increase in demand: consolidation of a sister location
into our location and the closure of the sister location, and exit from
the industry by a competitor in Florida. These factors have
significantly improved order flow through our location. We have also
seen a minor increase in order flow from existing customers, indicating
the beginning of a recovery in the housing sector. Commodity-based raw
material prices have begun to increase, partially due to higher energy
prices and a weak U.S. currency. As a result, we will seek a small
price increase for our products within the next two months. The impact
of the recent situation in Japan on the world economy has yet to be
determined, so we remain cautiously optimistic at this time.

Fabricated Metal Product Manufacturing
A large new project with a local maker of high-end furniture may double our volume of shipments.

Our oil field service,
coal mining and minerals mining customers continue to accelerate their
demand. Other markets remain soft. We are adding to our labor resources.
The only area of difficulty we have is hiring and retaining qualified

Machinery Manufacturing
We continue to see
a slow improvement in demand in our markets, but our industrial
customers remain very cautious and cost-conscientious. My impression of
the general economy is less optimistic than a month ago. Costs that
matter to consumers, like food and fuel, are going up very
significantly. The uncertainties in the Middle East and Japan are
affecting everyone's confidence.

Chemical Manufacturing
We are seeing a small slowdown in new orders thus far this month, but we expect it to pick back up to February-type numbers.

Demand seems to be
gaining traction slowly, but we are concerned about the effect of
higher oil prices, particularly on consumer demand.

Furniture and Related Product Manufacturing
The outlook seems
to be on the edge again, and we are very unclear as to the direction.
The last three weeks, which are normally dramatically upward, are two
weeks up and one week down. How much world events are playing on this is
unknown, but gas prices are dampening business. All of our dealers are
certain on that one point.

Computer and Electronic Product Manufacturing
Commercial aircraft business is anticipated to increase. Military and defense business is fairly flat.

About 10 percent of our
revenue is sourced from manufacturing sites in Japan that have been
affected by the recent earthquake. About 60 percent of our products are
sourced from other facilities, and it is possible to move all
production to other sites over time. Due to our manufacturing
processes, most of our WIP (work in process) to meet the current
quarter demand is in final stages in other parts of the world. Hence,
supply impact will be greatest in second quarter 2011. Near-term, about
10 percent of our revenue ships into Japan, and customer sites vary
from being fully back on line to not knowing when production would
resume. The impact on demand is not known at this point.

Food Manufacturing
Prices are high,
which makes for lower volume. The supply of cattle is limited. The cost
of grain for livestock is unusually high because of high corn prices,
partly attributable to ethanol subsidies.

All of our raw material costs are at record highs. The cost of diesel also hurts us. A weak dollar is not good for us.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Cognitive Dissonance's picture

Ho Hum. Market still climbing. QE 3.0 being priced in.

lizzy36's picture

Alas there will be NO QE3 this year. Looking forward to when it is priced out.


Harlequin001's picture

No surprises there then... bullish...

'The cost of grain for livestock is unusually high because of high corn prices, partly attributable to ethanol subsidies.'

Nothing to do with more new money chasing corn then...


QE3 is a certainty, it's just a matter of how many and how much.

Popo's picture

The Fed consistently demonstrates their bizarre inability to perceive causality.

It's kind of like the old fable about the man who attempts to train his horse to live without eating any food.  The training progresses extremely well day after day, week after week...   Weeks later the man claims "You know it would have worked, but I had some bad luck and my horse died".

...And quantitative easing would have worked too... if it wasn't for that dang coincidence of spiraling commodity prices.





Harlequin001's picture

Absolutely old stick...

Chuck Walla's picture

Its not that the Fed cannot perceive causality, but that it is very inconvenient to be faced with one's failure. Especially when the mandate comes from the bankers and not the people truly impacted by the policy failures.  In other words, tough titty said the kitty when the cow ran dry.

blindfaith's picture

It is not that this falls on deaf ears, but on egotists and narcissistic men who will not be convinced that they caused their child to shoot helpless classmates.  Same thing, only when catastrophic events take place, will their folly be perceived but not admitted to by them, and we can hear them sing in unison..."I had bad judgement, if I'd only known or been told". 

 Off the hook by the ever forgiving American people with memories two seconds long and far to busy with app's.

I don't understand why this should be any surprise to anyone who has been awake behind the big desk for the last 90 days.

FOC 1183's picture

that is certainly the current trend in FedSpeak.  But...will the process of pricing it out be the excuse for bringing it back?

Id fight Gandhi's picture

I agree no QE 3

How? Why? Everything is so fucking great and running tip top. World is burning and everyone buys Netflix and priceline.

alien-IQ's picture

because they want things to be even bettererer

blindfaith's picture

tanks, I nedded sumthin ta luagh at snice I saw my blii for coper go sky highh.

DarkMath's picture

Sorry Lizzy,

You're wrong. There will either be an explicit QE3 or the fed will just end QE2 without shrinking its balance sheet. In the latter case that is equivalent to QE2 in perpetuity because the Fed's balance sheet is now so large just re-investing the maturing bonds they bought is equivalent to QE2.

In other words the Fed's balance sheet is so big unless it shrinks there will be QE to infinity. QE3 would be an INCREASE in the Fed's balance sheet beyond the obscene level it is now.

See this article from Jim Rickards:





chairsatan's picture

I don't think this is accurate - without an explicit new QE program, the Fed only has its conventional OMO tools.  Their normal OMO auctions are for t-bills, not long bonds and certainly not toxic waste.  So as the long bonds and toxic waste matures, they can't roll it over using conventional tools, and without another QE they will hit the zero bound on short term rates while rates on the long bond and mortgages go vertical.  I think.

DarkMath's picture

"they can't roll it over using conventional tools"

Do you have a link confirming that?

blindfaith's picture

It is all guess work, because WE have NO idea what they are doing until after they did it.

  Look at the 120 billion "in other Assets" ....WHAT??? How did THAT happen while I was at lunch, that is what I would like to know.  120 billion is the combined GDP of 80% of the nations of the world...and it is a casual foot note on their balance sheets? 

alien-IQ's picture

looks like QE XXX is priced in. I'm looking forward to that asteroid hitting the earth rally...Homebuilders and REIT's are gonna rock.

TeamAmerica's picture

Big dittos on the asteroid strike.   We deserve a good one. :-)

Rogerwilco's picture

After being dead wrong for years, I'm finally seeing the light. Empty strip malls are a sign of growth and opportunity in CRE because they're proof positive that the developers are smart enough to screw the banks. Similarly, higher wholesale prices and stagnant wages show that employers have workers under their thumbs, so who needs to worry about margins? If the whiners need a break from the mandatory 75 hours a week, Uncle Sam has a 99 week paid vacation plan waiting for them. It's all good, ZIRP, S&P 2K, and 10% unemployment can coexist in the land of the free.

MachoMan's picture

All that vacant CRE property might as well be dumped on the RRE shadow inventory list...  because the services and retailers that filled those spaces, or at least a significant portion of those spaces, are gone forever.  The only possible use will be either governmental buildings or conversion to residential living...

blindfaith's picture

Actually we will need the space so we can store all those " we will create jobs" promisses from that last election.

Or has everyone gotten side-tracked and forgotten?

SheepDog-One's picture

'Market still climbing'? I dont really get the attitude sweeping across america today, 'nothing we can do, may as well bend over some more'....market climbing is DOW up 20 points? I think americans like getting fucked in the ass daily.

SparkyvonBellagio's picture

TIPs are still paying about 3-4% ? LOL

DeadFred's picture

Of course they are.  Haven't you heard inflation is very low, but at least deflation ins't so much a threat now.  TIPS always seemed like a bad investment to me, you have to rely on the governments inflation stats to get paid.

Boilermaker's picture


I can see Benny racing toward the 'wall of worry' with a pole vault stick and a bag of $7B in POMO.

They'll just jack it even harder.

Spalding_Smailes's picture

The drum beat of no QE 3 gets louder ...... BOOM - boom - boom - BOOM - boom - boom 


The market has 8 quarters of earnings getting better every time for 95% of the businesses .... Apple, Starbux, IBM, CAT, Exxon, McD's, Macy's, LuLu, AT&T, Ford,Google, 3M, Deere, Loews, PG&G, Pepsi, Amgen ect .......

Things getting better will crush QE3 expectations and carry stocks moving forward and the dollar, upp, up and away ....

Shameful's picture

Here is a question, why not just go into commodities?  Since you expect a massive manufacturing and economic boom to happen won't that put pressure on commodities?  I have to assume in the midst of a US industrial/economic boom people would drive more and use more copper.  If your wrong and it's just fraud and money printing that will also reflect well in commodities.

Spalding_Smailes's picture

Commodities have run up because of QE2 and China's building boom, after thats over they will get hit. This will help businesses moving forward, because quoting - bidding for work is so tight the pass along is not taking place my best friend owns one of the biggest manufacturing plants in the midwest ..... He's loaded with work and the quotes are flooding in, but margins are still tight ..... He just had someone in from Germany who will be building machines for Alcoa in the USA, they want this manufactured in the US, shipping cost from Europe would kill them ....


After the middle east quiets down, QE is over, oil will get crushed and everyone will be happy ....

SheepDog-One's picture

Well certainly people will be using more lead and copper soon.

Johnny Lawrence's picture

Wow, Spalding...you think stocks will continue "moving forward" if there is no QE3?  I agree with you that commodities will get hit if there is no QE3, but thinking equities will continue their rise is mentally retarded.

equity_momo's picture

Climbing a wall of worry? This market is climbing the Mount Everest of BS.

Boilermaker's picture

No kidding, but the cliche' is just so motivating.

alien-IQ's picture

hopefully they are also mandated to take lots of baths, drink lots of tap water and eat the local sushi.

blindfaith's picture

Welcome to ZH...you are really funny...and WE need it.  Seriously!!! You have a great sense of humor...to bad someone from Goldman didn't appreciate it.

SilverRhino's picture

Notice the people giving the orders are NOT staying and living in Tokyo.  Fucking hypocrites.  

andybev01's picture

' Some employees praised the level of information about radiation levels and safety the firm has communicated to them.'



RobotTrader's picture





No impact whatsoever.  They can raise prices and the consumer will gladly pay.

Once the U.S. Consumers engage in a spending orgy, and start eat out at restaurants, they cannot be stopped.

After getting dragged through the mud in 2008 and 2009, they are tired of gloom and doom and they are ready to start living it up and spending wildly.

Spalding_Smailes's picture

All the clowns that think we are in a depression .....

Look around, stores packed even with gas at $3.80, when QE 2 is over oil will get monkey hammered and people will be giddy this summer swiping those cards spending junkies need a fix ....

Cleverbot's picture

No I have no idea what that is but go on and explain it to me.

TeamAmerica's picture

Missing the connection between QE2 and the price of oil.    Ending QE2 increases oil supply...how?

LawsofPhysics's picture

"when QE 2 is over" ---  Bahahahahahahahah hahahahahaha Bahahahahahaha.  QE will never end, stealth QE will take it from here.  Very funny indeed.  Even the Fed, will no longer fight the Fed.  Bahahahahahahaha.  Thanks for the laugh this morning.

lieutenantjohnchard's picture

hey i like that! even the fed won't fight the fed. trademark it, my man.

Spalding_Smailes's picture

Now its stealth QE ? So gold should not drop .....

Why is it only at 1,417 with all the new black swans that have flown into town and the dollar fall, its done nothing since Oct 20th, ..... ? But, but, everyone must know QE can't stop as you say, but it's not being priced in, why ?


You should do stand up at the funny farm ..... A modern day Richard Pryor routine .... 

LawsofPhysics's picture

Gold will drop, some, only to correct relative to silver.  The innovators are indeed getting back in the game, but the up front costs for doing business remains high.  Margin compression big time.  Spinning paper on Wall Street does not create real value, period.

Harlequin001's picture

Hey Spalding, don't walk into the light...

tmosley's picture

Looks like you've got almost enough rope.  

How is the government going to continue operating with no more QE?  The Fed is buying 70% of treasury issuance.  Japan is down and out.  Where is the money going to come from?  The sky?

Rogerwilco's picture

All the clowns that think we are in a depression

Nope, no depression here...



The states conspired to make tax collections look worse than they really are.

topcallingtroll's picture

Yeah...I got burned out on doom and gloom too. Life is short. Spend your money and live it up. You only live once. Now back to my wife and our girlfriend. Do I have a cool wife or what!

overmedicatedundersexed's picture

top how much air pressure in that blow up doll you call a girl friend?? lol