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Dallas Fed Confirms Economic Re-Contraction, Respondents Complain About "Record Low Margins"

Tyler Durden's picture


And following the continuing plunge in new homes for sale reported earlier, we get the second validation of the theory that the Q2 GDP is about to get the rug pulled from underneath it. The April Dallas manufacturing number came precisely at the borderline we expected earlier would mean an outright downgrade of Q2 economic data by Goldman, or 10.5%. Of note: The production index, a key measure of state manufacturing conditions, moved down from 24 to 8, suggesting slower growth in output." We thing the proper word is "plunged." This is as expected considering our long held assumption that the Japanese economic collapse is already impacting the US. In addition to production, other indicators that saw a collapse were volume of shipments, down 10.9 and the average employee workweeks, which tumbled by over 13. But at least Bernanke is getting his hyperinflation wet dream on: average wages increased by 4. Probably the most important index: prices paid, barely budged, printing at 56.6 compared to 57.2 last month. We are confident that Hatzius will have some very unpleasant words when commenting on this latest contractionary data point. As for the respondents, they confirmed that the bulk of the broader inflation is about to hit, as manufacturers can no longer internalize plunging margins. To wit: "From a cost
standpoint, commodity prices continue to increase, negatively impacting
material and delivery costs
. As a result, we are in the process of
taking a price increase to the market, which should occur in May" and "
Our sales are up,
but our cost of goods sold and the cost of diesel are keeping our
margins at record lows" and, FTW: "
Rapidly increasing costs and fuel costs have
shocked the consumer away from any nonmandatory spending."
Pretty much says it all.

From the Dallas Fed:

Sufrvey respondents:

Plastics and Rubber Products Manufacturing
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.

Nonmetallic Mineral Product Manufacturing
We have seen a
modest increase in demand with existing customers. We have also added
some new customers as a result of competitor failures. From a cost
standpoint, commodity prices continue to increase, negatively impacting
material and delivery costs
. As a result, we are in the process of
taking a price increase to the market, which should occur in May. Our
future expectations remain guardedly optimistic.

Fabricated Metal Product Manufacturing
Lead times for
machine tools made in Japan and Korea have increased
. We understand the
principal issue is the availability of castings for the machine tool
bodies. We assume our Korean castings supplier sources from Japan.

The recent Japan supply
chain disruption has increased concern for diversification in the
supply chain to minimize risk
. Higher transportation costs along with
the need to reduce cycle time favor manufacturing being close to the
distribution channel. This increases opportunity for North America
manufacturers. Increased manufacturing increases job creation.

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

We have seen a slowdown
in awards of outstanding quotations from the first quarter. Our
backlog has been reduced to less than one month. Renewal of bank credit
facility remains very uncertain.

Machinery Manufacturing
The economy is still moving, but it remains shaky and unstable.

We are cautiously
optimistic. Activity levels are ticking up a little. We worry about the
impact inflation (energy and food) may have on the recovery and
consumer spending.

We continue to see
little change in the foodservice equipment market, new restaurant
openings or equipment replacements. The only real change that we see is
higher prices from almost all of our suppliers, especially for
stainless steel.

Chemical Manufacturing
If energy prices
stay the same or moderate a little, we believe we will see some
improvement in volumes over the next few months. A rapid increase in
prices from current levels will definitely have a dampening effect on
the markets
. In times of uncertainty, people and companies hold back on
expenditures, control inventories, etc.

Furniture and Related Product Manufacturing
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.

Computer and Electronic Product Manufacturing
Raw materials
(e.g., steel, tungsten) prices are rising exponentially, with an
anticipated leveling out at new highs around August or September of
this year. Our customers are unwilling to accept the increased pricing
from U.S. manufactured product and are turning to China, India and
Korea for cheaper prices.

Paper Manufacturing
Because of the
slower recovery of nondurable goods, business has remained flat. The
only positive coming out of this is that the expected price increase
this spring on containerboard is now off the table until July or August
at the earliest.

Food Manufacturing
Our sales are up,
but our cost of goods sold and the cost of diesel are keeping our
margins at record lows. A weak dollar does not help us. High commodity
prices also hurt us.


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Mon, 04/25/2011 - 11:04 | 1203508 Cindy_Dies_In_T...
Cindy_Dies_In_The_End's picture

We should all stand up at the same time and hold a sign that says "Well, DUH!!!" to the Fed.


Also Tyler, it is NOT Bernank's wet dream to see an increase in wages. If you read his scholarly articles, he kinda thinks the Great Depression did not end until wages FELL. So if that number is correct, that is not what he wants. Sticky wages are a problem.

Mon, 04/25/2011 - 11:05 | 1203533 eddybaby
eddybaby's picture


Mon, 04/25/2011 - 11:14 | 1203584 NorthenSoul
NorthenSoul's picture

So very typical of those tenured-for-life (with pension indexed to inflation TYVM) economists to have this sticky prejudice against the wages of other people than themselves.

Mon, 04/25/2011 - 11:29 | 1203625 topcallingtroll
topcallingtroll's picture

This is where keynes comes in handy.
"Ya getting too disruptive about those wage decreases buddy. Here, have a nominal increase. It's on me"

Mon, 04/25/2011 - 13:17 | 1204079 thames222
thames222's picture

love keynesian theory...where is he now when we need him?

Mon, 04/25/2011 - 11:06 | 1203526 RobotTrader
RobotTrader's picture

Obviously, its not affecting AAPL today, which is still green.  I guess the "resilient consumer" is anxiously awaiting the release of the white iPhone 4 at Best Buy on April 27.

Mon, 04/25/2011 - 11:21 | 1203599 Internet Tough Guy
Internet Tough Guy's picture

Food prices are already collapsing in L.A.
RobotTrader - Tue, Apr 12, 2011 - 10:14 PM

Yep, went to the MCD drive-through, where I usually order two McDoubles for a paltry $2.20.

But today, they announced a new special, two Big Macs for $3.25, so I took it.

Looks like the fast food joint are now front-running an all out collapse in food prices.

Mon, 04/25/2011 - 11:26 | 1203617 Harlequin001
Harlequin001's picture

looks like a real good reason to buy bank stocks...

Alternatively I could find a really big grid to go stuff my money down, that would do the trick.

Mon, 04/25/2011 - 11:24 | 1203618 mworden
mworden's picture

supersize you. Meanwhile $3/lb 80% hamburger, $4 gas, $4 bread, $13/50lb chicken scratch, etc etc

Mon, 04/25/2011 - 11:39 | 1203672 boiltherich
boiltherich's picture

Where do you get hamburger for $3/lb?  I used to buy the 93/7% fat at Safeway till it hit 5 bucks a pound, the 80% is actually tastier though a bit messy, still $4.29 a pound. 

As to indexing wages to inflation, my COLA has not gone up since 2008 making 2011 the third year without a raise. 

Mon, 04/25/2011 - 12:41 | 1203883 jtmo3
jtmo3's picture

Ha, got ya beat. Try 5 years for me.

Mon, 04/25/2011 - 12:11 | 1203773 SheepDog-One
SheepDog-One's picture

'The markets are not pricing in QE3, the markets are pricing in a robust consumer-driven recovery'- RobotTrader

Mon, 04/25/2011 - 11:07 | 1203532 LawsofPhysics
LawsofPhysics's picture

My margins have been collapsing since Ben started printing.  Nothing new here.

Mon, 04/25/2011 - 11:08 | 1203537 Cassandra Syndrome
Cassandra Syndrome's picture

What are the cures for cognitive dissonance and normalcy bias? Short, sharp shock treatment to awake the masses? How bad does it have to get until most people accept that this 80 year old Keynesian experiment is fooked?

Mon, 04/25/2011 - 11:10 | 1203566 NorthenSoul
NorthenSoul's picture

What Keynesian experiment are you talking about?

Ever seen a governement cutting expenses and generate surplus during good times as Keynes himself insisted upon repeatedly?

No, right?

So...what are you talking about again?


Mon, 04/25/2011 - 11:22 | 1203611 cxl9
cxl9's picture

For Keynes to have believed such a thing possible, given the observed nature of government, is at best silly and at worst criminally näive. Predictably, we got the "stimulus" (spending) half of the Keynesian prescription without the surplus (savings) half.

Mon, 04/25/2011 - 11:25 | 1203613 topcallingtroll
topcallingtroll's picture

Countercyclical spending to minimize recessions
Pro cyclical spending to gun the expansions.

Thats why we are where we are today.

Mon, 04/25/2011 - 11:26 | 1203621 Harlequin001
Harlequin001's picture


Now I know why I'm not an economist...

Mon, 04/25/2011 - 12:12 | 1203777 dexter_morgan
dexter_morgan's picture

spend in recessions, spend in expansions, spend when it's sunny, spend when it's cloudy - basically spend ALL THE TIME

Mon, 04/25/2011 - 11:32 | 1203642 Cassandra Syndrome
Cassandra Syndrome's picture

What am I talking about?


An obsession by his fanatical followers from Samuelson to Krugman to implement social choice on people using mathematical modelling through monetary and fiscal policies.

The dynamics of market forces made the depression of 1920-1921 mini. The government interference of hoover and worse still FDR under the watch of Keynes made the depression of 1929 to 1938 Great. It took a bloody war killing over 60 million people to bring it to an end.

They even got a term for it "Military Keynesianism"

Look at the global debt levels since the 1930s, its become mathematically impossible to service now, lets see them try and solve this mathematical conundrum.

Mon, 04/25/2011 - 12:08 | 1203764 dexter_morgan
dexter_morgan's picture

If Keynes was stupid enought to believe that governments would voluntarily do that then he was far stupider than I imagined........and I imagine him pretty damn stupid.

Mon, 04/25/2011 - 12:12 | 1203782 Rodent Freikorps
Rodent Freikorps's picture

Ideologues are rarely concerned with boots on the ground reality.

Mon, 04/25/2011 - 17:01 | 1205239 Mpizzie
Mpizzie's picture

Anarchy and communism both look equally appealing - until you see my neighbors down the street.

Mon, 04/25/2011 - 11:06 | 1203539 ivars
ivars's picture

Bad time to start tightening, but, as easing has not worked, what else to do?

Mon, 04/25/2011 - 11:45 | 1203701 NotApplicable
NotApplicable's picture

I'm hungry. Who's gonna buy me lunch?

Mon, 04/25/2011 - 14:21 | 1204497 BlackholeDivestment
BlackholeDivestment's picture

Does the looser buy lunch? ...or is the looser the buyer and the consumer in Chairsatan's world of market Zombie Wonders?

The 666 tramp stamp tatoo; is it not permanent, and there is no washing it off, once we accept the seal of the beast? Could it beeee .....Chairsatan is serving his own ass and U.S. all as lunch? 

Mon, 04/25/2011 - 14:31 | 1204543 BlackholeDivestment
BlackholeDivestment's picture

P.S. ZORG has another anthrax (via CroweAtBioPort) letter, I bet you lunch?


Mon, 04/25/2011 - 11:07 | 1203545 NorthenSoul
NorthenSoul's picture

Financialization of the economy and the hijacking of the political debte away from jobs toward the "gotta balance the budget" (you mean "Right Now or Die"??)  are sucking dry the needed capital for infrastructure restauration and long term investments. All this cannot do anything else than deprive consumers of their means to gain purchasing power, save, of course, for the minority who benefit from the financialization.

Mon, 04/25/2011 - 11:27 | 1203624 Sancho Ponzi
Sancho Ponzi's picture

What would you do to stimulate job growth and capital investment?

Mon, 04/25/2011 - 13:59 | 1204335 cxl9
cxl9's picture

1. Eliminate 90% of government. Most government jobs are nothing but welfare.

2. Close the law schools for a generation. We have enough lawyers.

3. Prosecute the blatant and pervasive fraud in the financial community. Same laws for all. Now enforce them.

4. Scrap the whole tax code and replace it with a citizen head tax. Everyone pays the same thing. Raise taxes for one, you raise them for all.

5. Eliminate the laughable idea of a debt-based currency and replace it with honest money.


Mon, 04/25/2011 - 12:33 | 1203838 Kickaha
Kickaha's picture

"infrastructure restauration"

Only when the supply of iPads have been consumed should we crush our infrastructure and serve it up in restaurants.

Mon, 04/25/2011 - 14:15 | 1204464 slewie the pi-rat
slewie the pi-rat's picture

the infrastructure is toast, BiCHeZ.

now, would you like fries with that?  any cheeZe?  how about a tofu tomatoe-banana slurpee?  with pine nutz?

Mon, 04/25/2011 - 11:08 | 1203552 mberry8870
mberry8870's picture

Imagine how bad this would be if people were feeling the full effect of the increase in gas prices. The payroll tax holiday has pretty much offset that increase (all while increasing our debt!). We are so screwed.

Mon, 04/25/2011 - 11:11 | 1203553 jkruffin
jkruffin's picture

HAHA,  Wanna know where all our money is going?  Check this out from FXCM:   it's all about Chinese manipulation baby


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Mon, 04/25/2011 - 14:26 | 1204501 slewie the pi-rat
slewie the pi-rat's picture

and poker is freaking illegal, now?  it is a wonderful game of skill and nash disequilibria resulting, like in america itself, in everybody losing, or at least ending up dead. 

too keynesian?

Mon, 04/25/2011 - 11:12 | 1203555 mberry8870
mberry8870's picture

Imagine how bad this would be if people were feeling the full effect of the increase in gas prices. The payroll tax holiday has pretty much offset that increase (all while increasing our debt!). We are so screwed.

Mon, 04/25/2011 - 11:33 | 1203637 Hansel
Hansel's picture

Wow, a nonuple post!  Congratulations on the impatient retardation.

Mon, 04/25/2011 - 11:42 | 1203683 mberry8870
mberry8870's picture

Yeah just imagine if the damned site didn't ask me 9 math questions? All of which we answered correctly. Good guess though.

Mon, 04/25/2011 - 11:12 | 1203558 mberry8870
mberry8870's picture

Imagine how bad this would be if people were feeling the full effect of the increase in gas prices. The payroll tax holiday has pretty much offset that increase (all while increasing our debt!). We are so screwed.

Mon, 04/25/2011 - 11:15 | 1203575 Hondo
Hondo's picture

Record low???  We went from record high to record low in a nano-second???

Mon, 04/25/2011 - 11:15 | 1203580 MarcusAurelius
MarcusAurelius's picture

So all I ask is ......are high commodity prices here to stay? It would seem that they are on the verge of doing what they always do in these scenarios. Deflating.

Mon, 04/25/2011 - 11:41 | 1203670 Hansel
Hansel's picture

Deflating like this?

Mon, 04/25/2011 - 11:15 | 1203587 shushup
shushup's picture

And once more - NO BODY CARES! Unfortunately.

Mon, 04/25/2011 - 11:21 | 1203600 AC_Doctor
AC_Doctor's picture

But ole Uncle Barry said we were having green shoots?

Mon, 04/25/2011 - 11:46 | 1203694 smithcreek
smithcreek's picture

Green shoots.  They sure gave up on that phrase pretty fast, haven't heard that in a while.  For the past year and a half we've been in the "as we begin to come out of this recession stage".  I'm amazed they can get away with that one for so long.  Then again, when the fucking joke of a pres we have can introduce the phrase "jobs saved or created" without being laughed out of office nothing surprises me much.

Mon, 04/25/2011 - 12:25 | 1203818 Dr. Porkchop
Dr. Porkchop's picture

It's the 'ongoing recovery'. Just like the 'Global War on Terror'. Empty phrases that can mean anything.

Mon, 04/25/2011 - 12:09 | 1203770 Worker Bee
Worker Bee's picture

Barry misread the tele-prompter. He was supposed to say Green sharts.

Mon, 04/25/2011 - 12:16 | 1203791 SheepDog-One
SheepDog-One's picture

Unfortunately all the green shoots were just poison ivy.

Mon, 04/25/2011 - 11:22 | 1203603 digitlman
digitlman's picture

Imagine if you posted the same thing 7 times...

Mon, 04/25/2011 - 11:48 | 1203709 NotApplicable
NotApplicable's picture

I wonder if you can?

Mon, 04/25/2011 - 11:25 | 1203604 TruthInSunshine
TruthInSunshine's picture
Dollar and many other fiat currencies getting destroyed, real and organic parts of many economies being leveled, inflation on anything fiat alternative (i.e. commodities traded on spec) running at breakneck clip...
To which The Bernank replies, "I am Shiva, god of economic death."
Ben is back getting the masses to chase bubbles. From Greenspan to The Bernank, it's the newest, oldest central bankster trick!

Mon, 04/25/2011 - 11:56 | 1203729 NotApplicable
NotApplicable's picture

Contracting margins = "We don't need anymore of your product at your current price"

I started to say, sans food and energy, but no, the substitution effect of dog food days and cold/sweltering nights are upon us.

Question is, will the producers be allowed to fail as to allow the more efficient to survive? Or will industry X be proclaimed TBTF, zombifying them all in a fascist frenzy, until they succumb completely, dying the death of nationalization?

I know where my bets lie.

Mon, 04/25/2011 - 12:07 | 1203754 Rodent Freikorps
Rodent Freikorps's picture

That's nuts. Dog food is expensive. Things are offcially bad when you eat your dog, not his food.

Mon, 04/25/2011 - 12:39 | 1203866 Kickaha
Kickaha's picture

Here, let me correct that for you:

"Things are officially bad when your dog eats you."

Mon, 04/25/2011 - 13:12 | 1204047 thames222
thames222's picture

Dog food is sooo expensive, I've even stopped buying the gourmet Blue Buffalo for my poor dude.  feed the pooches more chicken and rice!

Mon, 04/25/2011 - 13:15 | 1204051 thames222
thames222's picture

Dog food is sooo expensive, I've even stopped buying the gourmet Blue Buffalo for my poor dude.  feed the pooches more chicken and rice!

Mon, 04/25/2011 - 12:09 | 1203763 Worker Bee
Worker Bee's picture

This Rothbard guy Im reading says the things to NOT do are as follows.

1.Prevent or delay liquidation.

2. Inflate Further

3.Keep wages up.

4.Keep prices up.

5.Stimulate consumption and discourage saving.

6.Subzidize unemployment.

So the fed and gubbment are doing everything exactly backwards.

Mon, 04/25/2011 - 12:23 | 1203811 NotApplicable
NotApplicable's picture

This is known as government creating its own demand.

Mon, 04/25/2011 - 12:30 | 1203836 Ricky Bobby
Ricky Bobby's picture


Mon, 04/25/2011 - 13:19 | 1204071 thames222
thames222's picture

I like your style/avatar...what are your thoughts on gold vs. silver, and how to spread my physical holdings amongst the two?

Mon, 04/25/2011 - 12:30 | 1203820 TruthInSunshine
TruthInSunshine's picture

Ben S. Bernanke knows what he's doing. He had a really high SAT score, went to MIT & Harvard, and taught at Princeton.

He took all of Keynes already bad ideas, and then completely bastardized them, into ideas and functional policies magnitudes worse.

He and Krugman get into epistemological debates about how much money one has to print before it heals an economy.

Whether you're a conspiracy theorist or you believe that some of the most devastating human actors in history just so happen to have been lauded as "smart" and "knowing what they're doing," there's something in the upcoming book 'Shiva, Destroyer of Worlds: The Biography of Ben S. Bernanke' for everyone.

Mon, 04/25/2011 - 12:32 | 1203831 Worker Bee
Worker Bee's picture

I dont believe that its some vast conspiracy. Just ignorance and/or faith.

This time is different mentality.

Mon, 04/25/2011 - 12:32 | 1203825 Kickaha
Kickaha's picture

posted in wrong spot

Mon, 04/25/2011 - 13:10 | 1204031 tomster0126
tomster0126's picture

I've cut my spending so much in the last 2-3 years, it was really inevitable that the entire consumer economy would fall.  how do we get out of this?

Mon, 04/25/2011 - 13:30 | 1204139 Boilermaker
Boilermaker's picture


Jesus Christ, what a fucking joke.

Mon, 04/25/2011 - 14:07 | 1204391 slewie the pi-rat
slewie the pi-rat's picture

the index dropped from 24 to 8.

oh, my!  that is quite a drop!  i'll go back and read the rest, now...

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