Dallas Fed's Texas Manufacturing Index Misses Expectations Of 17, Comes At 12.8, Inventories Surge

Tyler Durden's picture

Another diffusion index miss, another snooze in stocks, another surge in inventories, another plunge in new orders, and another harbinger of margin collapse: that's how one can describe today's only relevant economic datapoint. The Dallas Fed's December Texas Manufacturing Index came at 12.8, a big miss from expectations of 17, and a drop from the November print of 13.1. And as always, the really nasty news was behind the headlines: finished goods inventories surged by 11.1 to -1.1 (and a whopping 19.5% in the six month forward index), while materials inventories rose by 3.9%. On the margin collapse side prices paid for raw materials jumped by 9%, wages and benefits increased by 4.4%, while new order volume and growth rate bit plunged by 7.5% and 6.8% respectively. We expect the futures to go green imminently on this piece of economic data which no computer gives a rat's ass about.

Index detail:

From the report:

Texas factory activity increased in December,
according to business executives responding to the Texas Manufacturing
Outlook Survey. The production index, a key measure of state manufacturing conditions, was positive for the fourth consecutive month.

Other indicators of current activity also remained positive, signaling continued growth in manufacturing. The shipments index held steady at a reading of 8, and the capacity utilization index rose from 10 to 15, with 29 percent of manufacturers reporting an increase. The new orders
index declined in December but stayed in positive territory, with more
than three-fourths of firms noting increased or unchanged order
volumes.

Measures of general business conditions remained positive in December. The general business activity index came in at 13, with nearly a quarter of respondents noting improved activity. The company outlook
index edged down to 15, although the share of manufacturers who said
their outlook improved rose to its highest level since May.

Labor market indicators improved notably this month. The employment
index rose from 6 in November to 15 in December, reaching its highest
level since early 2007. Twenty-four percent of firms reported hiring
new workers, compared with 9 percent reporting layoffs. Hours worked increased again this month, and the wages and benefits index rose from 5 to 10.

Prices climbed again in December. Input costs remained on an upward trend, with the raw materials price
index rising from 35 to 44. Forty-six percent of manufacturers saw an
increase in prices paid for raw materials, compared with only 2 percent
who saw a decrease. Finished goods prices
rose for the second month in a row, although the great majority of
respondents continued to note no change. More than half of respondents
anticipate further increases in raw materials prices over the next six
months, while 37 percent expect higher finished goods prices.

Manufacturers’ six-month outlook continued to improve. The future indexes for production and shipments edged up further; more than half of respondents expect increases in these measures in coming months. The future new orders
index rose to its highest level in four years, with all firms
anticipating either increased or stable order volumes. The future general business activity index advanced from 26 to 37, and the future company outlook index rose to 38, with 94 percent of firms anticipating similar or improved conditions six months from now.

The Dallas Fed conducts the Texas Manufacturing
Outlook Survey monthly to obtain a timely assessment of the state’s
factory activity. Data were collected Dec. 14–21, and 96 Texas
manufacturers responded to the survey. Firms are asked whether output,
employment, orders, prices and other indicators increased, decreased or
remained unchanged over the previous month.

Survey responses are used to calculate an index
for each indicator. Each index is calculated by subtracting the
percentage of respondents reporting a decrease from the percentage
reporting an increase. When the share of firms reporting an increase
exceeds the share reporting a decrease, the index will be greater than
zero, suggesting the indicator has increased over the prior month. If
the share of firms reporting a decrease exceeds the share reporting an
increase, the index will be below zero, suggesting the indicator has
decreased over the prior month. An index will be zero when the number of
firms reporting an increase is equal to the number of firms reporting a
decrease.

 

d

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malikai's picture

Everything is bigger in Texas.

rosiescenario's picture

.......but the financial press keeps telling me rising inventories are a sign of an improving economy....they signify business is confident about future sales.....

TumblingDice's picture

The fed is trying to trick us into thinking that the economy is not doing so hot so we stay out of stocks. Don't listen to them. Just buy the fucking dip.

gwar5's picture

The slow boats from China just cut their engines to save fuel

Lionhead's picture

Here's the "new normal" ship of the future. Reduced size, smaller crew, huge reduction in carbon footprint, appropriately sized for a low growth global economy.

http://www.marinetraffic.com/ais/showallphotos.aspx?mmsi=261148000

The future is now!

mynhair's picture

Funny how the Fed report spins it:

Texas factory activity increased in December, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, was positive for the fourth consecutive month.

Other indicators of current activity also remained positive, signaling continued growth in manufacturing. The shipments index held steady at a reading of 8, and the capacity utilization index rose from 10 to 15, with 29 percent of manufacturers reporting an increase. The new orders index declined in December but stayed in positive territory, with more than three-fourths of firms noting increased or unchanged order volumes.

HarryWanger's picture

Labor market indicators improved notably this month. The employment index rose from 6 in November to 15 in December, reaching its highest level since early 2007. Twenty-four percent of firms reported hiring new workers, compared with 9 percent reporting layoffs. Hours worked increased again this month, and the wages and benefits index rose from 5 to 10.

-You guys must be high, this was a pretty decent report.

Mr Lennon Hendrix's picture

-What is U 6?

-Is the BLS accurate?

Common_Cents22's picture

Warehouse help is needed to stack up all the production to make it fit in the warehouse.

Cleanclog's picture

Never mind.  TPTB will send the market higher on next to nothing volume to perpetuate the myth that everything is rosier.  

It was amazing at the various holiday gatherings of the past several days to hear so many people jazzed about the stock market and the good days around the corner that stock prices "suggest". When I would remind that those happy profits in their portfolios aren't actual money in their pockets unless they cash them in, (yeah yeah, I know how much fun I must be to be around)  that was pretty confusing to most.  Kinda like when they thought their house was worth $1million but doubt they could get $700K for it now.    

Popo's picture

Yes, but here's the rub:

Equity markets will look healthier, while rising input costs destroy business margins.

At some point (sooner than you think) the margin-collapse kills the businesses.  No amount of green-shaded ticker symbols is going to hide the horrific number of business closings or the devastating spike in unemployment.

That's the point at which Baghdad Bob admits it's over, and runs for the hills.

Right now you've got hundreds of thousands of small businesses praying that holiday consumer spending saves the day.   That game is up in another week..

voltaic's picture

I heard the same "the market is rocking right now and I'm making money" routine over the holiday. No talk of why or how, just the it's going higher mentality. Kind of reminded me of the late 1990s conversations where all is profit and losses aren't possible. Buy the dip.

This is the only site that I've read that had this manufacturing report as less than great. Every other site that I have read has it as the best this and that since 2007. Hiring is on fire and expectations are nothing but positive. Odd, but the pump continues unabated. 

Mr Lennon Hendrix's picture

Gold and silver testing resestence and platinum just broke out.  I would normally think PMs would break out here, but market sentiment has gone hugely PM bearish.  But I do think PM trumps all, and it will finish the global financial race to the bottom ontop.

malikai's picture

Gold got a nice slashing last night and looks like it's just holding steady. If I had balls of steal I'd put a bunch of lowball longs in on gold waiting for another slashing to come along so I could buy the fucking dip. But I'd be in and out quick. I'm expecting bad news and a general pullback and everyone going to treasuries again. After all, they probably want those yields to come back down a bit.

Mr Lennon Hendrix's picture

Treasuries?  Again?  Gold trumps treasuries, paper is worthless.

malikai's picture

Fundamentals are so 20th century.

Mr Lennon Hendrix's picture

Fundamentally gold is used as the first loan of recourse by every Central Bank and to prop up the FIAT ponzi system it has to hold its weight.

malikai's picture

Just a bit of sarcasm. I like my gold yellow, in my hand, and a bit cool to the touch. I am forced to play in the casino to acquire my yellow substance, so I must learn how to beat the house. Every gambler must learn how to work the house to be successful.

Mr Lennon Hendrix's picture

I gamble only with friends.  When it comes to casinos, I find breaking their vaults earns me the most monie.

Red Neck Repugnicant's picture

When it comes to casinos, I find breaking their vaults earns me the most monie.

Fuckin' A!  That's badass!  Talk like that makes me want to do donuts in my '92 Camaro with a sweet fuckin' 350 under the hood. 

Who's the fuckin' gangsta NOW? 

Bitch-ass-TRICKS!

Red Neck Repugnicant's picture

Treasuries?  Again?  Gold trumps treasuries, paper is worthless.

Just a quick update: paper not worthless (yet) as of 8:27 this morning.  I went to Starbucks, nervously attempted to buy a cup of coffee, handed the cashier a FRN, and she took it.  It was a tense moment, though.  She took the FRN, called her manager away from the drive-through register and had a small discussion about it.  Moments later, she returned and said, "ok, we'll take this, but maybe not tomorrow."

I'll keep you updated today as I attempt to redeem other goods and services for those FRN's.  The situation seems very fluid right now.  Lots of wild cards out there.

From the frontline,

RNR. 

Mr Lennon Hendrix's picture

You are pointing out that very few people understand the crime perped by the Federal Reserve Bank.  You are showing that slave training by the fascist eugenics has worked on certain people who  happen to be the vaste majority of the public.  The constitution says no coinage should be issued that isn't gold and silver.  You disagree with the constitution, do ya?

Spalding_Smailes's picture

Billions of fed paper traded daily. Look at the paper mountain/fear trade that helps print/underpin  1,381.00 gold... Lol'

Mr Lennon Hendrix's picture

WHat is wrong with the dollar?  I heard it is the strongest currencie...Platinum has the markets in a belly to belly suplex.  Time to roll the hips!

Spalding_Smailes's picture

Not sure . I thought it would be at 77' last week. 

Now its platinum...

What about all the gold miners getting blowtorched since Oct. 20th China hike (1) ??? Man, so many doomers have gotten monkeyhammered holding onto those miners.

Just buy "AIG,BankofAmarica,Us Steel,RAS" you will get those returns back.

Mr Lennon Hendrix's picture

Buy Bac before the Fraudclosuregate, gotcha!  AIG after today?  You must be joking.  I like Silver @29 ;)

Spalding_Smailes's picture

I bought AIG 2 weeks ago around 50.. .... major volume in 3 weeks was trading at 40-44 for 5 months before breakout.

Hephasteus's picture

Only if it is used to store his logout information.

TexDenim's picture

Richard Fisher takes this survey very seriously and personally talks to a circle of some 100+ local CEOs to get the more nuanced view of what is going on. This is a good survey. What I take from this is that production levels have exceeded the economy's capacity to absorb the new manufactures and that we are going to see a slowdown in 2011. As expected, if you read ZH.

UninterestedObserver's picture

Don't worry any slowdown will just be contributed to the snowstorm LOL

Caviar Emptor's picture

Prices paid rising > prices received. Biflation. Margin killer. Buying power crusher. Only gold can help. 

Dr. Doom's picture

Nothing to see here...Move along.

Oh regional Indian's picture

Upcoming acts to watch...

1) When margin pressure finally emerges from the shadows of creative accounting to prove how hollow 2010's stellar corporate profits actually were.

2) When the M&A tsunami, made inevitable by supply-side-ism's inherent flaw, begins in earnest.

3) When "true" (hah!) prices are actually reflected on store-shelves

4) When something actually shrinks in Texas.

 

ORI

http://aadivaahan.wordpress.com/2010/12/17/straykitty-wrote-in-2/

Caviar Emptor's picture

1) Margin pressure has already taken a dire toll in some sectors. We're seeing some bankruptcies. 

2) m&a will be muted. Just listen to the big PE shops. If they're not buying, there's not much interest. I never believed that 'cash mountains on the balance sheet' are ever going to be spent on hiring, capex or m&a when it can just become a golden parachute. 

3) prices are hitting the shelves and are exceeding prior records despite high unemployment and low growth

4) Egos are outpacing performance

Oh regional Indian's picture

CE, my points were more like when will this stuff hit the headlines with undeniable ferocity, as opposed to their current hide-ability.

Also, I disagree that M&A will be muted. Companies who are missing economies of scale will unite or die. It's baked into the supply-side pie. What form it will take is less unclear. And this will not be PE fund driven. More like all-stock deals of the dot.con boom, only this will be the tale of the industrial bust.

As for prices, true for needs but not yet true for wants. That was what I was really referrign to. Manufactured goods.

Your points are well taken too though.

 

ORI

owensdrillin's picture

I agree that we will see quite a bit of m&a this year. However I think it will mostly be China purchasing companies in emerging markets or in Canada or Austrailia. They want something for the paper they hold other than gold.

In Canada, some purchases over the past two years have been 17% of Tech (mining) for a song at $17 bucks a share, now $58 bucks. Other purchases have been mid to larger Canadian oil companies which are now trading at approximatley double the price paid. Our dirty oil up here may get a little more popular now that Nancy doesn't have quite the say she did.

plocequ1's picture

Margin pressure, What does margin have to do with stocks.. Besides,I dont eat Margin. I eat Parkay

Sean7k's picture

I'm not sure 96 manufacturers that CHOSE to reply is statistically significant. Probably get a better picture from a telephone poll. According to the Texas Manufacturing Index, there are more than 25,600 manufacturers in Texas.

Higher inventories? How high? High because of new orders or because you can't sell stock?

Higher input costs? How much higher? What percentage of your product requires them?

More hiring- Part time or full time? What wage levels? Were there layoffs as well?

What were the margins on what you are selling?

If you chose to respond, is that because you want to sell the PR end?

There are few things worse than lousy statistics, when even well developed statistics are presented to give the best picture.

RobotTrader's picture

Investors are now cheering this news by buying financial stocks.

Meanwhile Blythe Masters is also happy, since her favorite "Plus Size" clothing store is up 5% today....

Mr Lennon Hendrix's picture

Banks are rushing to the exits of the burning theatre.

Prof Gulliver's picture

Rushing to the exits? No, there is no exit strategy, nor do they need one. The Day of Reckoning has been forever cancelled, thanks to an endless supply of BennieBux.They are happily sitting in their offices cashing their bonus checks as everyone happilly snaps up their stocks.

Mr Lennon Hendrix's picture

Look at aig, you don't think it is a pump and dump?  Cheer up, the banks are insolvent and so is the financial system.  Handing out IOUs as meal tickets only lasts until the first person stops accepting them.  I don't want paper, do you?

malikai's picture

I wonder how FRNs compare to cat food on the caloric chart. Maybe dollars are a good investment after all?

Mr Lennon Hendrix's picture

I heard Warren Buffett has his doolars mulched and turned into toilet paper.

Red Neck Repugnicant's picture

I don't want paper, do you?

So far, the paper has proven to be pretty handy. 

Yesterday, I went to Nordstroms and bought some underwear on sale.  I went to the cash register and tried to barter with a couple chickens I had in a cage (any educated person that understands what our government is doing would take the chickens rather than the FRNs).  I just assumed all Americans knew about the paper money scam, but this dumb bitch behind the counter opted for the worthless paper rather than the chickens.  Unbelievable!  I got new underwear.  I kept my chickens and got rid of those bogus FRNs. 

You can't eat paper, you dumb bitch!  I'm going back today to see if she's working again.  If so, I'll notify all ZH readers which Nordstrom's it is.  

Dump your paper.  Keep your chickens.  Get goods and services for free, while the rest of America isn't smart enough to know what's going on!