'Hope' Hits Pre-Trump Lows As Regional Fed Surveys Slump

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by Tyler Durden
Tuesday, Apr 25, 2023 - 02:40 PM

This morning has seen a slew of regional Fed survey data (following yesterday's dismal Dallas Fed Manufacturing data).

Things started on a weak note with the Philly Fed Services index plummeting from -12.8 to -22.8 - the weakest since the COVID lockdowns collapse and negative for 8 of the last 9 months...

Source: Bloomberg

The indicators for firm-level general activity, new orders, and sales/revenues all declined, and firms surveyed continued to report overall increases in prices.

Next up was Richmond Fed's Manufacturing Index, which was also uglier than expected.

The composite manufacturing index fell from -5 in March to -10 in April (worse than the -8 exp).

Two of its three component indexes - shipments and new orders - declined.

Firms remained pessimistic about local business conditions, as the index fell to -19 in April.

Furthermore, the expectations index for future local business conditions edged down slightly again.

Source: Bloomberg

Finally, Dallas Fed Services survey printed in contraction for the 11th straight month...

Perceptions of broader business conditions continued to worsen in April, though pessimism waned slightly. Respondents’ expectations regarding future business activity were mixed in April.

The future general business activity index remained negative but largely unchanged at -13.0. The future revenue index stayed positive but fell eight points to 26.0.

  • The bank failures have slowed capital commitments and services.

  • We are seeing a decrease in transactions. Clients relate that there is uncertainty as to cap rates, and buyers and sellers are not on the same page.

  • The looming potential of a full-blown recession, coupled with a continuing increase in prices has caused many business owners to hold off making any major changes in their business.

  • We are concerned about the commercial real estate industry and an increase in defaults.

  • A number of apartment owners are being squeezed hard right now and are getting further and further behind. Debt service (for those with floating rates and insufficient rate caps), insurance and property taxes are killing them. Some aren't going to make it.

  • Clients are becoming more stressed about finances. Homeowners are spending less money, and clients' revenues are down, which trickles down to us. I still have to maintain a certain staffing model to perform services with decreased revenue and the high cost of credit; I am unable to pay myself wages at this time.

  • Our demand continues to soften given macroeconomic uncertainty.

  • The economy is starting to stall due to interest rates being higher.

  • Higher interest rates are starting to affect profitability due to increased costs to finance new-vehicle inventories.

All of which leaves 'soft' survey data dismally low relative to 'hard' data expectations - which is also starting to fade...

Source: Bloomberg

Simply put - hope is at its lowest level since before Trump was elected.