"Somebody Needs Their Head Examined" Dallas Fed Survey Respondents Fume As Stagflation Looms

The Dallas Fed survey of Texas manufacturing soared to 36.5 in June (from 26.8), back near its highest since 2004. The problem, however, is this spike is being driven by soaring prices as production slows - flashing a big red stagflationary alarm once again.

We have seen this stagflationary surge before - it led a recession in 2008 and prompted QE2 in 2011...

And perhaps just as worrisome for the micro-picture is the pressure on margins and prices paid soar more aggressively than prices received... for now...


Respondents are clear...

Nonmetallic Mineral Product Manufacturing

  • The price of steel raw materials is causing costs to increase.

Fabricated Metal Product Manufacturing

  • Steel tariffs to NAFTA partners is a mistake. Higher steel prices could slow down strong projects and the manufacturing recovery which started in fourth quarter 2017.

  • I can’t believe the effect the tariff response has had on the metals trade. Somebody needs their head examined if they think this is good for the American economy.

  • We are about to raise prices for the first time in six years due to the rising cost of steel and aluminum. That is going to cause some uncertainty, with our customers looking elsewhere to purchase the products we manufacture.

Machinery Manufacturing

  • There is lots of uncertainty among manufacturers regarding the impact of the steel tariffs. Even steel sourced from the U.S. is rapidly increasing in price due to capacity constraints.

  • We are operating at the lowest levels of our 70-year history. Chinese imports continue to depress pricing of our products.

  • Inflationary pressures are of concern. Freight costs per mile are up. Metals are costing more, impacting a large number of purchased parts. Tariff escalation is not going to help.

  • Business remains strong.

  • President Trump—trade, tariffs and diplomacy—is leading to more uncertainty.

Printing and Related Support Activities

  • The lingering effects of Hurricane Harvey have still impacted our volume. Through May, our volume is down 7 percent from last year at this time.

  • We are busy now because of a large single order that we entered in May and that is being worked on now and into July. We are feeling the need to raise labor wages, which will require a price increase, but since all our materials seem to be increasing in cost, why should we miss an opportunity to include a small increase to cover rising wages? I am very concerned long term about this goofiness with tariffs and possible foreign-country retaliation. Much of what we use in materials and equipment comes from Europe and a little from Asia.

Food Manufacturing

  • Tariffs impacting the price of stainless steel are a concern. We also are in an agriculture-related environment, and commodity price increases and stability are of concern.

Apparel Manufacturing

  • The Army is ordering huge volumes of apparel, which we anticipate will continue for another nine months.

Paper Manufacturing

  • We see a slight softness in order volume. We will wait and see how July turns out.

  • We lost a large contract, and it will decrease our production for the short term. We expect to get additional new business to replace it.

But - after all that - The Dallas Fed Survey rebounded dramatically?


LaugherNYC Mon, 06/25/2018 - 10:59 Permalink

Nobody has said tariffs will “be good for the American economy” in the short run. Any cathartic exercise takes some time and pain to work its way through the system.

Even the President, not the most sophisticated of economists, said “this may cause some short term pain, “ but now is the time to do it — while the economy is strong and has momentum. Yes, this could cause a setback, a stock market correction - in the short run. But, in the long run, fair and free trade will be a massive boon to the US economy.

One wouldn’t expect traders to be able to see past today’s close. But, balancing what is essentially a $1 trillion counterflow of trade can ONLY be good for the US long term. It may mean higher prices short term as the US industrial base rebuilds, but the investment in US plant and equipment will be great for the economy, as will a recovery of manufacturing and industrial jobs that everyone has said would never come back in a globalized economy.

And, yes, some companies like Harley will try building plants elsewhere to get around tariffs - I expect some new regulations to come down on them to stop this typically idiotic move. Does Harley think American buyers are going to ignore this move? I would expect there to be a well-deserved boycott coming from their typically conservative, white demographic. 

Yes, Americans have gotten spoiled with cheap Chinese imports. But, we have been subsidizing our single largest geopolitical rival, lying down and emboldening them economically and militarily.

If people can see past next week or next month, and look two-five years out, the re-negotiation of trade deals will be tremendous for the US’ long term health.

A shame that this was not done 20 years ago. It is high time that the US stops subsidizing the ROW with insane immigration policies and trade policies. Time to start re-building America first.

TrajanOptimus LaugherNYC Mon, 06/25/2018 - 11:01 Permalink

So, some doomsday article to justify the argument that steel tariffs are bad...

OF COURSE prices will go up due to a limited domestic supply when demand exceeds what is produced domestically.

The next phase is, producers will increase capacity. When capacity is increased, competition will drive prices to stabilize. Additional capacity coming online will cause prices to begin to fall until a point of equilibrium between demand and supply is reached.


This is not rocket science. These doomsday faggots need to fuck right off. We are not that fucking stupid, stop writing these bullshit articles thinking we are.

In reply to by LaugherNYC

LaugherNYC BaBaBouy Mon, 06/25/2018 - 11:19 Permalink

I like seeing new plants being built ALREADY, from Trump’s repatriation tax cut. I like seeing the US forcing the ROW to deal with us while we still have the big stick of trade primacy to negotiate with. I like the idea that a fractional increase in the PPI for a couple years could completely re-balance global trade flows, and make US products truly competitive all over the world, and what that will mean for the US economy when the shackles come off, and the world can buy US products and commodities at their REAL prices. Watch them see their industries gutted, their people unemployed. The next thing we should do is to pass legislation placing massive tariffs on goods produced with slave/substandard labor conditions and pay. Make the world treat its people fairly and decently, rather than exploiting them and using tariffs to keep American products from competiting in their markets.

In reply to by BaBaBouy

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In reply to by aleena.ange

bshirley1968 BaBaBouy Mon, 06/25/2018 - 11:36 Permalink

I have said all along that the tariff meme was just a strategy to get prices to go up.

The Fed has been juicing the economy for 10 years and can't get the "inflation" they want.  In a debt ridden, fiat system, falling prices are called the dreaded "deflation" (good for consumers but bad for banksters) and will lead to a recession and eventually a depression. 

Got to get prices up......no matter what.  I know, let's start a trade war that will increase prices on everyone and tell them we are "winning" by getting back at the mean ole Chinese for taking all our manufacturing jobs.  Sheeple will pay higher prices and tell everyone to quit bitching....."You are doing it for your country!"  Much like that sack of shit that made the first post on this article.

Didn't you know?  It's patriotic to pay higher prices to keep banks solvent and your government in power.  If paying more is what it takes to make Trump look good, hell, that's easy!  Dumbasses!

In reply to by BaBaBouy

bshirley1968 RedBaron616 Mon, 06/25/2018 - 13:06 Permalink

Hey, stupid!  It's not about buying "cheap", rather it's about being sure banksters can get paid.

Your low IQ statements appeal to Trumptards but are a waste of time on those of us that realize what is really going on.  It goes way past the "Us against Them" simpleton explanations that you uneducated, stupid bastards feed on.  Go somewhere else to work up your "stupid" frenzy.

While Trump is supposedly working on getting you Trumptards a "good job" he and his organization is making a killing on trade with China.  It is a clear conflict and he should be impeached for it.



In reply to by RedBaron616

Snaffew Ghost of PartysOver Mon, 06/25/2018 - 11:18 Permalink

if there is real free trade, then the US will never be able to compete with our high labor costs, high real estate costs, high taxes, high medical insurance, maternity leave, vacation time, sick time and pensions.  If any of you dolts think real free trade is good for the US, then you have no clue how the US has fingered, manipulated and forced other countries to buy our overpriced products due to their military strength and the domination of the USD as the global currency reserve.  You are living in a fucking dreamland, unless of course, you want to work in a manufacturing job for $2.15/hr and forgo all the other "perks" mentioned above in order to successfully compete in a global free trade market.  

In reply to by Ghost of PartysOver

LaugherNYC Snaffew Mon, 06/25/2018 - 11:25 Permalink

Creating cheap products with slave-level labor is not something the US should compete with. It is high time we erected barriers to these cheap products, even if it means paying more for those produced in America with fair wages.

The fact is most US products are competitive, particularly commodities, without tariffs. These markets should find their balance, with commodities and high value added, high margin goods being produced in the US, while cheap, low margin and value-added products should be made in the third world.

China’s dream relies on growing wages. They have already been pricing themselves out of many manufacturing sectors as their wage structure has surpassed other cheap producers like South Vietnam and Indonesia. Ultimately, all wages will have to normalize upwards in the third world, and downwards in the first world to attain a proper balance. Only a free market will do this.

In reply to by Snaffew

LaugherNYC TrajanOptimus Mon, 06/25/2018 - 11:14 Permalink

Exactly. Across all sectors. Energy is kind of unique, in that it is a true non-renewable commodity, with minor variations for sweet/sour crudes. 

The impact on China and Russia in the food grains market has yet to be thought through. Russia imports 40% of its food. To lower its US imports, it will have to dramatically shift its crop mixes, to less-profitable and/or more challenging plants. It will lose its own revenue source, as it will have to stop food exports to feed itself. The US runs massive surpluses across the board, and the loss or rising prices in the luxury products that make up the majority of US food imports are de minimum. China will be hamstrung in this vital sector. THAT is why China is targeting its retaliation against farmers. THIS is their key product, the most important to them strategically. As such, I personally am for some price supports here if necessary. It is a matter of national security.


In reply to by TrajanOptimus

camel717 LaugherNYC Mon, 06/25/2018 - 11:28 Permalink

Problem is everyone is a fucking Keynesian who will sacrifice long term growth for the short term so it looks good for votes. Also doesn't help that instant gratification is so apparent nowadays which is breeding more and more Keynes clowns (granted 90% of the people on FB and Twitter who opine on economic policy don't even know what an inverted yield curve or tariff is. Aka gender studies majors.)

In reply to by LaugherNYC

CashMcCall LaugherNYC Mon, 06/25/2018 - 11:30 Permalink

Tariff have never worked you fking idiot! Look at Smoot Hawley, look at Bush II. remember he was going to fix the steel industry. He fixed it with 200,000 jobs lost and 40% reduction in domestic steel producers. Do you Trumptards understand that if Smoot Hawley or Nixon's tariffs or Bush II had worked that they would be revered by Economists instead of massively opposed?

"Shame they didn't do it 20 years ago?" WTF are you talking about? They did it 88 years ago, then 50 years ago then 15 years ago and it failed every stupid time. How stupid can you TrumpTards get? 

Then you go off on your neocon path about immigration. Your head ain't working pal. 

In reply to by LaugherNYC

shortonoil LaugherNYC Mon, 06/25/2018 - 11:56 Permalink

When capital stops flowing from the EM to the Developed Economies, the DE is dead. The energy equations inform us that one or the other must go. The world simply does not have the resources to put a BMW in the garage of every one in a third world shit hole. Since the West gave them the keys to modern industrial civilization to begin with the trade controls being initiated are well justified. Sorry China, but reality is a bitch!

In reply to by LaugherNYC

gatorengineer Mon, 06/25/2018 - 11:06 Permalink

Prices rose largely due to profiteering, even before the first tariffed still hit a boat.

Just like gas.  Oil drops 15%, price at the pump didnt budget, now that oil is heading back up again, prices at the pump are rising again.....

notfeelinthebern gatorengineer Mon, 06/25/2018 - 11:17 Permalink

They are basically still giving it away, by historical standards, adjusted for inflation. I remember when gas doubled to $1.00 a gallon in 1978 or 9. I was driving from Duluth Mn to St Paul. Stopped at Hinckley (half way) and stuck in $10.00 for 10 Gallons - I thought that was lots of money and at the time, it was. That was 40 years ago when everything was cheaper by 5 times.

In reply to by gatorengineer

gatorengineer notfeelinthebern Mon, 06/25/2018 - 11:29 Permalink

Well, I dont agree.  In 1979 oil was $30 a barrel, now the raw material cost is $65 ish.  So linearizing it should be paying around $220.  Which is very conservative as the federal gas tax hasnt moved.  There hasnt been a refinery built in this country since 1979,  so forget about CAPEX drving the price, also as refining is NOT labor intensive, what you have actually seen is a huuuuge increase in refining margins....

In reply to by notfeelinthebern

notfeelinthebern Mon, 06/25/2018 - 11:11 Permalink

Same in the dairy biz; everywhere cost increases but not able to raise prices. But it's not about this moment in time. Short term pain is needed and perhaps a preview of US when not the worlds reserve currency. People need to toughen up.

RubberJohnny Mon, 06/25/2018 - 11:14 Permalink

When you have a "personality"  from CNBC running the show what the fuck do you expect?

The guy, who has the President's ear, will give him good solid advice?

I agree with the author.

Somebody has to have their head examined.

Cramer wanted too much money to grease his palm?

MuffDiver69 Mon, 06/25/2018 - 11:14 Permalink

I always pick the worst case scenario and use it to justify my pre-conceived notions. These fake ass writers never ever make an attempt to explain the other side...an economy running on dumped material,cheap labor,debt and no manufacturing base is a house of cards...this ass clown will be up with the usual impending debt crisis next...two and two equals whatever in the modern day economists models...

Scipio Africanuz Mon, 06/25/2018 - 11:22 Permalink

Stop bitching, take the hit. The FED is no longer sympathetic to cry babies, the punch bowl will be emptied, taken away, and hidden in the cupboard for a long long long time, till there's a need to party again.

Now, it's time for painful hardwork, to acquire resources that'll make it possible to procure punch-making ingredients. Suck it up, man up, and adjust accordingly. Normalising Equalisation is unavoidable.

My advice, reduce consumption, increase production, save like an avaricious squirrel, simple!...

affirmed_78 Mon, 06/25/2018 - 11:24 Permalink

"King dollar" Larry Kudlow needs to get in Trumpy's ear on trimming the budget.  Course with all our grand infrastructure plans that ain't gonna happen.  I don't get why we even collect taxes, our government can just print infinite amounts of money and the debt markets lap it up so eagerly it's gross.

Benito_Camela Mon, 06/25/2018 - 11:29 Permalink

As a civil libertarian whose mindset runs "liberal" (in the sense that the government should only be there to prevent people from hurting each other or to help only when absolutely necessary) I don't have much of an opinion on these tariffs. I also (erroneously) thought that Trump would represent a cathartic change to the "system" or the "establishment" that he hasn't amounted to - especially in regards to the "deep state" or the "swamp" - neither of which he has changed; and in fact both have become WORSE with a much MORE bloated military budget and a total insider's club running  the WH. 


All that bullshit aside, trade wars and cold wars have a tendency to become hot wars. Not saying they SHOULD, but in history they have tended to. My point is that I think the neocon/neolib/Zionist hawk crowd now pulling Trump's strings would LIKE for there to be more hot wars, and this is just the beginning. 

gaoptimize Mon, 06/25/2018 - 11:46 Permalink

"I can’t believe the effect the tariff response has had on the metals trade. Somebody needs their head examined if they think this is good for the American economy."


I am happy to buy only the metal as I can afford.  Maybe we will stop shipping scrap to China and reprocess/reuse here if prices go high enough.  I'd rather use bamboo from the neighbor's yard that pay the Chinese one red cent for their slave metal.