Dallas Fed: Manufacturing Can Recover, It Just Hasn’t Yet
The manufacturing sector has consistently flirted with contraction in the wake of the crisis and will need to experience a longer period of more robust growth in order to fully heal and once again become a driving force in the broader U.S. economy.
Recent manufacturing data fit well within that framework. Two separate readings of the sector’s August growth — Markit’s Flash U.S. Manufacturing PMI and the Federal Reserve Bank of Dallas’s Texas-area manufacturing survey — put factory output on differently trajectories. The Dallas Fed’s report is much more localized than Markit’s Purchasing Managers’ Index, but the difference between the two readings is enough to suggest that weakness still lingers in the manufacturing sector.
Business activity among Texas-area manufacturers expanded during August, but growth slowed for the second consecutive month. The Dallas Fed said that the headline production index — an important measure of factory activity — dropped to 7.3 in August from July’s 11.4. The new orders, capitalization, and shipments index also remained in positive territory but showed a similar decline from July levels. Still, the index of prices for finished goods was positive for the first time since March.