Bloomberg
Five Federal Reserve indexes of regional manufacturing all slumped in December 2018, the first time they’ve fallen in unison since May 2016 and the latest evidence that a pillar of
the US economy has started to wobble heading into 2019.
The Dallas Fed’s factory index unexpectedly contracted, falling to a two-year low of minus 5.1 from 17.6 in November, and the steepest decline since 2013. The district bank covers the oil-producing region of Texas, northern Louisiana and southern New Mexico. Oil prices are down about 40 percent from a nearly four-year high in October.
More than 20 percent of manufacturers said that their outl-ook worsened, according to the regional Fed report.
“Expectations regarding future business conditions remained positive but retreated notably in December 2018,†it said.
The report follows other weakening Fed factory gauges in the New York, Philadelphia, Richmond and Kansas City districts, just the sixth time that’s happened during the economic expansion now in its 10th year, a Bloomberg analysis of Fed data shows.
FIVE FED REGIONS
New York: “Looking ahead, firms remained fairly optimistic about the six-month outlook, though optimism was slightly more tempered than in November.â€
Philadelphia: The measure dropped to the weakest reading since August 2016: “The survey’s broad current indicators remained positive and at relatively low levels.â€
Richmond: The gauge saw its steepest month-on-month point drop in a quarter century, dragged down to lowest since June 2016 by shrinking orders and shipments.
Kansas City: Gauge declines to the lowest level since November 2016, with one business saying: “We were doing well this past spring until the tariffs hit.â€
Dallas: “Perceptions of broader business conditions turned slightly negative.â€
The Dallas gauge tracking the outlook for manufacturing fell into a contractionary reading for the first time in more than two years, while measures of shipments, capacity utilisation and unfilled orders all fell to the lowest levels since late-2016. The measure for employment weakened to the lowest level in more than a year.
In the oil and gas industry, US shale producers have begun to rein in spending to ride out the sudden crash of crude prices. Some explorers in the Permian Basin of Texas have begun to shut down rigs and fracking crews in response to the plunge in crude. A separate survey by the Dallas Fed showed no one in the industry saw a crash in crude prices coming.
Revitalising American industrial might has been a hallmark of President Donald Trump’s presidency.
The economy has created an average of 20,000 manufacturing jobs a month during his term, more than double the pace during President Barack Obama’s second term.
Now there are increasing signs factories are suffering from the uncertainty around Trump’s trade policy, which includes tariffs on imported steel, aluminum, and about $250 billion in Chinese products.
“Consumer confidence slum-ped in December 2018 to the lowest since July, the latest sign Americans are growing less optimistic as stock markets gyrate and the expansion moderates, according to a Conference Board report last week. Underneath that drop was the biggest plunge in 41 years in a measure of the employment outlook.