Dallas Fed

Having jumped miraculously from -18 to -1.3 in July, August's Dallas Fed plunged back to -6.2 - contracting for the 20th month in a row. The worse than expected headline data came despite a rise in new orders as the number of employees, average workweek, and capex all plunged into contraction. Hope also tumbled from 18.4 to 7.0 with inventories and new orders expected to slow.

Despite the surge in oil prices, the Dallas economy continues to contract...

With all the cranes and construction around the Dallas Fed building you would think the hipsters could have fabricated some better numbers! The truth is so 80's.

However, it wasn't the notoriously volatile data that attracted our attention, but rather the sampling of traditionally outspoken, well-formulated responses said as part of the survey. Here are some selected highlights:

• The global economies and the U.S. economy are very weak and uncertain.
• U.S. manufacturing is suffering because of the high dollar value.
• A good indication of business outlook is how many calls we get from truckers looking for freight business. On one day we received four calls. It was probably more calls than orders we received for the day.
• Refinery margins continue under pressure and the level of spending on equipment is being reduced significantly. I believe that the continued low level of spending will result in several providers going out of business. The market is getting very tough.
• Pricing has deteriorated to win bids, and many projects seem to be on hold. Owners are reevaluating capital expenditures priorities or deferring them all together.
• Despite some "hoopla" about construction metrics being strong, we seem to be on a plateau. Business is up and down some month to month, but no real growth year to year.
• Our increases are new product orders and not from existing products. Demand for existing products ranges from no change to worse.
• We are very busy right now, which is normal for this time of year. We are not sure how the next six months will pan out. We are very worried about persistent slowness of our customers, which does not bode well for us down the road unless things pick up soon for them.

The following analysis could have been penned by any econobserver who has not been captured by the system quite yet:

• Department of Labor rules and regulations are slowing growth and reducing hiring due to increased management time spent on compliance and higher costs of labor. Current efforts to bring foreign production to the U.S. are significantly reduced due to labor costs and because worker productivity remains low, especially for entry-level or unskilled workers. Taxes, costs and inefficiencies of exporting are reducing competitiveness in overseas markets. The lack of local support for foreign trade zones is causing our company to consider alternatives, including relocating and growing elsewhere that offers them. Growth and improvement for our company is primarily by product innovation overcoming a worsening business climate.

And finally, the punchline:

• Sometime after the election, historical data will show that in 2016 the U.S. was in recession.