Economic data was light this morning, but both US releases were disappointing with new home sales and the Dallas Fed’s reading on manufacturing activity coming in worse than expected. For the latter, the General Business Activity Index dropped to -19.9 from -19.2 the previous month. That was also 3.9 points below expectations.
With another negative reading, this headline index has now been in contraction for 19 straight months. That makes it the second-longest such streak on record (since 2004), surpassing the 18-month streak ending in June 2016. However, it would still need to last another six months to match the previous record streak of contractionary readings that occurred during the Global Financial Crisis.
Breadth in this month’s report was terrible with only two indices – inventories and capital expenditures – moving higher on a sequential basis. To make matters worse, with further declines across a number of categories, just under half of them now find themselves in the bottom deciles of their respective historical ranges. Expectations are similarly depressed with only three categories rising on a month over month basis.
Formerly, production and capacity utilization were two of the few indices that remained in positive territory as of last month. But steep declines meant both indices tipped into contraction in November.While production is nearing its recent low from August, capacity utilization’s enormous 15.5-point drop month over month was the largest one-month decline since June 2022 to leave the index at the lowest level since the spring of 2020. While the manufacturing sector has been weak for months, the now resolved auto strike didn’t help matters, so it will be interesting to see if December’s readings show any bounceback as workers come off the picket lines.
Readings on demand hit similar recent or post-pandemic lows. New orders have been in contraction since last June with this month’s reading of 20.5 marginally above the low from one year ago. But the order growth rate is down to -25.4 which is the lowest since April and May of 2020. Even though new orders and the order growth rate are at post-pandemic lows, current readings are much higher than they were in the spring of 2020. However, that margin is not as wide for unfilled orders. The new low of -18.1 is only 8.4 points below the April 2020 low.
Prices have also seen an interesting dynamic recently. Prices Paid are well off the highs and have been falling in the past couple of months, but readings are still positive meaning prices for raw materials are rising at a slower pace than other points of the past couple of years. Prices Received, on the other hand, are not exactly showing manufacturers passing on those higher prices. With demand showing weakness, prices received are falling sharply as the index re-entered contraction in November. In fact, outside of the onset of the pandemic, it was the most negative reading since April 2016.More By This Author:Flash PMIs MixedHappy Thanksgiving! 2023 YTD WinnersMarket Cap Less Of A Factor In Performance