Dallas Fed September manufacturing index -18.1 vs -17.2 prior

<ul><li>Prior was -17.2</li></ul><p>Details:</p><ul><li>Output (production) +7.9 vs -11.2 prior</li><li>New orders -5.2 vs -15.8 prior</li><li>Employment +13.6 vs +4.3 prior</li><li>Outlook -17.5 vs -18.4 prior</li><li>Prices paid for raw materials +25.0 vs +17.4 prior</li><li>Prices received +1.8 vs +1.8 prior</li><li>Wages +34.8 vs +34.9 prior</li></ul><p>The details of this report are much better than the headline as new orders and employment materially improve.</p><p>Comments in the report:</p><p>Chemical manufacturing</p><ul><li>China’s economic woes are believed to be much worse than
reported, driving down exports, while internal pressures on building and
construction, automotive and general merchandise through inflationary
pressures and particularly the cost of financing is slowing growth
domestically. As a basic materials company, this is hitting us on all
fronts and slowing business dramatically.</li></ul><p>Computer and electronic product manufacturing</p><ul><li>We are still seeing wage pressure for our blue-collar employees,
so we did another mid-year raise in order to keep our experienced team.
We finally feel like the rate of wage increases will slow down. New
orders have slowed slightly but a lot less than one would think from
watching the news. Our products are nondiscretionary expense items, so
we aren’t nearly as subject to slowdowns as capital equipment providers
or discretionary spend items. We are buying some new production
equipment, and we are seeing much shorter lead times and flexibility on
price from suppliers.</li><li>We had a very slow summer. Things seem to be picking up a little,
but the slow summer will cause the total recurring revenue numbers to
be lower, and we are constantly below our system sales numbers.</li><li>As a member of the industrial production segment, we have had a
very hard time hiring qualified personnel. For the last three years, we
as a country are trying to reshore our manufacturing back to the U.S.
and become more independent of China and Taiwan. The federal government
is doing very little to incentivize bringing manufacturing back to our
country. Our capital equipment customers are telling us that they are
looking for specific manufacturing capabilities, and they are not
finding them here at home. They have all moved to China in the last 30
years. I don’t have to say that raising interest rates to this level
does affect the capital equipment purchases in a big way, obviously.
Most of them are sold in leases, and over the last 35 years in this
industry, our company has experienced the same every time interest rates
go up beyond 5 percent. Hiring in the industrial production environment
is a lot more difficult and costly than in the consumer industry. We
are living under completely different economic circumstances to have
high interest rates. Isn’t it time to start lowering interest rates and
have the country’s backbone manufacturing industry become more confident
in the economy?</li><li>Due to the cost of borrowing and lower order levels for the
fourth quarter, the company had to "optimize" staff and is looking to
focus on the bottom line.</li><li>We have one vendor who uses aluminum, and their lead time has
increased to over five months. It is causing us all kinds of
difficulties.</li><li>China remains very weak, with no uptick post-COVID. All markets
have weakened except auto, which has built inventory over the last
several quarters. We expect that market to roll over, too; perhaps the
UAW [United Auto Workers] strike will be the impetus.</li></ul><p>Fabricated metal product manufacturing</p><ul><li>Supply constraints are improving, but there are still some ongoing challenges.</li><li>Uncertainty related to economy, fiscal policy and the ability to
renew our line of credit on favorable terms in early 2024 [are issues
affecting our business].</li><li>We are having a record level of sales, production and revenue for the last six months.</li></ul><p>Food manufacturing</p><ul><li>As we prepare for continued uncertainty in the economy, we are
holding off on replacing team members who leave for retirement or other
reasons. We are also introducing the lean principles and mindset to our
organization to reduce waste in every area of our business.</li><li>Beef prices and availability are posing challenges to our business right now. Chicken is also increasing in cost.</li><li>A significant cut in U.S. government purchasing looms, yet
domestic orders have increased. The latter is a blip due to a
specialized funding program.</li></ul><p>Food and beverage stores</p><ul><li>The consumer is changing purchasing habits and looking for value in their food purchases. This trend will continue.</li></ul><p>Machinery manufacturing</p><ul><li>The summer funk has not relented. We see glimmers of potential,
but purchase orders are not being released, quantities are being scaled
back, and general sentiment is rather blase.</li><li>The demand for our products remains soft, and we see no signs of improved business activity for at least another year.</li></ul><p>Paper manufacturing</p><ul><li>Overall activity is now trending down 2–3 percent. Our industry is down 6–10 percent.</li></ul><p>Primary metal manufacturing</p><ul><li>We continue to see weakening demand in the primary metals
sectors. This is in part due to uncertainty on many fronts, but
especially with federal regulations and taxes. We are closely monitoring
trends across all sectors of the economy but continue to receive
feedback from the majority of customers that the economy is slowing down
considerably.</li></ul><p>Printing and related support activities</p><ul><li>We have been very fortunate to have had some large jobs that have
kept us very busy this summer, when many in our industry have been
slow. September will be as good if not better than August, but then it
seems our world will get slower and see greater uncertainty. Labor costs
are continuing to go up, but it seems that prices we pay for our
materials are possibly staying constant.</li></ul><p>Transportation equipment manufacturing</p><ul><li>The outlook is dismal with oil prices increasing and interest rates strangling many sectors, including ours.</li><li>2024 is looking better for the commercial vehicle industry in
spite of increased interest rates. However, we are still forecasting a
13 percent drop in customer demand.</li></ul>

This article was written by Adam Button at www.forexlive.com.