Two surveys released today show expansion in the economy, with one of them rebounding from past contractions while the other finds manufacturers growing rapidly in its region.
The Texas Manufacturing Outlook Survey from the Dallas Federal Reserve Bank found that the current economic environment improved in October after five months of contracting sentiment. The index for general business conditions rose from -14.4 in September to +2.3 in October. Despite the more pessimistic opinion of the economy by respondents, measures of new orders, production and employment did not contract in recent months (although they did dip lower).
The index for new orders increased from 3.6 to 8.3 in the month, which is a positive sign of future growth for the sector. In addition, the pace of growth for employment, the average workweek and capital expenditures picked up. However, indicators for production and shipments grew at a slightly lower rate (but remained positive).
Those completing the survey were very optimistic about various measures of activity over the next six months. Statistics for new orders, production, capacity utilization and shipments all increased by significant margins from the previous month, with employment and capital spending also growing rapidly. They also anticipate pricing pressures lingering, with raw materials elevated and continuing to go higher.
Meanwhile, the Institute for Supply Management-Chicago report for October finds that manufacturing in the Chicago region continues to grow strongly. While the overall Business Barometer index edged lower from 60.4 in September to 58.4 in October, overall measures suggests that activity is expanding at a fast clip. The index for new orders, production and employment were all over 60, for instance. The backlog of orders moved from contraction to a slight expansion.
This marks the 25th consecutive month of expansion. This economic indicator is interesting in that, while it dipped in the summer months from earlier highs, it never showed a contraction in activity, unlike some of the other regional surveys. Increased durable goods production – especially for motor vehicles for this survey – has been a large part of why the ISM-Chicago and other Midwestern manufacturing studies have shown strength recently.
In summary, these two surveys continue to give us reasons for optimism. Both show the economy expanding, and in the case of the Dallas Federal Reserve Bank survey, there appears to be a significant rebound from recent weaknesses, as well.