Economy

Economic Data Roundup (03/26/2018)

3/26/18 12:00 PM

iStock-465055366-1.jpgManufacturing activity in the southern region of the country slowed considerably this month, according to a new report from the Federal Reserve Bank of Dallas (FRBD). Specifically, the 11th Fed district’s general business activity index fell from 37.2 to 21.4 in March, significantly worse than expected and the largest monthly decline since December 2015.

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However, the sharp pullback was from February’s 13-year high, and it is important to remember that any reading above zero signals net activity expansion. Under the hood, measures of production, capacity utilization, new orders, business growth, total employment, hours worked, wages and benefits, and capital expenditures all deteriorated in March, and forward-looking (six months ahead) optimism gauges also softened. According to surveyed manufacturers, though, the main factor behind all of the weakness recorded in March was near-term trade uncertainty (see the highlighted comments below).

  • Our business has had a sudden, dramatic change in outlook due to the new steel tariffs. We expect a large increase in volume and prices, but neither will be sustainable. The biggest uncertainty is the timing as to when the tariffs will be removed and the negative impact once that occurs. We expect a wild, unpredictable ride as there are also large, negative and unintended consequences which will hurt us. On balance, we will have temporary large increases in profits. We are fundamentally fair traders and not in favor of the heavy hand of government intervention, but we will enjoy it while it lasts.
  • The national rhetoric regarding steel tariffs immediately raised the price of steel significantly. We had a large amount of steel under contract, yet to be purchased, which will ultimately increase costs and reduce profits considerably.
  • Steel tariffs may put a damper on our business because of the increase in the price of finished goods and shortage of raw material.
  • We will likely have to raise prices due to the effects of aluminum tariffs.
  • Uncertainty regarding the pricing of steel and aluminum products (due to the potential impact of tariffs) is adversely impacting our capability to plan for future activity.

 


 

Sources: Econoday, FRBD, FRBSL

Post author: Charles Couch