The only important economic data released this morning was a report from the Federal Reserve Bank of Dallas which showed that business activity in the southern region of the country rebounded significantly this month. Specifically, the general activity index jumped from -1.5 to +10.2 in November, the highest print since July 2014 and the first positive (expansionary) reading in almost two years. Further, the production index, a key measure of state manufacturing conditions, lifted from +6.7 to +8.8 this month, the second-best reading year-to-date. Under the hood, capacity utilization, new orders, the growth rate of orders, total employment, hours worked, and wages/benefits all increased this month but measures of shipments and capital expenditures deteriorated. Gauges of future activity (six months ahead) were even more encouraging in November as every single metric improved markedly, likely related to the results of the Presidential election. There were also several comments from surveyed managers this month worth highlighting:
- We are looking forward to the end of the disastrous socialist policies of the last eight years. Please reduce the regulation, taxes and government interference so we can compete globally. We hope the new administration makes good on its promises and, if so, it will increase our business expansion, hiring and investments.
- There is a great deal of optimism from our customers that the new pro-growth and lower-tax focus by the incoming administration will be a positive change from the past eight years.
- We expect the election to improve confidence in the economy with above average growth. Hopefully, the Federal Reserve System will make the right interest adjustment; it is a distortion and will fuel inflation.
- We continue to be very busy, which is normal for this time of year but still a good thing and we are thankful for it. I would like to think that business will remain steady now that the election is over and a pro-business candidate will be president. There is so much government interaction, interference and added cost that businesses have to endure that any positive change to reduce that impact will be a huge benefit. Time will tell and hopefully it's not a long time that is required.
- Having commercial activity on both sides of the U.S.–Mexico border, we are concerned about the potential impact of announced revisions to the NAFTA agreement by the new administration.
- Manufacturing and U.S. capital equipment is suffering over the sky-high dollar around the world. Other countries are going wild on their currency devaluations, and the U.S. does nothing to control it. This is hurting manufacturing, energy and agricultural businesses.
- Tight labor in Texas continues to make staffing second and third shifts problematic. We have had two 10-percent increases in wages the last 18 months in order to remain fully staffed. We have also had challenges in the quality of candidates as well.
Sources: Econoday, Bloomberg, Twitter, ZH, FRBD, FRBSLPost author: Charles Couch