02/27/24 08:55 AM EST

Objectively Better Manufacturing Data

Below is a chart and brief excerpt from today’s Market Situation Report written by Tier 1 Alpha. If you’re interested in learning more about the Hedgeye-Tier 1 Alpha partnership, there’s more information here.

Today's bonus chart brings encouraging news, highlighting signs of incremental improvement — or perhaps less deterioration — in the economy. Over the past year, the Dallas Fed's manufacturing data has painted a rather bleak picture with some truly dismal figures. However, recent updates indicate a shift toward improvement, albeit from very low starting points. This uptick, however, is accompanied by increased costs for wages and inputs.

In February 2024, the Dallas Federal Reserve Bank reported a significant improvement in its general business activity index for the Texas manufacturing sector, climbing to -11.3 from a previous eight-month low of -27.4. This rebound suggests a revitalization in the industry's prospects. The production index, a vital gauge of manufacturing health in the state, advanced 16 points to 1.0, signaling a stabilization in activity.

Demand metrics also showed positive movement, with the new orders index surging 18 points to 5.2, its first positive reading since May 2022. Additionally, the capacity utilization and shipments indexes registered substantial gains, moving from contraction to neutral territory.

The employment landscape also showed signs of recovery, with the employment index rising 16 points to 5.9 after previously negative readings. On the pricing front, while wages and input costs continued their ascent, selling prices remained steady.

Looking to the future, the production index remained optimistic at 22.4, and the general business activity index experienced a significant increase of 17 points to 6.2, signaling positive sentiment for the first time in six months.

None of these numbers are red hot by any stretch of the imagination, but they are objectively better.

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