More January Fed Surveys Are In: Consensus is Up

The release of the Dallas Federal Reserve Bank’s regional survey is here. Some of its results were eye opening: the new orders index shot up to 9.5 in January, the highest it has been since June 2011, and the production index increased to 5.6, subsequent to decreases in November and December.

Consistent with the previous indexes, the employment index rose to 12.2 from 9.9 in January with longer workweeks also indicated.  21 percent of firms hired new employees, laying off 9 percent. The capacity utilization index moved from 4 to 8.5. Taken together these five indexes tell a story typical of economic recovery: new orders increase rapidly causing production to rise accordingly to fill the orders. Producers increase the hours of current employees first, then hire new ones as this becomes inadequate. Factory capacity utilized increases as well; if this trend continues, firms will either expand their quarters or move into larger ones, which could cause construction to increase.

Also in January the finished goods price index went from -0.8 to +9, suggesting that demand for those goods is increasing. If this is the case, the recovery mechanism detailed above will be reinforced by stronger sales.

General business activity index rose to 15.3 after being negative in December. Future business activity index increased from 9.5 to 22.3, the highest in almost a year.

Although the Dallas report was for the state of Texas, other regional surveys for January show that the Eastern and Midwestern indexes are moving in tandem, with New York and Philadelphia having somewhat higher highs and lower lows. Indexes are based on zero, and are obtained by subtracting decreases from increases.

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