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“Somebody Needs Their Head Examined” Dallas Fed Survey Respondents Fume As Stagflation Looms

The Dallas Fed survey of Texas manufacturing soared to 36.5 in June (from 26.8), back near its highest since 2004. The problem, however, is this spike is being driven by soaring prices as production slows – flashing a big red stagflationary alarm once again.

We have seen this stagflationary surge before – it led a recession in 2008 and prompted QE2 in 2011…

And perhaps just as worrisome for the micro-picture is the pressure on margins and prices paid soar more aggressively than prices received… for now…

 

Respondents are clear…

Nonmetallic Mineral Product Manufacturing

  • The price of steel raw materials is causing costs to increase.

Fabricated Metal Product Manufacturing

  • Steel tariffs to NAFTA partners is a mistake. Higher steel prices could slow down strong projects and the manufacturing recovery which started in fourth quarter 2017.

  • I can’t believe the effect the tariff response has had on the metals trade. Somebody needs their head examined if they think this is good for the American economy.

  • We are about to raise prices for the first time in six years due to the rising cost of steel and aluminum. That is going to cause some uncertainty, with our customers looking elsewhere to purchase the products we manufacture.

Machinery Manufacturing

  • There is lots of uncertainty among manufacturers regarding the impact of the steel tariffs. Even steel sourced from the U.S. is rapidly increasing in price due to capacity constraints.

  • We are operating at the lowest levels of our 70-year history. Chinese imports continue to depress pricing of our products.

  • Inflationary pressures are of concern. Freight costs per mile are up. Metals are costing more, impacting a large number of purchased parts. Tariff escalation is not going to help.

  • Business remains strong.

  • President Trump—trade, tariffs and diplomacy—is leading to more uncertainty.

Printing and Related Support Activities

  • The lingering effects of Hurricane Harvey have still impacted our volume. Through May, our volume is down 7 percent from last year at this time.

  • We are busy now because of a large single order that we entered in May and that is being worked on now and into July. We are feeling the need to raise labor wages, which will require a price increase, but since all our materials seem to be increasing in cost, why should we miss an opportunity to include a small increase to cover rising wages? I am very concerned long term about this goofiness with tariffs and possible foreign-country retaliation. Much of what we use in materials and equipment comes from Europe and a little from Asia.

Food Manufacturing

  • Tariffs impacting the price of stainless steel are a concern. We also are in an agriculture-related environment, and commodity price increases and stability are of concern.

Apparel Manufacturing

  • The Army is ordering huge volumes of apparel, which we anticipate will continue for another nine months.

Paper Manufacturing

  • We see a slight softness in order volume. We will wait and see how July turns out.

  • We lost a large contract, and it will decrease our production for the short term. We expect to get additional new business to replace it.

But – after all that – The Dallas Fed Survey rebounded dramatically?