A third Federal Reserve regional bank factory survey weakened in June, adding to signs of waning momentum in manufacturing amid heightened trade tension.
The Dallas Fed’s gauge of manufacturing in Texas slumped to a three-year low of minus 12.2 as more firms saw conditions worsen, according to a report Monday that also showed further deterioration in the six-month outlook. The main reading was well below the minus 2 median projection following minus 5.3 in May and weaker than all estimates in a Bloomberg survey of economists.
The fourth-straight monthly drop is the latest sign President Donald Trump’s trade war with China is weighing on the expansion and follows Fed officials last week downgrading their assessment of the economy while citing greater uncertainty about the outlook. The downbeat June reading on manufacturing follows other surveys showing deterioration. The New York Fed’s Empire State index fell by a record, the Philadelphia Fed gauge dropped to a four-month low and the Institute for Supply Management’s national measure decreased in May to the lowest level since October 2016.
The composition of the Dallas report was mixed, with some gauges showing improvement. The measure of new orders rose slightly from a two-year low the prior month, while the measure of production also gained. Both remained at levels indicating expansion. The capital expenditures gauge slumped to a more than two-year low.
The index of future general business activity dropped to minus 2.7, the lowest since January 2016, as more firms said they expect worsened activity six months from now. Data were collected June 11–19 from 116 manufacturers in Texas.