- The Dallas Fed’s monthly manufacturing index crashed to record lows in March, and to levels not seen since the 2008-09 financial crisis.
- Coronavirus is accelerating the loss of U.S. manufacturing as production, new orders and capacity utilization plunge.
- Those hoping for a v-shaped recovery could be disappointed as coronavirus alters the fabric of the U.S. economy – perhaps permanently.
On Monday, the Federal Reserve Bank of Dallas released its monthly Manufacturing Index. The gauge of factory activity crashed much faster than expected and carved out an even lower bottom than the one we saw during the 2008-09 Great Recession.
The sharp and sudden plunge was largely due to the coronavirus pandemic as local factories shuttered their doors and sent workers home. The report was so shocking that it’s hard to dispel the near certainty of a deep recession beginning this year.
Texas may have been the first casualty as far as data releases go, but it won’t be the last as coronavirus establishes a strong foothold in America.
What the Dallas Fed Survey Says
The Dallas Fed’s general business activity index of manufacturing plunged to -70 in March from a reading of 1.2 in February. That’s the lowest level on record and much worse than the projected reading of 6.2.
Factory output all but disappeared in March, as the production index crashed to -35.3 from 16.4 in June. New orders fell to their lowest levels since March 2009. Capacity utilization and shipments also collapsed to levels last seen in early 2009.
On the Dallas Fed’s scale, zero is the cut-off point between expansion and contraction.
The report is based on data collected between Mar. 17-25, making it one of the first to fully quantify the impact of coronavirus on the economy.
The Future of U.S. Manufacturing
It took less than a month for coronavirus to wreak havoc on Texas’ manufacturing industry. The following chart provides a quick summary of just how quickly things turned: