QUICK QUILL — Inaugural credit questions asked of Dallas Fed District executives are elevating fundamental risks in the world’s eighth-largest economy and exporting nation, a.k.a., Texas. Cyclical risks in the Lone Star States’ factory sector New Orders growth and Backlogs flag another step down in the ongoing global industrial recession. A paralysis born of uncertainty promises to spread beyond Texas’ borders. Volatility remains a tactical buy.
TAKEAWAYS
- In the Dallas Fed’s July data, executives across Manufacturing, Services, and Retail noted a slowdown in receivables coming in over the last three months; the trend is a sign of rising credit stresses in the nation’s largest exporting state and world’s eighth largest economy
- Dallas Fed Mfg New Orders fell -20.4 points in the last three months to -16.6, which equates to a -1.5 z-score swing; Current Backlogs also collapsed -21.9 points to -26.6, the third worst one-month drop in history, a red flag for Industrial Production and the Mfg Workweek
- From June’s three-year low of 9.8, the Dallas Fed Mfg Uncertainty Index vaulted to a two-year high of 30.7 in July; given the series’ past correlation with the VIX, the uptick in the former suggests increased volatility will be a staple through the end of the year