ELLEN: Aren’t you having any breakfast?
CLARK: Not in the mood.
ELLEN: What are you looking at?
CLARK: Oh…The silent majesty of a winter’s morn. The clean, cool, chill of holiday air. And an a***ole in his bathrobe emptying a chemical toilet into my sewer.
COUSIN EDDIE: [sees Clark at the window, toasts him with his beer] Sh***er was full!
CLARK: Ah…yeah…you check our sh***ters, honey?
ELLEN: Clark, please. He doesn’t know any better.
CLARK: He oughta know, it’s illegal. It’s a storm sewer. If it fills with gas, I pity the person who lights a match within ten yards of it.
[Neighbor Todd comes out his front door in sweats and stretches his leg, on his way for a run. He notices a strange odor. He looks to Clark’s house. Eddie, unshaven, in his bathrobe, black socks and loafers, drinking a Meister Brau, smoking a cigar, keeps the hose flowing. Eddie sees Todd, toasts him.]
COUSIN EDDIE: “Merry Christmas! Sh***er was full!”
It’s the most wonderful time of year for rewatching QI’s favorite holiday movies. National Lampoon’s Christmas Vacation tops the list. And we were reminded of Cousin Eddie’s exchange upon discovering the following Monday Bloomberg headline: “Porta-Potty Company Sinks into Bankruptcy to Slash Debt Load.” Westborough, Massachusetts’s United Site Services, provider of portable restrooms and other related services, filed on Monday a Chapter 11 petition in New Jersey to wipe out $2.4 billion in debt. They may not have been able to help Cousin Eddie, but it’s clear that the bankruptcy cycle isn’t taking a Christmas vacation.
Neither is the U.S. economic calendar. Excerpts from December’s Dallas Federal Reserve manufacturing survey were the farthest thing from the Griswolds’ holiday light spectacular:
“Texas factory activity contracted slightly in December after rising notably in November, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, fell 24 points to -3.2, indicating a slight decline in output.
“Other measures of manufacturing activity also declined this month. The new orders index fell 11 points to -6.4, and the capacity utilization index plunged 24 points to -4.5. The shipments index fell to -10.6, its lowest reading in 17 months.
“Perceptions of broader business conditions worsened in December. The general business activity index remained negative at -10.9, and the outlook index fell further into negative territory to -11.9.”
The month-over-month swings in both production and capacity utilization were so severe as to rank them third largest since the survey’s 2004 inception. More significantly, outside the pandemic months of March and April of 2020, the -23.9-point reversal (to be exact) in the Texas factory operating rate (lilac line) was fundamentally the largest ever. Such an abrupt turn of events raises the likelihood that recessionary factory figures via the key Lone Star manufacturing complex that doubles as the largest export state guide the national numbers lower when the Federal Reserve releases December’s U.S. Industrial Production and Capacity Utilization (dark blue line) on January 16. The swing toward additional upstream slack keeps with the theme of manufacturing disappointments from other regional December surveys.
Capacity Utilization wasn’t the only gauge to flag slackening industrial activity. Dallas Fed’s Current Backlogs fell to a 13-month low of -13.5 in December, on par with the whole-economy Great Recession of 2007-2009 and 2015-2016’s industrial recession (fuchsia line). This month’s Backlogs were not only well below the long-run average of -2.7; but the negativity stretched to 40 of the last 43 months. The absence of unfinished work also waylaid the nascent revival in the Current Workweek – the -7.5-print fell to a six-month low following a string of expansions in four of the five months ended November (light blue line, top right).
The margin squeeze narrative also held strong, keeping a yellow flag raised for expected investment activity. The average of current input costs (i.e., Prices Paid) and Wages rose to a three-month high of 28.9 in December (yellow line), contrasting with Prices Received slumping to 8.2, the second single-digit figure in the last three months (red line). As recently as June, Prices Received came in at 26.1, a three-year high. The inability to push through higher costs, including tariffs, crimps capital spending plans. Despite the Future Capex index rising 4.8-points to 17.7, it has remained below the long-run average of 19.4 in seven of the last ten months (light blue line, bottom left).
Survey respondent comments were also telling. As one fabricated metal producer noted, “Customers are deferring or canceling projects.” Even in the IT industry, where AI has been a boon, further Fed easing was demanded: “We need interest rates to go down further.” Peering into 2026, consider the caution out of the transportation equipment sector: “The latest forecast for the trucking industry remains very weak and is now expected to continue until third quarter 2026. We are taking additional cost reductions with reduced work weeks and reductions and delays in merit increases and holding off filling [open] positions.”
Texas factories’ primary concerns for 2026’s first half outweighed anything Cousin Eddie could throw Clark’s way. At 51%, revenue worries about ‘demand/recession’ topped the list (aqua bars). At identical 41% reads were ‘domestic policy uncertainty’ and ‘input costs/inflation’ (orange and purple lines). ‘Cost of credit/interest rates’ anxiety waned to December’s 19% concomitant with Fed rate cuts and expectations of more to come (green bars). In the not-so-obvious department, the strong -.89 correlation over the last four quarters between credit/rate and demand/recession concerns has us asking: Is this a case of correlation or causation? OK, that was rhetorical…unless you’re a Fed policymaker who’s so oblivious they don’t know that arresting the easing cycle at this juncture is equivalent to lighting a match right next to a storm sewer.