Trump Recession in the Loan Star State
The far reaching economic impact from the coronavirus crisis has sent Texas reeling into Trump Recession as well.
While it might be incorrect to say that the recession would certainly have started in the loan start state this month without the massive economic shock from the pandemic, the fundamentals heading into the hit were already soft, at best.
This is how recessions get made. You have soft fundamentals and often soft to weakening leading economic indicators of a sufficient intensity, breath and duration. And at some point, invariably, a trigger event of some kind.
In the case of the 2020 Trump Recession in the U.S., most manufacturing regions have been pressured under the Trump Slump of 2018-present, enduring now years of trade warring, hampered tourism, embarrassment on the global stage, and more.
What’s New This Month
For this month’s survey, Texas business executives were asked supplemental questions on the impacts of the coronavirus (COVID-19). Results for these questions from the Texas Manufacturing Outlook Survey, Texas Service Sector Outlook Survey and Texas Retail Outlook Survey have been released together. Read the special questions results.
Texas factory activity declined sharply in March, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, plummeted from 16.4 to -35.3, suggesting a notable contraction in output since last month.
Other measures of manufacturing activity also point to a sudden decline in March. The new orders index dropped to -41.3, its lowest reading since March 2009 during the Great Recession. Similarly, the growth rate of orders index fell to -44.9. The capacity utilization and shipments indexes fell to -33.4 and -33.8, respectively, also the lowest readings since the Great Recession. Capital expenditures declined sharply, with the index dropping from 6.9 to -34.3.
Perceptions of broader business conditions turned quite pessimistic in March. The general business activity index plunged from 1.2 to 70.0, and the company outlook index fell from 3.6 to -65.6. Both March readings are the lowest since the survey began in June 2004. The index measuring uncertainty regarding companies’ outlooks surged from 11.0 to 62.6.
Labor market measures indicate employment declines and shorter workweeks this month. The employment index fell to -23.0 from its near-zero reading in February. Three percent of firms noted net hiring, while 26 percent noted net layoffs. The hours worked index dropped to -22.4 […]
(Bold emphasis ours)
The above reports, as well as those from other Fed regions, really call into question Wall Street’s forecasts for the ISM March Manufacturing Index, which will be released on Wednesday, April 1st.
The data so far suggest all risks to the March ISM will be strongly to the downside. Consensus at this time is for a modestly contractionary reading of 45.0, down from the flatline Trump Slump 50.1 seen in the U.S. last month.