Released this morning at 8:30 am, the survey’s headline index fell 15 points to 0.8 and the business climate index fell as well. On average, according to the report, "...respondents viewed the business climate as worse than normal." However, the index for future business activity climbed up two points to 37.4, and the index for future business climate is up seven points to 33.3.
In the Supplemental Survey Report the Fed asked respondents:
To what extent do you expect your firm’s spending on new plant and equipment to be higher or lower this year than last? How do you expect each of these capital spending categories to change?According to the report the number of business leaders planning to hike spending greatly outnumbered those expecting to reduce spending by a margin of 38 to 25 percent, among service sector firms, and 41 to 22 percent among manufacturers.
Bottom line: Signs are pointing south from a technical or operational perspective, and while business leaders acknowledge that the business climate is worse than normal, they are optimistic, evidenced by the number willing to increase capital spending compared to this time last year. Only time will tell if QE cuts helped the economy or prolonged the inevitable, meanwhile financial leaders are growing anxious about the fed-funds rate.
The FOMC is testing a series of term reverse repurchase agreements, through the FRB of New York from mid-February through early March as a potential way to control the fed-funds rate in the absence of QE. Look for a follow-up post on the effect of these tests shortly.