"Unequivocally" not good. Following last week's surge in initial jobless claims for 'Shale' states, Baker Hughes confirms rig counts continue to tumble. The last two weeks have seen the total US rig count fall the most since 2009 (and Canada down 9.3% this week alone). Seemingly confirming this weakness, The Kansas City Fed notes respondents see non-durable (petroleum) demand "sluggish", and rather awkwardly against the "everything's great meme," one respondent exclaims, "demand from oilfield customers is dropping rapidly." The current US rig count is now the lowest in 5 months.

US Rig Counts are sliding fast...

But just as in 2008, there is a lag... this has only just begun...

And Canada is getting crushed...

The Kansas City Fed region has a slightly bigger share of energy-related industries than the national average and the impact of falling oil prices is popping up in today's KC Fed factory survey. The composite index edged up to 8 this month from 7 in November, but the bank notes the strength is in durable goods manufacturing. Nondurables, which includes petroleum and coal products, have "remained sluggish." One respondent comments "Our industrial markets are OK, but demand from oilfield customers is dropping rapidly."

From Kansas Fed

“There is more general optimism about the economy, although the overall economy is still not great. Our industrial markets are OK, but demand from oilfield customers is dropping rapidly.” “Rumored production cuts so far have not impacted our order backlog. We are still operating at full capacity while striving hard to expand capacity and hire more production personnel.” “The price of crude oil is a large factor that will impact selling prices for some of our products. If it remains low, we will see prices for some products drop significantly as demand drops.” “The prices we charge for our products can’t keep pace with the non-stop growth of the costs incurred for compliance with Federal agencies. Federal regulatory burden continues to sap our enthusiasm, risk taking, and meaningful job growth and pay raises.” “We expect raw material prices to primarily be determined by demand and we are concerned demand could be lower. Parcel shipping companies have already announced healthy increases for 2015 even with declining energy costs. We expect our labor costs to continue to increase at about 3% annually.” “Overbuilding of capacity will restrain price increases. Higher input prices will result in restricted margins unless offset by cost savings and efficiency improvements.”

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Paging Larry Kudlow...