Texas Manufacturing Outlook Survey

Texas factory activity continued to expand in September, according to business executives responding to the Texas Manufacturing Outlook Survey.

The production index, a key measure of state manufacturing conditions, fell four points to 13.9, suggesting output growth continued but at a slightly slower pace than in August.

Other measures of manufacturing activity also suggested slightly slower expansion in September. The new orders index edged down two points to 7.1, while the shipments index fell three points to 14.7.

Similarly, the capacity utilization index fell four points to 12.0. A bright spot this month was the growth rate of orders index, which edged up to 4.4, a five-month high.

Perceptions of broader business conditions remained positive in September. The general business activity index came in at 1.5, a second positive reading in a row after three months in negative territory.

The company outlook index inched up to 7.4, its highest reading since February. The index measuring uncertainty regarding companies’ outlooks remained elevated at 13.3.

Labor market measures suggested stronger growth in employment and work hours in September. The employment index jumped 13 points to 18.8, its highest reading in nearly a year. Twenty-seven percent of firms noted net hiring, while 8 percent noted net layoffs. The hours worked index edged up to 5.7.

Input costs and wages continued to rise in September, while selling prices remained fairly steady. The raw materials prices index shot up 11 points to 20.3, a reading slightly below average. The wages and benefits index remained positive but fell 10 points to 17.4, a reading closer to the series average.

Meanwhile, the finished goods prices index continued to oscillate around zero for a fifth consecutive month, this time coming in at 1.0. These near-zero readings suggest little change in selling prices month to month.

Expectations regarding future business conditions were mixed in September. The index of future general business activity slipped into negative territory for the second time this year, falling eight points to -6.8.

The index of future company outlook also fell eight points but remained barely positive, coming in at 2.4. Other indexes for future manufacturing activity showed mixed movements but stayed solidly in positive territory.

Data were collected Sept. 17–25, and 115 Texas manufacturers responded to the survey. The Dallas Fed conducts the Texas Manufacturing Outlook Survey monthly to obtain a timely assessment of the state’s factory activity.

Firms are asked whether output, employment, orders, prices and other indicators increased, decreased or remained unchanged over the previous month.

Survey responses are used to calculate an index for each indicator. Each index is calculated by subtracting the percentage of respondents reporting a decrease from the percentage reporting an increase.

When the share of firms reporting an increase exceeds the share reporting a decrease, the index will be greater than zero, suggesting the indicator has increased over the prior month.

If the share of firms reporting a decrease exceeds the share reporting an increase, the index will be below zero, suggesting the indicator has decreased over the prior month. An index will be zero when the number of firms reporting an increase is equal to the number of firms reporting a decrease. Data have been seasonally adjusted as necessary.

Source: Federal Reserve Bank of Texas