Texas Manufacturing Expansion Picks Up Pace

Texas Manufacturing Expansion Picks Up Pace

What’s New This Month…

For this month’s survey, Texas business executives were asked supplemental questions on the labor market and pricing power. 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 expanded at a faster clip in August, according to business executives responding to the Texas Manufacturing Outlook Survey.

The production index, a key measure of state manufacturing conditions, shot up nine points to 17.9, its highest reading in nearly a year.

Other measures of manufacturing activity also suggested faster expansion in August. The shipments index rose seven points to 17.6, and the capacity utilization index rose five points to 15.7, both reaching 11-month highs.

The new orders index moved up from 5.5 to 9.3, while the growth rate of orders index was largely unchanged at 1.8.

Perceptions of broader business conditions improved in August. The general business activity index pushed into positive territory for the first time in four months, rising nine points to 2.7.

Similarly, the company outlook index rose to 5.0 following three months in negative territory. However, the index measuring uncertainty regarding companies’ outlooks jumped nine points to 18.6, a reading well above average.

Labor market measures suggested slower growth in employment and work hours in August.

The employment index remained positive but retreated 11 points to 5.5, a level closer to average. Eighteen percent of firms noted net hiring, while 12 percent noted net layoffs. The hours worked index edged down to 4.0.

Input costs and wages continued to rise in August, while selling prices declined slightly. The raw materials prices index remained positive but fell from 17.0 to 9.8.

The wages and benefits index rose seven points to 27.3, an elevated level. Meanwhile, the finished goods prices index posted a second slightly negative reading in a row, suggesting a modest decline in selling prices this month.

Expectations regarding future business conditions remained positive in August. The index of future general business activity posted a second consecutive positive reading but moved down five points to 1.4.

The index of future company outlook was little changed at 10.4. Both readings, while positive, remain well below average. Other indexes of future manufacturing activity moved down but stayed solidly in positive territory.

Data were collected August 13–21, and 118 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.

Questions regarding the Texas Manufacturing Outlook Survey can be addressed to Emily Kerr at emily.kerr@dal.frb.org.

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