Texas Manufacturing Activity Still Weak-incoming orders continue to fall

Texas Manufacturing Outlook Survey

Federal Reserve Bank of Dallas

Texas factory activity was unchanged in August, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, came in at zero, posting a third consecutive month of little to no growth.

Most other indexes for current activity remained negative in August. The new orders index stayed at –9, implying incoming orders continue to fall. The capacity utilization and shipments indexes pushed deeper into negative territory, suggesting further contraction of business.

The general business activity index was negative for the third month in a row, but advanced in August as the share of respondents reporting improved activity rose from 10 to 15 percent. The company outlook index climbed back into positive territory after being negative for two months, as 23 percent of manufacturers said their outlook improved in August, compared with 13 percent in July.

The employment index turned negative for the first time in six months, largely due to the share of firms reporting layoffs rising from 15 percent in July to 23 percent in August, and hours worked contracted again. Wage and benefits costs rose modestly.

The raw materials price index doubled from 12 in July to 24 in August, reflecting a surge in input costs. Twenty-eight percent of manufacturers reported an increase in raw materials prices, while only 4 percent noted a decrease. Finished goods prices fell again in August, although three-fourths of firms reported no change in selling prices. The future indexes for both raw materials prices and finished goods prices were positive and rose.

Most future indexes of manufacturing conditions fell in August, but remained in solid positive territory. The future company outlook index fell from 16 to 9, with 31 percent of respondents expecting an improved outlook six months from now. However, the future general business activity index, a broader measure of economic conditions, dipped into negative territory for the first time in more than a year.

The Dallas Fed conducts the Texas Manufacturing Outlook Survey monthly to obtain a timely assessment of the state’s factory activity. Data were collected August 17–25, and 99 Texas manufacturers responded to the survey. Firms are asked whether output, employment, orders, prices and other indicators increased, decreased or remained unchanged over the previous month. Link to complete report including charts and graphs