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November 2005
The November Texas Manufacturing
Outlook Survey indicates that manufacturing activity
in Texas continues to expand. According to firms surveyed,
indicators for general business
activity, production,
and employment remain
positive.
The indicator for finished goods
inventories, which had been negative over the summer,
moved back into positive territory in November. Since
mid-summer, there has been a strengthening in the indicator
of prices paid for raw materials. The indicator of prices
received for finished goods has been positive but strengthened
only slightly in November. The index of wages and benefits
has been positive but relatively stable over the past
year.
Expectations for future activity
have been consistently stronger than current activity
over the past year and a half for a number of indicators,
suggesting Texas manufacturers are optimistic about
the outlook for the next year. Since mid-summer 2005,
there has been an upward drift in the future expectations
for production, capacity utilization and the volume
of new orders, suggesting an acceleration of optimism
in recent months.
About the Survey
The Texas Manufacturing Outlook
Survey asks participants whether various indicators
have increased, decreased or remained unchanged. Answers
cover changes over the previous month and expectations
for activity six months into the future.
Near the end of the month, the
questions for the new manufacturing survey are electronically
transmitted to respondents, and answers are collected
over a few days. Survey respondents are instructed to
exclude the effects of normal seasonal changes. After
more data are gathered, the survey will be statistically
tested for the presence of seasonality, and corrections
will be made if necessary.
Survey responses are used to calculate
an index for each question. Each index is calculated
by subtracting the percentage reporting a decrease from
the percentage reporting an increase. When all firms
report that activity has increased, an index will register
100. An index will register –100 when all firms
report a decrease. An index will be zero when the number
of firms reporting an increase or decrease is equal.
At this time, there are not sufficient
data to statistically test the relationship of the Manufacturing
Outlook Survey to employment, output or other data.
Roughly 80 manufacturers regularly
participate in the Dallas Fed survey, which began collecting
data in May 2004. Participants include a broad range
of manufacturing industries from across the state.
Texas Manufacturing Has Muscle
The outlook survey focuses
on manufacturing because movements in this sector can
be particularly useful for understanding changes in
the general economy. Swings in business activity are
often felt more quickly and more intensely in the manufacturing
sector, which tends to be more cyclically sensitive
than the total economy.
Texas is important to the nation’s
manufacturing. The state produced $98 billion worth
of manufactured goods in 2003, roughly 7 percent of
the country’s output. Texas ranks second behind
California in factory production and first as an exporter
of manufactured products.
Texas turns out a large share
of the country’s production of petroleum and coal
products, reflecting the muscular refining industry.
Texas also has nearly 10 percent of the nation’s
output in computer and electronics products and nonmetallic
mineral products, such as brick, glass and cement.
Questions regarding the Texas
Manufacturing Outlook Survey can be addressed to Fiona
Sigalla at Fiona.Sigalla@dal.frb.org.
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