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December 2005
Recent Results
Texas manufacturing activity
continues to expand, according to firms polled in December
for the Texas Manufacturing Outlook Survey. Indicators
for production, capacity
utilization and volume of shipments remain positive
for the most recent month, although these indicators
weakened.
Survey participants continue to
be optimistic about activity six months from now, with
respondents expecting production, capacity utilization
and the volume of shipments to be stronger.
While still positive, indexes
for prices paid for raw materials and prices received
for finished goods were lower. Just over twice as many
respondents report an increase in prices paid for raw
materials than report an increase in prices paid for
finished goods.
Survey participants indicate that
they are currently more optimistic about their company
outlook as well as the outlook for general
business activity than they were in November.
Manufacturing Expansion Continues
Continued expansion of manufacturing
is indicated by continued positive index values for
production, capacity utilization, volume of shipments
and volume of new orders, although all these indicators
fell from November to December.
The index for production fell
from 23.2 in November to 7.9 in December. There continue
to be more firms reporting an increase in production
than reporting a decrease, but the percentage of firms
reporting an increase declined from 39.3 to 31.4. The
percentage of firms reporting a decrease in production
rose from 16.1 to 23.5.
The December index for capacity
utilization fell from 19.6 to 2.0. Fewer firms report
an increase in capacity utilization, falling from 33.9
percent to 25.5 percent, and more firms report a drop
in December (23.5 percent) than in November (14.3 percent).
The index for volume of shipments
fell from 26.7 in November to 13.7 in December, while
the index for volume of new orders dropped from 23.2
in November to 17.7 in December.
The indicator for finished goods
inventories fell from 10.9 in November to 3.9 in December.
Most firms report no change in finished goods inventories
this month (64.7 percent). The index for materials inventories
was up slightly from 1.8 in November to 5.9 in December.
Price Pressures Ease Slightly
Most firms report increases
in prices paid for raw materials (62.7 percent) and
no change in prices received for finished goods (66.7
percent). Both index values were lower in December.
The index of prices paid for raw
materials fell from 62.5 in November to 58.8 in December,
with fewer firms reporting increases in raw materials
prices. Only 3.9 percent of firms report a decrease
in raw materials prices, down from 7.1 percent in November.
The percentage of firms reporting
higher finished goods prices also fell in December.
The index for finished goods prices dropped from 32.1
to 25.5. Similar to raw materials prices, the percentage
of firms reporting a decline in finished goods prices
fell from 5.4 percent in November to 3.9 in December.
The indexes for prices six
months from now are slightly below the indexes for the
current period. Most firms expect an increase in the
price of raw materials six months from now (54.9 percent),
but most firms expect no change in the prices received
for finished goods (51 percent).
Outlook Improves
Expectations for future activity
continue to be consistently stronger than current activity
for most indicators. There continues to be an upward
drift in future expectations for production and volume
of new orders, suggesting Texas manufacturers are more
optimistic about the outlook six months from now.
The index for company outlook
increased slightly from 21.8 in November to 25.5 in
December, with the percentage reporting a worse company
outlook falling from 10.9 in November to 3.9 in December.
Note: The Texas
Manufacturing Outlook Survey does not yet have a sufficiently
large sample size to permit seasonal adjustment of the
indexes. Thus, the month-to-month values of these indexes
may include some normal seasonal variation that is not
indicative of changes in the business cycle. Other Federal
Reserve Bank business outlook indexes benefit from seasonal
adjustment, and the Texas indexes will be seasonally
adjusted when three years of data are available.
Questions regarding the Texas
Manufacturing Outlook Survey can be addressed to Fiona
Sigalla at Fiona.Sigalla@dal.frb.org.
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