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December 2006
Factory Activity Declines
Texas Manufacturing:
A Primer
The Texas Manufacturing
Outlook Survey takes the pulse of an important
segment of the nation’s industrial
sector. The state produced $126.8 billion
worth of manufactured goods in 2005, 8.3
percent of the U.S. total. Texas ranks second
behind California in factory production
and first as an exporter of manufactured
products.
Texas turns out 29
percent of U.S. production of petroleum
and coal products. The state also has nearly
10 percent of the nation’s output
of computer and electronics products and
nonmetallic mineral products, such as brick,
glass and cement. |
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Manufacturing activity contracted
in December, according to the Texas Manufacturing Outlook
Survey. Most indexes were negative, including production,
capacity utilization, volume of new orders and shipments.
At the same time, manufacturers continued to be optimistic
about future business. Nearly two-thirds of responding
firms expect increases in production and volume of new
orders six months from now.
The production index fell from
8.5 in November to –5.2 in December, the lowest
reading since the series began in 2004. The percent
of business leaders indicating increases in production
was roughly unchanged from last month, but a larger
percentage of firms reported a production decline than
reported an increase. About 10 percent of firms switched
from reporting no change in activity in November to
reporting production declines in December.
Sentiment on general business
activity was negative in November and declined further
this month. The percentage of firms reporting conditions
had worsened was essentially unchanged from last month,
but a smaller percentage of firms said their evaluation
of the level of general business activity had improved.
In the December survey, the indexes
for production, capacity
utilization and volume
of shipments fell negative. Indexes for new
orders and unfilled orders
remained negative and fell further. The index for materials
inventories remained positive and increased. The
index for finished goods inventories
was still positive but eased slightly. The index for
number of employees dropped
to zero. The raw materials
price index was positive and increased. The finished
goods price index was positive but declined from
last month.
The Dallas Fed conducts the Texas
Manufacturing Outlook Survey monthly to obtain a quick
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. Readings above zero
point to expansion, while negative levels indicate contraction.
Click on links in the table for
greater details, including historical data .
| Questions
regarding the Texas Manufacturing Outlook
Survey can be addressed to Fiona Sigalla at
Fiona.Sigalla@dal.frb.org
or 214-922-5166.
Note
The Texas Manufacturing
Outlook Survey does not yet have a sufficiently
large sample size to permit seasonal adjustment
of the indexes. Thus, while respondents
are asked to adjust for normal seasonal
variation, 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 a sufficient
series are available. |
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