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April 27, 2009
Texas Manufacturing Slump Moderates, Six-Month Outlook Improves
The decline in Texas manufacturing activity slowed in April, according to the Texas Manufacturing Outlook Survey.
Indexes for production, capacity utilization, volume of new orders and shipments edged upward for the second consecutive month, but they remained negative, indicating manufacturers are still retrenching. For the most part, the gains reflect fewer companies seeing declines in these measures, not more firms reporting recoveries.
Although still negative, the business activity index—the survey’s broadest measure of state manufacturing trends—saw improvement as the share of companies reporting better market conditions rose from March to April. The company outlook index strengthened, recovering the ground lost since September.
Manufacturers continued to draw down inventories. The index for materials inventories remained close to the previous month’s record low, and over a third of those responding noted declines in their finished goods inventory levels.
Manufacturers’ labor demand continued to contract. Firms reporting job cuts exceeded those hiring workers by a 10-to-1 margin, and 36 percent of firms noted declines in work hours. Falling demand for factory workers kept wage pressures in check, with 84 percent of companies noting no changes in compensation.
Downward price pressures persisted. Firms paying less for raw materials outnumbered firms paying more by 6-to-1, and 34 percent cited lower prices for their goods. Firms expect deflationary price pressures to subside over the next six months. More than two-thirds of manufacturers expect no change in finished goods prices six months from now, up from just a third in July.
Most indicators of future activity continued to improve, suggesting manufacturers expect declines in factory activity to slow further over the next six months. Indexes for future capacity utilization, shipments, new orders and growth rate of orders rose notably, and more than a third of manufacturing executives foresee increases in production and capacity utilization six months from now. The six-month company outlook index turned positive for the first time since June 2008, and 32 percent of firms anticipate that their firm’s conditions will improve.
The
Dallas Fed conducts the Texas Manufacturing Outlook
Survey monthly to obtain a timely assessment of the
state’s factory activity. Data for the latest
survey were collected April 14–22, and 101 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.
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. Next release: May 26, 2009
For additional perspective
on the survey, see
"The Texas Manufacturing Outlook Survey: A Tool
for Understanding the Economy" and "Made
in Texas: The Natural Selection of Manufacturing."
- Click on links in the table for greater details,
including historical data.
Questions
regarding the Texas Manufacturing Outlook
Survey can be addressed to Mine Yücel at mine.k.yucel@dal.frb.org.
Note
The Texas Manufacturing
Outlook Survey has not been produced for
a long enough time period to assess the
appropriateness of seasonal adjustment.
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
if appropriate. |
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