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July 25, 2011

Texas Manufacturing Activity Picks Up

Texas factory activity expanded in July, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, rose from 5.6 to 10.8, suggesting output growth picked up this month.

Other measures of current manufacturing conditions also indicated growing activity, and the pace of new orders increased. The shipments index rose to a reading of 7.8 after coming in at zero last month. The capacity utilization index was positive but remained near zero, indicating little change over the prior month. The new orders index rose sharply from 6.4 in June to 16 in July. Thirty-four percent of firms said order volumes increased this month, the highest share since November 2010.

Indexes reflecting general business conditions improved in July. The general business activity index remained negative for the third month in a row but jumped from –17.5 to –2, suggesting only a slight worsening this month. The company outlook index rose from 7.2 in June to 11 in July, indicating manufacturers were more optimistic about their firms’ prospects for the near future. Ninety percent of respondents said their outlooks were unchanged or improved from last month.

Labor market indicators reflected more hiring and longer workweeks. The employment index came in at 12.1, up from 5.3 in June. Twenty-two percent of manufacturers reported hiring new workers, the highest share this year. The hours worked index rose from 1.5 to 7.9.

Prices and wages increased again in July. The raw materials price index rose slightly after trending down in recent months, edging up from 31.1 to 34.3. The finished goods price index fell from 10 in June to 4.6 in July, suggesting selling prices rose but at a slower pace than last month. More than 50 percent of respondents anticipate further increases in raw materials prices over the next six months, while 27 percent expect higher finished goods prices. The wages and benefits index moved up from 15.5 in June to 18.4 in July, although the great majority of respondents noted no change in labor costs.

Expectations regarding future business conditions were generally more optimistic in July. The indexes of future general business activity and future company outlook edged up this month after trending down in the first half of the year. Several indexes of future manufacturing activity, including production, rose in July while others edged down but remained in solid positive territory.

The Dallas Fed conducts the Texas Manufacturing Outlook Survey monthly to obtain a timely assessment of the state’s factory activity. Data were collected July 12–20, and 87 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 indicator. Each index is calculated by subtracting the percentage of respondents reporting a decrease from the percentage reporting an increase. When the share of firms reporting an increase exceeds the share reporting a decrease, the index will be greater than zero, suggesting the indicator has increased over the prior month. If the share of firms reporting a decrease exceeds the share reporting an increase, the index will be below zero, suggesting the indicator has decreased over the prior month. An index will be zero when the number of firms reporting an increase is equal to the number of firms reporting a decrease.

Next release: August 29, 2011

July 25, 2011

*Indicator direction refers to this month's index. If index is positive (negative), indicator is increasing (decreasing) or improving (worsening). If zero, indicator is unchanged.
**Number of months moving in current direction.
Data have been seasonally adjusted as necessary.

July 25, 2011

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July 25, 2011

Comments from Survey Respondents

These comments were selected from respondents' completed surveys and have been edited for publication.

Fabricated Metal Product Manufacturing
The Architecture Billings Index for nonresidential construction has been negative for three months after six consecutive months of growth. Uncertainty about the economy and a lack of regional bank financing for new commercial and industrial projects is holding back the recovery.

There is more uncertainty related to our bank renewals. We are still seeing customers reluctant to commit to start projects that have been designed and approved. A large job we have been told we are receiving has been divided up into smaller releases because the plant owner does not want to release a larger purchasing order at one time.

Machinery Manufacturing
Business is sluggish. People are waiting to see what happens with budget, economy and this fall.

Chemical Manufacturing
Our business is somewhat seasonal, and our volume is off around 2–4 percent from a year ago. From early 2010 to now the industry we serve has been flat. We have some large contracts dealing with Canadian oil sands that will start at the end of the year, so we expect higher volumes next year.

Furniture and Related Product Manufacturing
The weight of continued slow retail home furnishings sales is taking its toll on dealers, and they have closed up buying.

Food Manufacturing
We are still very negatively impacted by high commodity prices.

Historical Data

Historical data can be downloaded dating back to June 2004.

Indexes

Download indexes for all indicators. For the definitions of all variables, see Data Definitions.

Unadjusted
Seasonally adjusted

All Data

Download indexes and components of the indexes (percentage of respondents reporting increase, decrease, or no change). For the definitions of all variables, see Data Definitions.

Unadjusted
Seasonally adjusted