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Texas Manufacturing Outlook Survey


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October 31, 2011

Texas Manufacturing Activity Expands

What's New This Month

For this month's survey, manufacturers were asked supplemental questions on borrowing conditions and credit availability. Read Special Questions.

Texas factory activity increased in October, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, remained positive but edged down from 5.9 to 4.1, suggesting growth slowed slightly.

Other measures of current manufacturing conditions also indicated growth in October, and the pace of new orders increased. The shipments index fell from 9.4 to 2.7, suggesting shipment volumes continued to increase but at a slower pace. The capacity utilization index moved back into positive territory after being negative for two months. The new orders index suggested a pickup in demand, moving from 3.6 to 8.3. Nearly 30 percent of manufacturers noted increased order volumes in October, compared with about 20 percent noting a decrease.

Perceptions of general business conditions improved in October. The general business activity index jumped up from -14.4 to 2.3, its first positive reading in six months. The company outlook index also rose markedly, bouncing back to a reading of 7.2 after coming in near zero in September.

Labor market indicators reflected higher labor demand growth. The employment index came in at 15.1, up slightly from 13.4 in September. Twenty-one percent of manufacturers reported hiring new workers, while 6 percent reported layoffs. This share of layoffs represents the lowest figure since 2006. The hours worked index continued to suggest average workweeks lengthened.

Upward pressure on input prices and wages abated in October, and selling prices were unchanged from September levels. The raw materials price index fell to 19.1, its lowest reading since mid-2010. The finished goods price index came in near zero after a reading of 3.9 last month. Forty-four 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 fell from 17.4 in September to 8.9 in October, although the great majority of respondents continued to note no change in labor costs.

Expectations regarding future business conditions were notably more optimistic in October. The index of future general business activity advanced to 14.7 after dipping into negative territory in September. The index of future company outlook jumped up as well, rising from 11.8 to 25.3. Most indexes of future manufacturing activity also increased considerably in October, reaching their highest levels since spring.

The Dallas Fed conducts the Texas Manufacturing Outlook Survey monthly to obtain a timely assessment of the state’s factory activity. Data were collected Oct.18–26, and 90 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: November 28, 2011

October 31, 2011
 

Click on links in the table for greater details. Historical data are available from June 2004 to the most current release month.

Business Indicators Relating to Facilities and Products in Texas
Current (versus previous month)
Indicator Oct
Index
Sep
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Increase
%
Reporting
No Change
%
Reporting
Decrease
Production
4.1
5.9
-1.8
Increasing
24
24.0
56.1
19.9
Capacity Utilization
2.8
-1.3
+4.1
Increasing
1
23.2
56.4
20.4
New Orders
8.3
3.6
+4.7
Increasing
12
28.6
51.1
20.3
Growth Rate of Orders
-0.9
0.6
-1.5
Decreasing
1
20.7
57.7
21.6
Unfilled Orders
-5.7
-5.1
-0.6
Decreasing
3
14.4
65.5
20.1
Shipments
2.7
9.4
-6.7
Increasing
12
22.7
57.3
20.0
Delivery Time
-6.7
-4.3
-2.4
Decreasing
3
4.4
84.4
11.1
Materials Inventories
-0.1
2.1
-2.2
Decreasing
1
18.6
62.7
18.7
Finished Goods Inventories
-6.7
-6.4
-0.3
Decreasing
3
14.4
64.4
21.1
Prices Paid for Raw Materials
19.1
23.5
-4.4
Increasing
27
29.3
60.5
10.2
Prices Received for Finished Goods
-0.6
3.9
-4.5
Decreasing
1
10.6
78.2
11.2
Wages and Benefits
8.9
17.4
-8.5
Increasing
23
12.2
84.4
3.3
Employment
15.1
13.4
+1.7
Increasing
12
20.8
73.5
5.7
Hours Worked
7.1
5.5
+1.6
Increasing
2
18.3
70.5
11.2
Capital Expenditures
7.8
1.1
+6.7
Increasing
3
16.7
74.4
8.9
General Business Conditions
Current (versus previous month)
Indicator Oct
Index
Sep
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Improved
%
Reporting
No Change
%
Reporting
Worsened
7.2
0.5
+6.7
Improving
13
19.4
68.4
12.2
2.3
-14.4
+16.7
Improving
1
17.5
67.3
15.2
Business Indicators Relating to Facilities and Products in Texas
Future (six months ahead)
Indicator Oct
Index
Sep
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Increase
%
Reporting
No Change
%
Reporting
Decrease
Production
43.2
24.3
+18.9
Increasing
32
48.9
45.4
5.7
Capacity Utilization
42.5
24.6
+17.9
Increasing
32
46.5
49.4
4.0
New Orders
39.7
26.3
+13.4
Increasing
32
45.0
49.8
5.3
Growth Rate of Orders
23.4
16.9
+6.5
Increasing
32
29.7
64.0
6.3
Unfilled Orders
8.0
3.3
+4.7
Increasing
4
14.9
78.2
6.9
Shipments
39.8
26.1
+13.7
Increasing
32
46.4
46.9
6.6
Delivery Time
-2.3
-7.6
+5.3
Decreasing
5
6.8
84.1
9.1
Materials Inventories
-3.4
-4.4
+1.0
Decreasing
4
14.8
67.0
18.2
Finished Goods Inventories
-6.8
-17.4
+10.6
Decreasing
4
10.2
72.7
17.0
Prices Paid for Raw Materials
36.3
37.4
-1.1
Increasing
31
44.3
47.7
8.0
Prices Received for Finished Goods
20.5
20.6
-0.1
Increasing
15
27.3
65.9
6.8
Wages and Benefits
32.1
32.4
-0.3
Increasing
89
35.0
62.1
2.9
Employment
19.3
13.0
+6.3
Increasing
26
29.5
60.2
10.2
Hours Worked
5.7
4.3
+1.4
Increasing
32
18.2
69.3
12.5
Capital Expenditures
18.2
13.3
+4.9
Increasing
23
27.3
63.6
9.1
General Business Conditions
Future (six months ahead)
Indicator Oct
Index
Sep
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Improved
%
Reporting
No Change
%
Reporting
Worsened
25.3
11.8
+13.5
Improving
29
31.9
61.5
6.6
14.7
-1.5
+16.2
Improving
1
24.0
66.7
9.3

*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.

October 31, 2011

Current and future production

Downloadable chart: Low-res (72 dpi) | Hi-res (300 dpi)

October 31, 2011

Comments from Survey Respondents

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

Fabricated Metal Product Manufacturing
Our outlook is murky due to a lack of political and fiscal direction.

The nonresidential market has seen improved demand in manufacturing, maintenance and warehousing. This improvement has not overcome the broader market weakness.

We are bidding a lot of projects, but at this time very few are being awarded. The need exists; however, the confidence to move forward is not there. Hopefully confidence will improve over the next six months.

There seems to be increased request for quotation activity, but there continues to be extreme pressure on margins. There is still considerable uncertainty in the regulatory and banking environments affecting our industry and related customers.

Nonmetallic Mineral Product Manufacturing
We do not expect any meaningful improvement in current economic conditions, and risks are on the downside. Present geopolitical events and conditions along with the U.S. political environment have greatly impacted the present level of uncertainty. We do not expect that these conditions will improve until after the 2012 elections.

Chemical Manufacturing
We have a seasonal slowdown historically this last quarter. We expect things to stay fairly strong post this quarter, if our customers are correct in their forecasts for next year. We still need to see what exploration and production budgets are from our major customers to really get a better idea.

Part of our business is seasonal. Improvements in April of next year depend on the warmer weather arriving normally. This past year, cooler weather later in the spring delayed our normal uptick until June.

Plastics and Rubber Product Manufacturing
Our orders for November and December are lagging due to customers moving production in-house to save freight and keep their own employees on the payroll.

Business has remained the same at a good level of production. We are busy.

Machinery Manufacturing
We see a very busy project schedule for spring 2012.  We are not sure whether this is just project timing or a strengthening of activity levels in refining and petrochemical markets.  Overall economy doom and gloom sentiment seems a little over done to me.  It is not great, but it also is not collapsing.

Computer and Electronic Product Manufacturing
We have seen demand drop across a wide range of markets and geographies with the exception of Japan, as they rebound off a low from the impact of the earthquake.

Furniture and Related Product Manufacturing
Housing is bouncing at or near the bottom. Second quarter was up, and the third quarter slowed. The fourth quarter will be a slow period, followed by some pickup in the first quarter. It's a wait and see what happens with the economy and jobs before releasing new housing starts.

Paper Manufacturing
Business was very good last period and is starting out pretty good this period. We needed this as our slower periods are November and December.

Food Manufacturing
High commodity prices are still hurting us. The ethanol program and the cheap dollar are resulting in very high commodity prices.

Beverage and Tobacco Product Manufacturing
Unit sales improved, but not enough to offset increase in cost and decrease in price. Price decline lessened from the prior month, but cost increases ramped up more. Our gross margin decline was better than last month, but we still made less money than the prior year. We have no visibility six months out.

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 excel
Seasonally adjusted excel

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 excel
Seasonally adjusted excel

Questions regarding the Texas Manufacturing Outlook Survey can be addressed to Laila Assanie at laila.assanie@dal.frb.org.

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