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Texas Manufacturing Outlook Survey


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April 30, 2012

Texas Manufacturing Growth Slows

Texas factory activity increased in April, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, fell from 11.1 to 5.6, suggesting growth continued but at a slower pace than last month.

Other measures of current manufacturing conditions stagnated in April. The capacity utilization index came in at 1.4, down markedly from 12.3 in March, with one-quarter of respondents noting decreases. Shipment volumes were flat in April after increasing for the previous three months; the shipments index fell from 8.6 to -0.8. The new orders index posted a near-zero reading for the second consecutive month.

Perceptions of broader economic conditions worsened in April. The general business activity index turned negative after three months of positive readings, falling from 10.8 to -3.4. Thirteen percent of firms noted improvement in the level of business activity, while 16 percent noted a worsening. The company outlook index also fell into negative territory, slipping to -4.5 after a reading of 9.5 last month.

Labor market indicators reflected sharply slower labor demand growth and shorter workweeks. Employment growth continued in April, but at a much slower pace than in previous months, with the index receding from 21.7 to 11.8. Nineteen percent of firms reported hiring new workers, while 7 percent reported layoffs. The hours worked index declined eight points to -4.6, its first negative reading in eight months.

Input prices and wages increased at a slower pace in April, and selling prices declined. The raw materials price index was 21.2, down from 27.7 in March. This was the index’s lowest reading in five months and is well below last year’s April reading of 57.1. The wages and benefits index moved down from 21 to 15.2. The finished goods price index was negative for a second month in a row and edged down to -5.4. Looking ahead, 45 percent of respondents anticipate further increases in raw materials prices over the next six months, while 24 percent expect higher finished goods prices.

Expectations regarding future business conditions were less optimistic in April. The index of future general business activity edged down from 19.1 to 15.7. The index of future company outlook came in at 14.4, down significantly from 26.2 in March. Other indexes for future manufacturing activity also decreased, although all remained in strong 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 Apr. 17–25, and 89 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: May 29, 2012

April 30, 2012
 

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 Apr
Index
Mar
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Increase
%
Reporting
No Change
%
Reporting
Decrease
Production
5.6
11.1
-5.5
Increasing
5
29.7
46.1
24.1
Capacity Utilization
1.4
12.3
-10.9
Increasing
5
25.9
49.6
24.5
New Orders
-1.0
-0.3
-0.7
Decreasing
2
25.4
48.2
26.4
Growth Rate of Orders
-2.6
-0.8
-1.8
Decreasing
2
22.7
52.0
25.3
Unfilled Orders
-8.3
0.3
-8.6
Decreasing
1
11.8
68.1
20.1
Shipments
-0.8
8.6
-9.4
Decreasing
1
26.2
46.9
27.0
Delivery Time
-1.1
6.8
-7.9
Decreasing
1
7.9
83.1
9.0
Materials Inventories
7.3
-0.3
+7.6
Increasing
1
21.4
64.5
14.1
Finished Goods Inventories
-5.6
-8.0
+2.4
Decreasing
3
15.7
62.9
21.3
Prices Paid for Raw Materials
21.2
27.7
-6.5
Increasing
33
27.6
66.0
6.4
Prices Received for Finished Goods
-5.4
-1.3
-4.1
Decreasing
2
6.0
82.6
11.4
Wages and Benefits
15.2
21.0
-5.8
Increasing
29
18.3
78.6
3.1
Employment
11.8
21.7
-9.9
Increasing
18
19.3
73.2
7.5
Hours Worked
-4.6
2.9
-7.5
Decreasing
1
14.6
66.2
19.2
Capital Expenditures
6.1
6.3
-0.2
Increasing
7
15.7
74.7
9.6
General Business Conditions
Current (versus previous month)
Indicator Apr
Index
Mar
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Improved
%
Reporting
No Change
%
Reporting
Worsened
-4.5
9.5
-14.0
Worsening
1
10.6
74.3
15.1
-3.4
10.8
-14.2
Worsening
1
12.8
71.0
16.2
Business Indicators Relating to Facilities and Products in Texas
Future (six months ahead)
Indicator Apr
Index
Mar
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Increase
%
Reporting
No Change
%
Reporting
Decrease
Production
38.5
44.0
-5.5
Increasing
38
46.7
45.1
8.2
Capacity Utilization
34.9
41.8
-6.9
Increasing
38
43.5
47.8
8.6
New Orders
31.4
44.0
-12.6
Increasing
38
44.4
42.5
13.0
Growth Rate of Orders
21.1
37.2
-16.1
Increasing
38
33.7
53.7
12.6
Unfilled Orders
4.6
15.1
-10.5
Increasing
10
14.9
74.7
10.3
Shipments
34.7
42.8
-8.1
Increasing
38
45.9
42.9
11.2
Delivery Time
-2.3
1.2
-3.5
Decreasing
1
9.2
79.3
11.5
Materials Inventories
5.8
11.8
-6.0
Increasing
6
18.4
69.0
12.6
Finished Goods Inventories
-2.3
7.0
-9.3
Decreasing
1
10.5
76.7
12.8
Prices Paid for Raw Materials
40.2
55.8
-15.6
Increasing
37
44.8
50.6
4.6
Prices Received for Finished Goods
16.1
29.1
-13.0
Increasing
21
24.1
67.8
8.0
Wages and Benefits
36.4
40.3
-3.9
Increasing
95
38.0
60.4
1.6
Employment
19.8
36.9
-17.1
Increasing
32
29.1
61.6
9.3
Hours Worked
9.8
9.6
+0.2
Increasing
37
18.4
72.9
8.6
Capital Expenditures
21.0
25.6
-4.6
Increasing
29
29.1
62.8
8.1
General Business Conditions
Future (six months ahead)
Indicator Apr
Index
Mar
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Improved
%
Reporting
No Change
%
Reporting
Worsened
14.4
26.2
-11.8
Improving
36
26.9
60.6
12.5
15.7
19.1
-3.4
Improving
7
25.9
63.9
10.2

*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.

April 30, 2012

Current and future production

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

April 30, 2012

Comments from Survey Respondents

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

Fabricated Metal Product Manufacturing
We are seeing a slowdown in the release of new contracts. There are still a number of requests for quotes. On the customer side, we are seeing large companies taking longer on payments for completed work.

The general level of activity associated with low natural gas prices is increasing from capital expansion projects to increased spending in the petrochemical facilities.

In April our company added a second shift to eliminate the need for overtime, which was affecting profitability. Our company had record revenues in the first quarter and the month of March. We anticipate growth of over 25 percent for 2012 versus 2011.

Machinery Manufacturing
We are seeing pretty steady demand with a positive tone in our segment. There is still a lot of uncertainty relating to the general economy—that could trend either way from here.

Customers are generally seeing modest growth versus basically being flat last year. A major threat to our customers staying on a positive growth track is the continued rise in gas/diesel prices. If there is another spike in gas/diesel costs, our customer base expansion will come to a quick halt.

Chemical Manufacturing
We have seen a slight slowdown this month, but last month was a record month. The rig count will be a driver in the future, and as of now it is holding up.

We will be seeing seasonal increases soon. They appear to be doing as is normal.

Plastics and Rubber Products Manufacturing
We are most encouraged by the gradual ramping up this year. We were a bit slow in February and March but are busier in April with a good backlog.

Retail is very constipated.

Nonmetallic Mineral Product Manufacturing
Revenues declined slightly in April as a result of a declining order volume. Some pull forward of business may have occurred in February due to the mild winter weather conditions. We feel that there is continued weakness in housing and that this weakness will continue as a result of the current economic conditions. Weak economic growth is expected to continue due to the uncertainty of government policy. The delay in investment by business is expected to continue until after this uncertainty is removed following the November presidential election.

After a stronger than normal January and February, weakness/correction in March seems to have spilled over into April. There is still much uncertainty about the rest of 2012.

Food Manufacturing
The continued increase in governmental regulations and paperwork becomes more of a burden each year.

Beverage and Tobacco Product Manufacturing
We may be losing our best supplier, which would cause cost and price increases resulting in volume decreases.

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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