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Texas Manufacturing Outlook Survey


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June 24, 2013

Texas Manufacturing Activity Surges and Outlook Improves

Texas factory activity increased sharply in June, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, rose six points to 17.1, posting its highest reading in more than two years.

Notably stronger manufacturing activity was reflected in other survey measures as well. The new orders index climbed to 13 in June, a level not seen since July 2011. The capacity utilization index rose to a two-year high, jumping from 6.4 to 15.3. The shipments index advanced 12 points to 15.4.

Perceptions of broader business conditions rebounded strongly in June. The general business activity index rose to 6.5 after posting negative readings in April and May. The company outlook index soared 20 points to 13.3, reaching its highest level in 16 months.

Labor market indicators reflected steady labor demand and longer workweeks. The employment index was zero in June, suggesting no change in employment levels. The hours worked index moved up to 4.8 after four months in negative territory.

Price movements were mixed in June; input prices and wages rose while selling prices declined. The raw materials price index increased again this month, rising from 6.4 to 14.3. The wages and benefits index also strengthened, from 14 to 20, although the great majority of manufacturers continued to note no change in compensation costs. The finished goods price index remained negative for the third month in a row but moved up from -8.3 to -2.1. Looking ahead, 33 percent of respondents anticipate further increases in raw materials prices over the next six months, while 25 percent expect higher finished goods prices.

Expectations regarding future business conditions improved significantly in June. The index of future general business activity surged to 14.7 after negative readings in April and May. The index of future company outlook rose sharply as well, coming in at 21.8. Indexes for future manufacturing activity also moved up.

The Dallas Fed conducts the Texas Manufacturing Outlook Survey monthly to obtain a timely assessment of the state’s factory activity. Data were collected June 11–19, and 95 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. Data have been seasonally adjusted as necessary.

Next release: July 29, 2013

June 24, 2013
 

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 Jun
Index
May
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Increase
%
Reporting
No Change
%
Reporting
Decrease
Production
17.1
11.2
+5.9
Increasing
2
34.5
48.1
17.4
Capacity Utilization
15.3
6.4
+8.9
Increasing
7
31.9
51.5
16.6
New Orders
13.0
6.2
+6.8
Increasing
2
36.0
41.1
23.0
Growth Rate of Orders
7.1
-4.3
+11.4
Increasing
1
27.3
52.5
20.2
Unfilled Orders
-0.4
-8.3
+7.9
Decreasing
12
18.9
61.8
19.3
Shipments
15.4
3.1
+12.3
Increasing
2
32.4
50.6
17.0
Delivery Time
3.2
3.3
-0.1
Increasing
2
11.6
80.0
8.4
Materials Inventories
0.3
-7.3
+7.6
Increasing
1
16.5
67.3
16.2
Finished Goods Inventories
-2.1
0.0
-2.1
Decreasing
1
11.6
74.7
13.7
Prices Paid for Raw Materials
14.3
6.4
+7.9
Increasing
47
21.0
72.3
6.7
Prices Received for Finished Goods
-2.1
-8.3
+6.2
Decreasing
3
8.4
81.1
10.5
Wages and Benefits
20.0
14.0
+6.0
Increasing
43
20.0
80.0
0.0
Employment
0.2
-6.3
+6.5
Increasing
1
13.0
74.2
12.8
Hours Worked
4.8
-2.3
+7.1
Increasing
1
18.9
67.0
14.1
Capital Expenditures
9.9
2.2
+7.7
Increasing
11
21.6
66.7
11.7
General Business Conditions
Current (versus previous month)
Indicator Jun
Index
May
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Improved
%
Reporting
No Change
%
Reporting
Worsened
13.3
-6.8
+20.1
Improving
1
25.8
61.7
12.5
6.5
-10.5
+17.0
Improving
1
20.5
65.5
14.0
Business Indicators Relating to Facilities and Products in Texas
Future (six months ahead)
Indicator Jun
Index
May
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Increase
%
Reporting
No Change
%
Reporting
Decrease
Production
40.6
34.6
+6.0
Increasing
52
49.2
42.1
8.6
Capacity Utilization
37.2
27.9
+9.3
Increasing
52
44.1
49.0
6.9
New Orders
33.2
26.9
+6.3
Increasing
52
42.2
48.8
9.0
Growth Rate of Orders
26.3
18.6
+7.7
Increasing
52
35.2
55.9
8.9
Unfilled Orders
6.6
0.0
+6.6
Increasing
1
16.5
73.6
9.9
Shipments
36.9
30.1
+6.8
Increasing
52
44.0
49.0
7.1
Delivery Time
-3.2
-5.4
+2.2
Decreasing
17
7.5
81.8
10.7
Materials Inventories
-2.2
2.2
-4.4
Decreasing
1
15.6
66.7
17.8
Finished Goods Inventories
0.0
2.2
-2.2
Unchanged
1
12.2
75.6
12.2
Prices Paid for Raw Materials
29.2
27.8
+1.4
Increasing
51
32.6
64.0
3.4
Prices Received for Finished Goods
20.9
11.1
+9.8
Increasing
12
25.3
70.3
4.4
Wages and Benefits
36.7
31.9
+4.8
Increasing
109
36.9
62.9
0.2
Employment
23.1
14.5
+8.6
Increasing
46
28.6
65.9
5.5
Hours Worked
8.0
-3.3
+11.3
Increasing
1
14.8
78.4
6.8
Capital Expenditures
18.9
14.8
+4.1
Increasing
43
31.1
56.7
12.2
General Business Conditions
Future (six months ahead)
Indicator Jun
Index
May
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Improved
%
Reporting
No Change
%
Reporting
Worsened
21.8
5.3
+16.5
Improving
50
31.9
58.0
10.1
14.7
-2.6
+17.3
Improving
1
26.3
62.1
11.6

*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.

June 24, 2013

Current and future production

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

June 24, 2013

Comments from Survey Respondents

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

Paper Manufacturing

  • Summer is our slow season. The outlook for sales is positive, but an increase in health care costs is a concern.

Chemical Manufacturing

  • Our order volume has increased, and we may start quoting longer lead times for some items.

Fabricated Metal Manufacturing

  • Refineries are trying to deal with the crude slate and being able to export product. Utilization is dropping as a sense of urgency on repairs is diminished.
  • We have seen some softness in the recent oil and gas boom. We have a robust pipeline of new accounts, and the softness in oil and gas will allow us to onboard these new accounts effectively. Profitability remains a challenge, so we've been selectively increasing prices to customers.
  • Just when we see an increase in our manufacturing business for the last 12 months, we now must deal with considerable increases in medical premiums. All these mounting costs placed on us by our government through OSHA, EPA, TCEQ, IRS, Affordable Care Act, etc., are making it harder and harder to make a worthwhile return for our investment in capital and people.

Machinery Manufacturing

  • Orders continue to be strong, especially for replacement equipment that was severely depressed during 2009 through 2011.

Computer and Electronic Product Manufacturing

  • We have seen general broad-based improvements as we had hoped for. There are still some mixed signals coming through, but most are biased positively. We continue to remain hopeful for follow-through in the second half of the year, which has been elusive the past few years.
  • The aerospace industry is momentarily on an upswing in the U.S. However, it is highly probable that much of this work will end up in China or India within the next year, lowering the economic drivers for manufacturing airframe parts and assemblies in the U.S.
  • Uncertainty still seems to be the order of the day. Customers are unwilling to commit to long-term orders.

Furniture and Related Product Manufacturing

  • Housing starts and residential construction continue to improve. Consumers seem to be confident to take on long-term obligations. Credit and lending appears to have loosened, and buyers are qualifying. Short of a political or economic event, this confidence should continue through year-end.

Food Manufacturing

  • Our margins are under some pressure, and there is considerable resistance to a price increase at this time.
  • We are making substantial investment in upgrading equipment to increase labor savings.

 

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 Emily Kerr at emily.kerr@dal.frb.org.

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