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Texas Manufacturing Outlook Survey


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August 31, 2015

Texas Manufacturing Activity Holds Steady, but Outlooks Deteriorate

What's New This Month

For this month's survey, Texas business executives were asked supplemental questions on employment expectations and the labor market. Results for these questions from the Texas Manufacturing Outlook Survey (TMOS), Texas Service Sector Outlook Survey (TSSOS) and Texas Retail Outlook Survey (TROS) have been released together. Read Special Questions results.

Texas factory activity was essentially flat in August, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, climbed to near zero (-0.8), suggesting output held steady after five months of declines.

Other measures of current manufacturing activity showed mixed movements in August. The capacity utilization index, like the production index, rose to zero after several months in negative territory. The shipments index also edged up, coming in at -3. Sharp declines were seen in measures of demand, however. The new orders index plunged 13 points to -12.5 after rebounding to positive territory last month, and the growth rate of orders index fell from -5.2 to -14.

Perceptions of broader business deteriorated markedly in August. The general business activity index dropped 11 points from -4.6 to -15.8, and the company outlook index also posted a double-digit decline, coming in at -10.3.

Labor market indicators reflected slight employment declines and stable workweek length. The August employment index was negative for a fourth month in a row but edged up to -1.4. Fifteen percent of firms reported net hiring, compared with 16 percent reporting net layoffs. The hours worked index rose from -6.3 to 0.6, with the near-zero reading suggesting no change in workweek length from July.

There was notable downward pressure on prices in August, while upward wage pressure persisted. The raw materials prices index fell to -8 after a zero reading last month and a positive reading in June. The finished goods prices index declined 13 points to -15.7, hitting its lowest level since October 2009, when Texas was working its way out of the latest recession. Meanwhile, the wages and benefits index remained positive and rose slightly to 18.2.

Expectations regarding future business conditions deteriorated notably in August. The indexes of future general business activity and future company outlook both posted double-digit declines, but they remained slightly positive. Indexes for future manufacturing activity fell as well, but also remained in 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 Aug. 18–26, and 114 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: September 28, 2015

August 31, 2015
 

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 Aug
Index
Jul
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Increase
%
Reporting
No Change
%
Reporting
Decrease
Production
-0.8
-1.9
+1.1
Decreasing
6
25.0
49.2
25.8
Capacity Utilization
-0.2
-4.2
+4.0
Decreasing
7
22.5
54.8
22.7
New Orders
-12.5
0.7
-13.2
Decreasing
1
22.7
42.1
35.2
Growth Rate of Orders
-14.0
-5.2
-8.8
Decreasing
10
15.8
54.4
29.8
Unfilled Orders
-4.6
-6.5
+1.9
Decreasing
9
15.3
64.8
19.9
Shipments
-3.0
-4.3
+1.3
Decreasing
7
25.2
46.6
28.2
Delivery Time
1.3
0.8
+0.5
Increasing
2
14.0
73.3
12.7
Materials Inventories
-5.2
8.9
-14.1
Decreasing
1
12.9
69.0
18.1
Finished Goods Inventories
-0.9
10.7
-11.6
Decreasing
1
15.8
67.5
16.7
Prices Paid for Raw Materials
-8.0
0.1
-8.1
Decreasing
1
11.9
68.2
19.9
Prices Received for Finished Goods
-15.7
-2.9
-12.8
Decreasing
8
6.3
71.6
22.0
Wages and Benefits
18.2
14.4
+3.8
Increasing
69
21.1
76.0
2.9
Employment
-1.4
-3.3
+1.9
Decreasing
4
14.7
69.2
16.1
Hours Worked
0.6
-6.3
+6.9
Increasing
1
16.0
68.6
15.4
Capital Expenditures
4.0
1.6
+2.4
Increasing
5
16.7
70.6
12.7
General Business Conditions
Current (versus previous month)
Indicator Aug
Index
Jul
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Improved
%
Reporting
No Change
%
Reporting
Worsened
-10.3
1.2
-11.5
Worsening
1
13.4
62.9
23.7
-15.8
-4.6
-11.2
Worsening
8
12.2
59.8
28.0
Business Indicators Relating to Facilities and Products in Texas
Future (six months ahead)
Indicator Aug
Index
Jul
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Increase
%
Reporting
No Change
%
Reporting
Decrease
Production
28.0
37.4
-9.4
Increasing
78
46.4
35.1
18.4
Capacity Utilization
22.8
36.8
-14.0
Increasing
78
42.4
38.1
19.6
New Orders
25.8
39.0
-13.2
Increasing
78
41.8
42.2
16.0
Growth Rate of Orders
18.6
29.7
-11.1
Increasing
78
34.7
49.2
16.1
Unfilled Orders
0.4
8.8
-8.4
Increasing
2
14.6
71.2
14.2
Shipments
28.4
38.9
-10.5
Increasing
78
44.1
40.2
15.7
Delivery Time
-6.8
6.4
-13.2
Decreasing
1
9.0
75.2
15.8
Materials Inventories
-0.9
1.9
-2.8
Decreasing
1
16.5
66.1
17.4
Finished Goods Inventories
-2.8
1.0
-3.8
Decreasing
1
14.8
67.6
17.6
Prices Paid for Raw Materials
12.8
18.8
-6.0
Increasing
77
22.0
68.8
9.2
Prices Received for Finished Goods
2.7
11.4
-8.7
Increasing
38
15.7
71.3
13.0
Wages and Benefits
32.4
31.2
+1.2
Increasing
135
34.9
62.6
2.5
Employment
11.4
17.4
-6.0
Increasing
33
23.9
63.6
12.5
Hours Worked
4.4
14.6
-10.2
Increasing
6
17.5
69.4
13.1
Capital Expenditures
9.4
13.5
-4.1
Increasing
69
23.4
62.6
14.0
General Business Conditions
Future (six months ahead)
Indicator Aug
Index
Jul
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Improved
%
Reporting
No Change
%
Reporting
Worsened
6.4
24.5
-18.1
Improving
77
26.3
53.8
19.9
3.4
18.8
-15.4
Improving
4
24.1
55.2
20.7

*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.

August 31, 2015

Current and future production

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

August 31, 2015

Comments from Survey Respondents

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

Primary Metal Manufacturing

  • Overall business is slowing.
  • The strength of the dollar is impacting us through an inability to export and high volume of imports.
  • The price of finished product dropped dramatically.

Fabricated Metal Manufacturing

  • New orders have dropped to half of what they were last year. Capital project equipment continues to be sourced in China and Korea as the owners are chasing every dollar of savings possible. We had our first layoff in 15 years.
  • We are currently experiencing a large surge in the automotive industry due to our relationship and close proximity to an automotive plant during a new vehicle implementation period.
  • It seems like if you are in a position to take on work and able to turn it around quickly there seems to be plenty of small to medium-range quantity types knocking. We are hoping that as oil prices continue to fall, food and other commodities fall also. A little more deflation could certainly help.
  • Our oil and gas business, historically 50 percent of our revenues, is still down. Inventories have been consumed fairly well, which now offsets the second drop of oil prices. The growth we expect is due to our efforts to grow our non-oil and gas business.
  • The continued decline in the West Texas Intermediate crude oil price is expected to soften the demand for our basic fabricated products.
  • The volatility in the stock market and decreased energy costs always have a negative impact on replacement windows orders. Even though there is a substantial decrease in raw material prices, capacity levels in PVC and glass are extremely constrained. The reason for the decreased capacity levels is that during the housing crisis no capital expenditures were made and now most vendors are at full capacity.
  • The current sequential increases of some 40 percent in volume are the result of low single-digit growth in low-rise nonresidential construction volumes. This was enhanced by a catch-up from the effects of poor weather that extended into May and June that inhibited the normal start of the construction season. Of note, nonresidential new construction starts for low-rise buildings (less than five stories) has grown by 1.6 percent, while mid- and high-rise buildings (greater than six stories) have grown by 17.3 percent.
  • August will be our worst production and delivery month since March 2014.
s

Machinery Manufacturing

  • The quantitative easing hangover is starting.
  • July was a particularly bad month for the oil patch. August has shown an uptick as people are showing signs of releasing orders, i.e., pent up demand. Customers have starved vendors for the first half of the year, and things are turning loose now. Who knows how long it will last. Uncertainty about where the price of oil is headed has everyone on pins and needles.
  • Certain customers’ business is growing briskly, while others are flat or even down. Overall, our business sales continue to grow at almost a double-digit rate.

Computer and Electronic Product Manufacturing

  • The broader market is incrementally weaker, not falling off a cliff.
  • The interest in manufacturing has increased; however, the orders have not followed. Quoting is certainly up, but it appears to be companies just testing the waters, curious to see if the changes in China will be beneficial.

Transportation Equipment Manufacturing

  • Part of our revenue comes from the support of offshore oil activity, which has been seriously impacted due to low oil prices.

Wood Product Manufacturing

  • We are deeply concerned about the markets and the effects they are having globally.

Paper Manufacturing

  • There has been a consistent softness in business activity for the outlook to move from same to 5–10 percent decline as compared with last year.

Printing and Related Support Activities

  • Our optimism as reflected in the "improved" business outlook is based on an initiative in our Illinois sister plant that has doubled throughput with minimal capital and reduced labor. We have some consultants helping us and it’s not easy, but we are making organization changes, breaking down departmental barriers and holding people accountable for execution. It is a breakthrough in manufacturing performance, critical to our future survival .It's really quite exciting.
  • There seems to be a general slowdown in the regional economy. We typically get busy in the August to December timeframe, and while we are seeing an uptick in activity, it's below what we expected. August billing will be much lower than July, and July was a weak month.

Food Manufacturing

  • All our time is spent complying with increasing government regulations.
  • The strong dollar has significantly impacted our export business. We have balanced this with domestic growth.

Beverage and Tobacco Product Manufacturing

  • We sell soft drinks. We are facing market declines in our largest categories. Despite outperforming our industry, we are still swimming upstream. Yet the cost of doing business and regulation continues to go up.

Textile Product Mills

  • We are experiencing a normal seasonal downturn in the summer months. Our business should increase for the balance of the year. Margins are very tight.

Miscellaneous Manufacturing

  • Oil and gas prices, weather, world outlook and politics make for a poor forecast.

 

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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