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Texas Manufacturing Outlook Survey


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September 29, 2014

Texas Manufacturing Strengthens

Texas factory activity increased again in September, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, rose markedly from 6.8 to 17.6, indicating output grew at a faster pace than in August.

Other measures of current manufacturing activity also reflected significantly stronger growth in September. The new orders index climbed 5 points to 7.5. The capacity utilization index surged to 20.2 after dipping to 3.6 in August, with nearly a third of manufacturers noting an increase. The shipments index rebounded to 15.9 after falling to 6.4 last month.

Perceptions of broader business conditions were more optimistic this month. The general business activity index moved up to a reading of 10.8, nearly four points above its nonrecession average of 7. The company outlook index rose from 1.5 to 5.8, due to a larger share of firms noting an improved outlook in September than in August.

Labor market indicators reflected continued employment growth and longer workweeks. The September employment index posted a fourth robust reading, holding fairly steady at 10.6. Twenty-four percent of firms reported net hiring compared with 14 percent reporting net layoffs. The hours worked index rose to a five-month high of 9.5, indicating a stronger rise in hours worked than in recent months.

Upward pressure on prices eased slightly in September, while wage pressure increased. The raw materials price index fell seven points to a reading of 19.5. The finished goods price index also fell but to a lesser degree, edging down from 9.1 to 7. The wages and benefits index, however, ticked up for the second month in a row and came in at 26.2, its highest reading since before the Texas recession began in mid-2008.

Expectations regarding future business conditions remained optimistic in September. The index of future general business activity fell from 18.7 to 12.1, while the index of future company outlook rose from 30.1 to 32.3. Indexes for future manufacturing activity generally moved down in September but remained in solidly 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 Sep. 16–24, and 105 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: October 27, 2014

September 29, 2014
 

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 Sep
Index
Aug
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Increase
%
Reporting
No Change
%
Reporting
Decrease
Production
17.6
6.8
+10.8
Increasing
17
30.8
56.0
13.2
Capacity Utilization
20.2
3.6
+16.6
Increasing
22
31.4
57.4
11.2
New Orders
7.5
2.2
+5.3
Increasing
17
25.9
55.7
18.4
Growth Rate of Orders
-3.2
-9.6
+6.4
Decreasing
2
15.6
65.6
18.8
Unfilled Orders
-0.9
3.8
-4.7
Decreasing
1
12.5
74.1
13.4
Shipments
15.9
6.4
+9.5
Increasing
17
28.7
58.5
12.8
Delivery Time
1.5
4.8
-3.3
Increasing
4
12.3
76.9
10.8
Materials Inventories
-0.7
0.0
-0.7
Decreasing
1
16.7
65.9
17.4
Finished Goods Inventories
-6.8
-6.2
-0.6
Decreasing
3
8.7
75.7
15.5
Prices Paid for Raw Materials
19.5
26.4
-6.9
Increasing
62
27.6
64.3
8.1
Prices Received for Finished Goods
7.0
9.1
-2.1
Increasing
14
14.7
77.6
7.7
Wages and Benefits
26.2
23.7
+2.5
Increasing
62
26.5
73.2
0.3
Employment
10.6
11.1
-0.5
Increasing
16
24.3
62.0
13.7
Hours Worked
9.5
2.9
+6.6
Increasing
9
19.5
70.5
10.0
Capital Expenditures
4.4
6.6
-2.2
Increasing
36
16.6
71.2
12.2
General Business Conditions
Current (versus previous month)
Indicator Sep
Index
Aug
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Improved
%
Reporting
No Change
%
Reporting
Worsened
5.8
1.5
+4.3
Improving
16
17.7
70.4
11.9
10.8
7.1
+3.7
Improving
16
22.0
66.8
11.2
Business Indicators Relating to Facilities and Products in Texas
Future (six months ahead)
Indicator Sep
Index
Aug
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Increase
%
Reporting
No Change
%
Reporting
Decrease
Production
40.0
44.5
-4.5
Increasing
67
47.5
45.0
7.5
Capacity Utilization
34.7
39.8
-5.1
Increasing
67
43.3
48.2
8.6
New Orders
34.6
45.3
-10.7
Increasing
67
44.0
46.7
9.4
Growth Rate of Orders
30.8
30.0
+0.8
Increasing
67
37.3
56.2
6.5
Unfilled Orders
3.4
4.5
-1.1
Increasing
14
14.1
75.2
10.7
Shipments
38.6
44.6
-6.0
Increasing
67
44.6
49.5
6.0
Delivery Time
0.5
-1.6
+2.1
Increasing
1
11.6
77.3
11.1
Materials Inventories
5.3
0.0
+5.3
Increasing
1
18.8
67.7
13.5
Finished Goods Inventories
-1.0
-1.8
+0.8
Decreasing
5
14.6
69.8
15.6
Prices Paid for Raw Materials
36.4
43.5
-7.1
Increasing
66
45.5
45.5
9.1
Prices Received for Finished Goods
29.3
22.2
+7.1
Increasing
27
36.4
56.6
7.1
Wages and Benefits
40.7
43.8
-3.1
Increasing
124
40.7
59.3
0.0
Employment
18.4
24.1
-5.7
Increasing
61
29.6
59.2
11.2
Hours Worked
11.6
11.7
-0.1
Increasing
16
22.1
67.4
10.5
Capital Expenditures
23.5
16.3
+7.2
Increasing
58
35.7
52.0
12.2
General Business Conditions
Future (six months ahead)
Indicator Sep
Index
Aug
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Improved
%
Reporting
No Change
%
Reporting
Worsened
32.3
30.1
+2.2
Improving
66
37.2
57.9
4.9
12.1
18.7
-6.6
Improving
16
23.1
65.9
11.0

*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.

September 29, 2014

Current and future production

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

September 29, 2014

Comments from Survey Respondents

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

Fabricated Metal Manufacturing

  • Wages are escalating rapidly, and welders are impossible to find.
  • We have begun to see customers cut orders in hopes that projects are complete by year’s end.

Machinery Manufacturing

  • We believe interest rates will increase in the next six months.
  • We have a positive view of demand from our major customer sectors—midstream and downstream energy companies. The new construction activities along the Gulf Coast will tighten labor markets, which we expect will lead to both higher labor rates and higher pricing.
  • International business is up for Eastern Europe, the Middle East and Far East. Business is down for Brazil and the future is uncertain. Manufacturing equipment for oilfield exploration is up, leading with rock bits and drill pipe, which indicates we are on the upward side of the cycle. Manufacturing equipment for petroleum production is strong. The general industry is flat. We are hopeful that crude export restrictions are lifted, which should benefit the industry. Trade restrictions with Russia have curtailed business in that country. Unrest in Ukraine has reduced trade with Kiev.
  • Orders continue to be strong across about half of our customer base, and the customer base continues to expand. Raw material costs have started to increase across the board at a 3 percent plus average. Difficult pricing market may lead to lower margins.

Chemical Manufacturing

  • Our increased business activity is based on orders placed this time last year. We see some softening, especially in demand from Europe and China, while the U.S. remains strong.

Plastics and Rubber Products Manufacturing

  • Our business is between contracts with key customers; therefore, our current lull in sales is not indicative of the economy in general. Our new orders will pick up in six months.

Transportation Equipment Manufacturing

  • Lower gas prices at the pump have improved our end customer sales, which has increased our production. As long as gas prices stay in the current range of the last two months, sales and production should remain strong.

Food Manufacturing

  • We waited too long to raise our prices, thinking that our raw material costs would come down to more normal levels. They remain at record highs, and we will be raising our prices significantly.
  • We remain concerned that our consumers remain under serious financial pressure. Our products are primarily purchased by blue collar and lower-income consumers. We are forecasting low single-digit growth for 2015, primarily due to lack of wage and employment growth in most regions of the country.

Paper Manufacturing

  • After a slight slowdown at the end of July and beginning of August, orders are picking up again and we are optimistic for the rest of the year.

Printing and Related Support Activities

  • Customers have become increasingly price buyers; they've commoditized our product offering, and some have had serious trouble with the low price bidder. We've had to double down on our efforts to drive out costs and increase the rate of reduction.
  • Our order entry volume remains very strong and is anticipated to remain seasonally stronger than in prior years.

 

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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