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Texas Manufacturing Expands at a Slower Pace in August, Says Dallas Fed Survey

For immediate release: August 25, 2014

Affordable Care Act Raising Health Care Costs For Texas Manufacturing Companies, According To Supplemental Questions

DALLASTexas factory activity increased again in August, but at a slower pace, according to the Federal Reserve Bank of Dallas’ Texas Manufacturing Outlook Survey.

Texas produces more than 11 percent of total manufactured goods in the United States, ranking second behind California in factory production.

The production index—a key measure of state manufacturing conditions—fell from 19.1 to 6.8, indicating output growth slowed from July.

Positive readings in the survey generally indicate expansion of factory activity, while readings below zero generally indicate contraction.

Slower growth was reflected in other manufacturing activity as well. The new orders, capacity utilization and shipments indexes remained positive but declined markedly.

Perceptions of broader business conditions were less optimistic in August. The general business activity index stayed positive but fell to a five-month low of 7.1, and the company outlook index fell from 11.3 to 1.5 due to a smaller share of firms noting an improved outlook in August than in July.

Labor market indicators reflected continued employment growth and longer workweeks. The August employment index posted its third robust reading in a row, but the hours worked index suggested a smaller rise in workweek length than last month.

Expectations regarding future business conditions remained optimistic in August. The index of future general business activity inched down, while the index of future company outlook rose.

Indexes for future manufacturing activity showed mixed movements in August but remained in solidly positive territory.

For this month's survey, manufacturers were asked supplemental questions on health care costs and the impact of the Affordable Care Act (ACA). The median manufacturing firm responding to the supplemental survey estimated its health care costs per worker in 2014 to be 10 percent higher than in 2013, and expects an 11 percent increase next year. Most firms said the ACA has contributed to the rise in these costs.

Sixty-two percent of responding firms said they were making modifications to their health care plan in response to the ACA. Twenty-six percent of firms are lowering (or lowered) the number of workers they employ because of the effects of the ACA, and 35 percent said they are raising (or raised) the prices they charge to customers because of the ACA.

Full results to the supplemental survey questions can be found along with the August Texas Manufacturing Outlook Survey report.

The Dallas Fed conducts the Texas Manufacturing Outlook Survey monthly to obtain a timely assessment of the state’s factory activity.

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Media contact:
Alexander Johnson
Federal Reserve Bank of Dallas
Phone: 214-922-5288
Email: alexander.johnson@dal.frb.org