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Texas Manufacturing Activity Strengthens Further in September, Says Dallas Fed Survey

For Immediate Release: Sept. 26, 2016

DALLASTexas factory activity increased markedly in September, according to the Federal Reserve Bank of Dallas’ Texas Manufacturing Outlook Survey.

The production index—a key measure of state manufacturing conditions—rose 12 points to 16.7, suggesting output picked up at a notably faster pace this month.

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

Other measures of current manufacturing activity also reflected faster expansion, while the survey’s demand indicators dipped back into negative territory. The capacity utilization and shipments indexes posted double-digit gain to reach 13.5 and 20.1, respectively. The readings are the highest for these indexes in roughly two years. The new orders index fell from 5.3 to –2.9 in September, while the growth rate of orders index fell to –5.8 after pushing into positive territory last month.

Perceptions of broader business conditions were mixed in September. The general business activity index remained negative for a 21st consecutive month, although it edged up to –3.7. The company outlook index reflected optimism as it pushed into positive territory for the first time since November 2015, coming in at 6.7.

“The acceleration in demand growth seen in the August survey translated into a substantial pickup in factory activity this month,” said Emily Kerr, Dallas Fed business economist. “Although the demand indicators fell back negative in September, the manufacturing sector in Texas seems to be on an upswing, and the newly positive company outlook index suggests optimism going forward.”

Labor market measures indicated slight employment gains and longer workweek length in September. The employment index came in at 2.3, its first positive reading in nine months. The hours worked index also moved up to positive territory, coming in at 3.7.

Expectations regarding future business conditions improved again in September. The index of future general business activity posted a fourth positive reading in a row, edging up to 9.3. The index of future company outlook also edged up, coming in at 17.8. Other indexes for future manufacturing activity fell but stayed in solid positive territory.

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

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: Justin Jones
Federal Reserve Bank of Dallas
Phone: (214) 922-5449
e-mail: justin.jones@dal.frb.org