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Texas Manufacturing Expansion Picks Up in May, Says Dallas Fed Survey

Several key indexes hit levels not seen since before the oil bust

For Immediate Release: May 30, 2017

DALLAS—Texas factory activity increased at a faster pace in May, according to the Federal Reserve Bank of Dallas’ Texas Manufacturing Outlook Survey.

The production index—a key measure of state manufacturing conditions— moved up eight points to 23.3, reaching its highest level since April 2014.

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

“This month’s report is quite notable, as several key indexes reached levels not seen since mid-2014, when oil prices were still over $100 per barrel and the Texas economy was growing at a breakneck pace,” said Emily Kerr, Dallas Fed senior business economist.

“We’ve seen how the oil bust has been a major headwind for Texas manufacturers, especially those directly supporting the oil industry. Manufacturers also noted how the marked appreciation of the dollar that began in the second half of 2014 has also been a significant headwind. These headwinds have abated somewhat in recent months as the oil price and dollar value have stabilized, and it’s a great sign for Texas manufacturing to see that production is surging in the current environment.”

The new orders and growth rate of orders indexes edged up to 18.1 and 12.3, respectively. The shipments index surged 15 points to 24.7, reaching a level not seen in nearly 10 years. The capacity utilization index moved up to 19.4.

Perceptions of broader business conditions improved again. The general business activity index held fairly steady at 17.2, and the company outlook index rose five points to 20.2.

Labor market measures indicated employment gains and markedly longer workweeks in May. The employment index posted a fifth consecutive positive reading, coming in at 8.3. The hours worked index shot up 10 points to 15.7, its highest reading in six years.

Expectations regarding future business conditions continued to improve. The indexes of future general business activity and future company outlook came in at 31.6 and 30.9, respectively, up several points from last month’s readings. Other indexes for future manufacturing activity pushed further into 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:
Jennifer Chamberlain
Federal Reserve Bank of Dallas
Phone: (214) 922-6748
E-mail: jennifer.chamberlain@dal.frb.org