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Texas Manufacturing Growth Moderates in January, Outlook Remains Strong, says Dallas Fed Survey

For Immediate Release: January 29, 2018

DALLAS—Texas factory activity continued to expand in January but moderated from the rapid expansion seen in December, according to the Federal Reserve Bank of Dallas’ Texas Manufacturing Outlook Survey.

“Outlooks remained highly positive, although several firms continue to express uncertainty about NAFTA negotiations,” said Emily Kerr, Dallas Fed senior business economist, referring to the North American Free Trade Agreement.

Here are more key takeaways from this month’s report:

Several measures of manufacturing activity pointed to slower growth. The production index, a key measure of state manufacturing conditions, remained elevated but retreated to 16.8 in January after surging to an 11-year high in December. The new orders index moved down from 30.1 to 25.5, and the growth rate of orders index fell six points to 15.5. The capacity utilization index stayed positive but dropped 12 points to 14.5, while the shipments index rose six points to 27.1, indicating a pickup in growth.

Perceptions of broader business conditions remained highly positive. The general business activity index rose further to 33.4—its highest reading in more than 12 years. The company outlook index remained elevated but edged down to 27.8.

Upward pressure on prices and wages continued. The raw materials prices index ticked up one point to 33.5, and the finished goods prices index rose four points to 22.3.

“The current wage measure was little changed from prior months, but firms were more bullish about future wages,” Kerr said. “Sixty percent of manufacturers expect wages and benefits will be higher six months from now, pushing the index to 56.9 in January, its second-highest reading since the series began in 2004 and more than 20 points above its postrecession average.”

Manufacturers were even more optimistic about future business conditions. The index of future general business activity rose four points to 44.5, its highest level since December 2004. The future company outlook index edged up to 43.2.

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