Texas Manufacturing Expands at a Slower Pace, Uncertainty Increases
For Immediate Release: November 26, 2018
DALLAS—Texas factory activity continued to expand in November but at a much slower pace, according to the Federal Reserve Bank of Dallas’ Texas Manufacturing Outlook Survey.
The production index, a key measure of state manufacturing conditions, remained positive but fell nine points to 8.4, indicating output growth continued to abate.
Positive readings in the survey generally indicate expansion of factory activity, while readings below zero generally indicate contraction.
“Growth in Texas manufacturing activity slowed further this month, continuing a trend that started in the third quarter,” said Emily Kerr, Dallas Fed senior business economist. “Price and wage growth also decelerated in November, particularly for input costs.”
The November report also includes results to special questions on labor market conditions, which cover not only manufacturing but also services and retail.
“Two-thirds of firms report difficulty finding qualified workers when hiring, with the most acute difficulty noted for mid-skill positions,” Kerr said. “Two-thirds of firms also say they are raising wages and/or benefits to recruit and retain employees, a share that is up notably from about 50 percent a year ago.”
Here are some additional key takeaways from this month’s manufacturing report:
The survey’s demand indicators declined. The new orders and growth rate of new orders indexes declined to 9.7 and 4.8, respectively, representing their lowest readings in 20 months. The capacity utilization index fell six points to 9.4, and the shipments index fell nine points to 7.7, both at their lowest levels in at least 20 months.
Manufacturers were less optimistic than in October, and uncertainty increased. The general business activity and company outlook indexes posted double-digit declines, coming in at 17.6 and 13.7, respectively, but both are still well above long-term averages. The index measuring uncertainty regarding companies’ outlooks rose five points to 12.3, indicating uncertainty was more widespread this month.
Labor market measures suggested slower employment growth. The employment index retreated eight points to 15.9. The hours worked index edged down to 4.9.
Price and wage increases eased in November. The raw materials prices index posted a 21-point decline to 33.7 after reaching a seven-year high last month. The finished goods prices index also fell, down 10 points to 7.5. However, both indexes remained well above average. Compensation costs also continued to rise at a faster clip than normal, although the pace slowed from October, with the wages and benefits index moving down eight points to 24.9.The Dallas Fed conducts the Texas Manufacturing Outlook Survey monthly to obtain a timely assessment of the state’s factory activity.
Federal Reserve Bank of Dallas
Phone: (214) 922-6748