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Texas Manufacturing Activity Picks Up, Says Dallas Fed Survey

For Immediate Release: January 28, 2019

DALLAS—Texas factory activity continued to expand in January, according to the Federal Reserve Bank of Dallas’ Texas Manufacturing Outlook Survey.

The production index, a key measure of state manufacturing conditions, rose from 7.3 to 14.5, indicating an acceleration in output growth. Positive readings in the survey generally indicate expansion of factory activity, while readings below zero generally indicate contraction.

“The January report suggests continued growth in the Texas manufacturing sector. While the latest reading showed an uptick in the pace of growth, when we look at the broader trend, we see that growth has actually downshifted over the past few months from the robust expansion seen through most of last year,” said Emily Kerr, Dallas Fed senior business economist.

Perceptions of broader business conditions improved in January. The general business activity index rebounded from a multiyear low of -5.1 in December to 1.0 in January. The company outlook index rose more than 10 points to 7.1.

“A bright spot in the survey results this month was the company outlook index, which had dipped into negative territory last month but rebounded somewhat in January, returning to positive territory. However, uncertainty ticked up, with more than a quarter of respondents noting increased uncertainty regarding their company’s outlook, the highest share since we started asking this question a year ago,” Kerr said.

Here are some additional key takeaways from this month’s manufacturing report:

Activity expanded; demand growth slowed. The capacity utilization index rose seven points to 14.8, and the shipments index rose five points to 11.4. Meanwhile, the new orders index edged down to 11.6 and the growth rate of new orders index fell from 5.8 to 1.2.

Employment growth also slowed. The employment index retreated four points to 6.6, a two-year low. Sixteen percent of firms noted net hiring, compared with 10 percent noting net layoffs.

Upward wage and price pressures continued. The raw materials price index slipped eight points to 21.2, and the wages and benefits index ticked down two points to 27.4. Meanwhile, the finished goods price index held steady at 6.4.

Manufacturers were more positive about future business conditions. The indexes of future general business activity and future company outlook rose to 11.7 and 22.3, respectively. Other indexes of future manufacturing activity also posted increases this month.

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
Email: jennifer.chamberlain@dal.frb.org