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Texas Manufacturing Activity Expands, Outlooks Improve, Says Dallas Fed Survey

For Immediate Release: February 25, 2019

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

The production index, a key measure of state manufacturing conditions, slipped four points to 10.1, indicating a slight deceleration in output growth. Positive readings in the survey generally indicate expansion of factory activity, while readings below zero generally indicate contraction.

Perceptions of broader business conditions improved notably. The general business activity index rose 12 points to 13.1. The company outlook index rose seven points to 14.2, a four-month high. The index measuring uncertainty regarding companies’ outlooks retreated 12 points to 4.1, its lowest reading in nine months. The employment index rebounded from 6.6 to 12.6.

“The Texas manufacturing expansion continued in February, though still at a slower pace than what was seen in the first three quarters of last year,” said Emily Kerr, Dallas Fed senior business economist. “A bright spot in this month’s report is that company outlooks improved notably—with that index rebounding in February after two months of weak readings—and uncertainty moderated.”

For this month’s Texas Business Outlook Surveys, respondents were also asked special questions on employment expectations and the labor market.

“Another highlight is that employment growth picked up this month, and a special question posed to all contacts—not just manufacturers but services and retailers as well—showed that nearly half of businesses expect to increase employment over the next six to 12 months,” Kerr said.

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

Other measures of manufacturing activity pointed to continued but slower expansion. The new orders index fell five points to 6.9, its lowest reading in more than two years. Similarly, the capacity utilization index fell eight points to 7.1 and reached a two-year low.

Upward wage and price pressures continued. The raw materials and finished goods prices indexes held steady at 21.8 and 5.2, respectively, roughly in line with average levels for these indexes. The wages and benefits index remained quite elevated at 28.9.

Manufacturers remained positive about future business conditions. The indexes of future general business activity and future company outlook rose to 17.7 and 26.7, respectively. Most other indexes for future manufacturing activity fell but remained solidly positive.

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Media contact:
Jennifer Chamberlain
Federal Reserve Bank of Dallas
Phone: (214) 922-6748
Email: jennifer.chamberlain@dal.frb.org