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Texas Manufacturing Expansion Continues but Outlooks Worsen, Uncertainty Rises, Says Dallas Fed Survey

For Immediate Release: June 24, 2019

DALLAS—Texas factory activity continued to expand in June, according to business executives responding to the Texas Manufacturing Outlook Survey.

The production index, a key measure of state manufacturing conditions, rose from 6.3 in May to 8.9 in June. Positive readings in the survey generally indicate expansion of factory activity, while readings below zero generally indicate contraction.

“The June report reflects continued moderate expansion in Texas manufacturing, with growth this year remaining below the more robust pace seen throughout most of 2017 and 2018,” said Emily Kerr, Dallas Fed senior business economist.

Perceptions of broader business conditions shifted down again in June. The general business activity and company outlook indexes declined to three-year lows, at -12.1, and -5.5, respectively. Meanwhile, the index measuring uncertainty about companies’ outlooks pushed up to 21.6.

“Some signs of weakness continue to materialize, with demand growth slowing and outlooks worsening,” Kerr said. “Uncertainty increased again this month, with about 40 percent of manufacturers noting that tariffs and other potential changes to trade policy have increased uncertainty regarding their outlook and business decisions.”

For this month’s survey, executives in both manufacturing and the service sector responded to supplementary questions on the impact of tariffs.

“In a follow-up set of special questions on tariffs, Texas firms note direct business impacts, especially in the manufacturing sector,” Kerr said. “More than half of manufacturers report that tariffs have increased their input costs, and more than a quarter report a reduction in capital spending plans.”

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

Other measures of manufacturing activity were mixed. The capacity utilization index inched up to 9.6, while the shipments index retreated six points to 1.7, a two-year low. The capital expenditures index posted a double-digit decline, falling 11 points to 6.9.

Employment growth was solid but slower. The employment index slipped from 11.6 to 8.8 but remained slightly above average. The hours worked index inched down to 4.7.

Input cost pressure increased but wage pressure moderated. The raw materials prices index rose nine points to 16.4. The finished goods prices index was largely unchanged at 1.2. The wages and benefits index dropped five points to 22.7.

Texas produces around 10 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
Email: jennifer.chamberlain@dal.frb.org