Skip to content

Texas Manufacturing Outlook Survey

Report in PDF

February 26, 2018

Growth in Texas Manufacturing Accelerates in February

What’s New This Month

For this month’s survey, Texas business executives were asked supplemental questions on employment expectations and the labor market. Results for these questions from the Texas Manufacturing Outlook Survey (TMOS), Texas Service Sector Outlook Survey (TSSOS) and Texas Retail Outlook Survey (TROS) have been released together. Read the Special Questions results.

Texas factory activity expanded at a faster pace in February, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, rose 11 points to 27.9, signaling a pickup in output growth.

Demand growth continued at roughly the same pace as in January, while some other measures of manufacturing activity pointed to slightly stronger growth this month. The new orders and growth rate of orders indexes held steady at 25.3 and 15.3, respectively. The capacity utilization index rose five points, coming in at 19.6. The shipments index also rose five points and reached 32.1, its highest reading since 2006.

Perceptions of broader business conditions improved further in February. The general business activity index pushed up to 37.2, its highest reading in 12 years. The company outlook index climbed four points to 31.5, on par with its December 2017 reading, which was also the highest in 12 years.

Labor market measures suggested a pickup in hiring and longer workweeks this month. The employment index came in at 19.1, up four points from January. Thirty percent of firms noted net hiring, compared with 11 percent noting net layoffs. The hours worked index moved up to 16.3.

Price pressures remained elevated in February, and wages rose at a faster clip. The raw materials prices index climbed six points to 39.8, its highest reading since 2011. The finished goods prices index edged up to 22.5, also a level last seen in 2011. The wages and benefits index posted a 9-point increase to 32.2, an 11-year high. Nearly a third of firms noted an increase in compensation from January levels, while roughly two-thirds noted no change.

Expectations regarding future business conditions remained optimistic in February. The indexes of future general business activity and future company outlook slipped to 40.6 and 34.5, respectively, but both stayed well above their average readings. Most other indexes for future manufacturing activity also fell but remained highly positive.

Next release: Monday, March 26

Data were collected Feb. 13–21, and 106 Texas manufacturers responded to the survey. The Dallas Fed conducts the Texas Manufacturing Outlook Survey monthly to obtain a timely assessment of the state’s factory activity. Firms are asked whether output, employment, orders, prices and other indicators increased, decreased or remained unchanged over the previous month

Survey responses are used to calculate an index for each indicator. Each index is calculated by subtracting the percentage of respondents reporting a decrease from the percentage reporting an increase. When the share of firms reporting an increase exceeds the share reporting a decrease, the index will be greater than zero, suggesting the indicator has increased over the prior month. If the share of firms reporting a decrease exceeds the share reporting an increase, the index will be below zero, suggesting the indicator has decreased over the prior month. An index will be zero when the number of firms reporting an increase is equal to the number of firms reporting a decrease. Data have been seasonally adjusted as necessary.

February 26, 2018

Results Summary

Historical data are available from June 2004 to the most current release month.

Business Indicators Relating to Facilities and Products in Texas
Current (versus previous month)
IndicatorFeb IndexJan IndexChangeIndicator Direction*Trend** (Months)% Reporting Increase% Reporting
No Change
% Reporting Decrease

Production

27.9

16.8

+11.1

Increasing

20

41.3

45.3

13.4

Capacity Utilization

19.6

14.5

+5.1

Increasing

20

34.3

51.0

14.7

New Orders

25.3

25.5

–0.2

Increasing

16

39.1

47.0

13.8

Growth Rate of Orders

15.3

15.5

–0.2

Increasing

14

31.0

53.3

15.7

Unfilled Orders

11.5

7.1

+4.4

Increasing

14

22.3

66.9

10.8

Shipments

32.1

27.1

+5.0

Increasing

15

45.1

42.0

13.0

Delivery Time

4.8

9.0

–4.2

Increasing

8

15.5

73.8

10.7

Finished Goods Inventories

7.6

0.0

+7.6

Increasing

1

20.8

66.0

13.2

Prices Paid for Raw Materials

39.8

33.5

+6.3

Increasing

24

43.0

53.8

3.2

Prices Received for Finished Goods

22.5

22.3

+0.2

Increasing

19

27.6

67.3

5.1

Wages and Benefits

32.2

23.3

+8.9

Increasing

99

32.9

66.4

0.7

Employment

19.1

15.2

+3.9

Increasing

14

29.6

59.9

10.5

Hours Worked

16.3

13.4

+2.9

Increasing

16

28.7

58.9

12.4

Capital Expenditures

23.7

20.0

+3.7

Increasing

18

25.2

73.3

1.5

General Business Conditions
Current (versus previous month)
IndicatorFeb IndexJan IndexChangeIndicator Direction*Trend** (Months)% Reporting Improved% Reporting
No Change
% Reporting Worsened

Company Outlook

31.5

27.8

+3.7

Improving

18

38.7

54.1

7.2

General Business Activity

37.2

33.4

+3.8

Improving

17

45.3

46.6

8.1

IndicatorFeb IndexJan IndexChangeIndicator Direction*Trend** (Months)% Reporting Increase% Reporting
No Change
% Reporting Decrease

Outlook Uncertainty†

–5.8

–8.3

+2.5

Decreasing

2

13.6

67.0

19.4

Business Indicators Relating to Facilities and Products in Texas
Future (six months ahead)
IndicatorFeb IndexJan IndexChangeIndicator DirectionTrend* (Months)% Reporting Increase% Reporting
No Change
% Reporting Decrease

Production

46.0

51.6

–5.6

Increasing

108

54.5

37.0

8.5

Capacity Utilization

45.9

46.4

–0.5

Increasing

108

53.8

38.3

7.9

New Orders

49.6

51.2

–1.6

Increasing

108

55.3

39.0

5.7

Growth Rate of Orders

37.5

40.4

–2.9

Increasing

108

41.3

54.9

3.8

Unfilled Orders

18.2

14.0

+4.2

Increasing

29

25.3

67.6

7.1

Shipments

44.4

50.2

–5.8

Increasing

108

52.2

40.0

7.8

Delivery Time

2.8

5.7

–2.9

Increasing

15

12.7

77.4

9.9

Finished Goods Inventories

5.9

11.7

–5.8

Increasing

4

17.8

70.3

11.9

Prices Paid for Raw Materials

43.0

44.0

–1.0

Increasing

107

48.0

47.0

5.0

Prices Received for Finished Goods

31.6

36.2

–4.6

Increasing

25

36.6

58.4

5.0

Wages and Benefits

49.7

56.9

–7.2

Increasing

165

49.7

50.3

0.0

Employment

34.0

44.5

–10.5

Increasing

63

41.9

50.2

7.9

Hours Worked

15.1

14.4

+0.7

Increasing

21

23.1

68.9

8.0

Capital Expenditures

39.6

36.2

+3.4

Increasing

99

43.6

52.5

4.0

General Business Conditions
Future (six months ahead)
IndicatorFeb IndexJan IndexChangeIndicator Direction*Trend** (Months)% Reporting Increase% Reporting
No Change
% Reporting Worsened

Company Outlook

34.5

43.2

–8.7

Improving

25

41.1

52.3

6.6

General Business Activity

40.6

44.5

–3.9

Improving

21

45.7

49.3

5.1

*Indicator direction refers to this month's index. If index is positive (negative), indicator is increasing (decreasing) or improving (worsening). If zero, indicator is unchanged.

**Number of months moving in current direction.

†Added to survey in January 2018.

Data have been seasonally adjusted as necessary, with the exception of the outlook uncertainty index which does not yet have a sufficiently long time series to test for seasonality.

February 26, 2018

Production Index

Downloadable chart

February 26, 2018

Comments from Survey Respondents

These comments are from respondents' completed surveys and have been edited for publication.

Chemical Manufacturing

  • We are just beginning to see higher raw material, regulatory and shipping costs. Last quarter our labor costs soared, as expected. Controlling for inflation is beginning to creep into our decision-making processes, as we think the economy is headed for a soft landing late this year.

Primary Metal Manufacturing

  • We saw a slight decrease in new orders for our building and construction industry customers. This may be related to winter weather delays on projects.
  • As interest rates climb, we anticipate business levels growing slower.
  • Sales and operations have remained fairly steady.

Fabricated Metal Product Manufacturing

  • We are seeing solid bookings across different end-user segments. Bookings are not just energy driven like in 2013–14. Commodity pricing is going up weekly, such as for flat stock steel and rebar.
  • Steel prices have been increasing rapidly, originating at the mills and affecting the entire steel industry. Across-the-board price increases were seen in December, January and again in February.
  • We are still working on restoring production equipment and operations from major flooding with Hurricane Harvey.

Machinery Manufacturing

  • Our customers are requesting more of us in a shorter timeframe because pressures are coming from their management to get work completed sooner so they can plan more projects. Our growth this year is the best in the past five years. We believe this will carry into 2019.

Computer and Electronic Product Manufacturing

  • Our company is finishing a large contract during the summer, which is going to result in decreases in volume and employees at that time. Thus, our projections six months out are based more on our specific situation. The general business environment seems to be strong.
  • The Federal Highway Administration terminated interim approval on a product. This has decreased our sales by 20 percent. We hope to have some new products to replace this one going to market in April.

Transportation Equipment Manufacturing

  • We are seeing good labor supply and material prices.
  • We are a small company focused on the defense industry. We compete with major prime contractors for resources. As the F-35 program gears up, we will be incurring significant increases in costs related to labor, some raw materials, and specialized processing.
  • Our increase in volume of orders is tied to exporting internationally. As the dollar drops in value internationally, our exports increase.

Food Manufacturing

  • We are converting from an S-Corp to a C-Corp to reduce taxes, thanks to recent legislation passed by Congress, and we will spend all of the savings on new equipment to increase efficiency and capacity.
  • We are a unique manufacturer and are moving into new areas of production to meet humanitarian food relief markets and challenges. There is a limitless market/need for what we produce, and our challenge lies in creating economic models which are compatible with our customers’ ability to support the funding of what we produce. Like all businesses, we are evolving while maintaining our focus on the mission of our day-to-day operations.

Beverage and Tobacco Product Manufacturing

  • The increase in uncertainty is due to the acquisition of my main supplier company.

Paper Manufacturing

  • We have seen a slight pullback in new orders. It’s not worrisome unless it persists for a few more weeks.

Printing and Related Support Activities

  • We are receiving price increase notices from our suppliers of petroleum-based products; sometimes they are actually implemented and sometimes they are not. We have not passed any price increases on to our customers to date. This is creating more uncertainty for the business.
  • Other than a large, long-time customer going Chapter 11 rather unexpectedly on us, February is actually busier with better incoming orders than last year and better than normal when we are typically slow. We did get one large one-hit-wonder order that may be distorting things some.

 

Historical Data

Historical data can be downloaded dating back to June 2004.

Indexes

Download indexes for all indicators. For the definitions of all variables, see Data Definitions.

Unadjusted
Seasonally adjusted

All Data

Download indexes and components of the indexes (percentage of respondents reporting increase, decrease, or no change). For the definitions of all variables, see Data Definitions.

Unadjusted
Seasonally adjusted

Questions regarding the Texas Manufacturing Outlook Survey can be addressed to Emily Kerr at emily.kerr@dal.frb.org.

Sign up for our email alert to be automatically notified as soon as the latest Texas Manufacturing Outlook Survey is released on the web.