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Texas Manufacturing Outlook Survey

Report in PDF

April 30, 2018

Growth in Texas Manufacturing Rebounds Strongly

What’s New This Month

This month, business executives were asked supplemental questions on a range of topics, covering tax reform, tariffs and linkages to the energy industry. Read the Special Questions results.

This month’s data release also includes annual seasonal factor revisions. In April of each year, the Federal Reserve Bank of Dallas revises the historical data for the Texas Manufacturing Outlook Survey after calculating new seasonal adjustment factors. Annual seasonal revisions result in slight changes in the seasonally adjusted series. Read more information on seasonal adjustment.

Texas factory activity rose markedly in April after posting slower growth in March, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, increased 11 points to 25.3.

Other indexes of manufacturing activity also rose sharply in April. The new orders and growth rate of orders indexes jumped to their highest readings this year, 27.9 and 18.9, respectively. The capacity utilization index climbed eight points to 18.7, and the shipments index rose nine points to 19.3.

Perceptions of broader business conditions remained highly positive on net in April. The general business activity index was largely unchanged at 21.8, and the company outlook index edged up four points to 23.6. Both indexes remained far above their average levels.

Labor market measures suggested stronger growth in employment and work hours in April. The employment index came in at 17.8, up six points from March. Twenty-four percent of firms noted net hiring, compared with 6 percent noting net layoffs. The hours worked index moved up four points to 14.3.

Price and wage pressures remained elevated in April. The raw materials prices index ticked up to 46.3, its highest reading in seven years, while the finished goods prices index edged down to 17.0. The wages and benefits index rose five points to 29.3, with 30 percent of firms reporting an increase in pay from March.

Expectations regarding future business conditions remained largely optimistic in April. The index of future general business activity held steady at 31.9, and the index of future company outlook rose to 37.1. Both readings are significantly above average. Other indexes for future manufacturing activity pushed further into positive territory.

Next release: Tuesday, May 29

Data were collected Apr. 17–25, and 114 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.

April 30, 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)
IndicatorApr IndexMar IndexChangeIndicator Direction*Trend** (Months)% Reporting Increase% Reporting
No Change
% Reporting Decrease

Production

25.3

14.4

+10.9

Increasing

22

38.0

49.3

12.7

Capacity Utilization

18.7

11.1

+7.6

Increasing

22

32.3

54.1

13.6

New Orders

27.9

10.3

+17.6

Increasing

18

40.1

47.7

12.2

Growth Rate of Orders

18.9

5.3

+13.6

Increasing

16

33.1

52.7

14.2

Unfilled Orders

7.2

6.7

+0.5

Increasing

13

19.3

68.6

12.1

Shipments

19.3

10.3

+9.0

Increasing

17

35.2

48.9

15.9

Delivery Time

14.5

2.6

+11.9

Increasing

10

20.2

74.1

5.7

Finished Goods Inventories

1.7

1.8

–0.1

Increasing

3

15.0

71.7

13.3

Prices Paid for Raw Materials

46.3

43.0

+3.3

Increasing

26

49.5

47.3

3.2

Prices Received for Finished Goods

17.0

19.2

–2.2

Increasing

21

22.4

72.2

5.4

Wages and Benefits

29.3

24.1

+5.2

Increasing

105

30.3

68.7

1.0

Employment

17.8

11.7

+6.1

Increasing

16

23.9

70.0

6.1

Hours Worked

14.3

10.2

+4.1

Increasing

18

22.4

69.5

8.1

Capital Expenditures

23.9

18.2

+5.7

Increasing

20

29.9

64.1

6.0

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

Company Outlook

23.6

19.8

+3.8

Improving

20

32.8

58.0

9.2

General Business Activity

21.8

22.8

–1.0

Improving

18

31.8

58.2

10.0

IndicatorApr IndexMar IndexChangeIndicator Direction*Trend** (Months)% Reporting Increase% Reporting
No Change
% Reporting Decrease

Outlook Uncertainty†

12.4

2.8

+9.6

Increasing

2

21.2

69.9

8.8

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

Production

52.3

46.0

+6.3

Increasing

110

57.8

36.7

5.5

Capacity Utilization

49.0

47.1

+1.9

Increasing

110

54.3

40.4

5.3

New Orders

47.6

44.5

+3.1

Increasing

110

52.6

42.4

5.0

Growth Rate of Orders

37.8

33.6

+4.2

Increasing

110

43.8

50.2

6.0

Unfilled Orders

15.5

17.6

–2.1

Increasing

31

22.5

70.5

7.0

Shipments

49.2

48.3

+0.9

Increasing

110

54.9

39.4

5.7

Delivery Time

11.4

6.9

+4.5

Increasing

17

19.2

73.0

7.8

Finished Goods Inventories

11.1

5.7

+5.4

Increasing

6

22.2

66.7

11.1

Prices Paid for Raw Materials

49.1

50.5

–1.4

Increasing

109

53.7

41.7

4.6

Prices Received for Finished Goods

33.3

28.7

+4.6

Increasing

27

36.1

61.1

2.8

Wages and Benefits

50.1

48.5

+1.6

Increasing

167

50.2

49.7

0.1

Employment

35.4

34.7

+0.7

Increasing

65

41.3

52.8

5.9

Hours Worked

14.4

19.4

–5.0

Increasing

23

22.5

69.4

8.1

Capital Expenditures

31.0

37.8

–6.8

Increasing

101

39.1

52.8

8.1

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

Company Outlook

37.1

29.7

+7.4

Improving

27

42.6

51.9

5.5

General Business Activity

31.9

31.6

+0.3

Improving

23

37.8

56.3

5.9

*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.

April 30, 2018

Production Index

Downloadable chart

April 30, 2018

Comments from Survey Respondents

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

Chemical Manufacturing

  • We are starting to see the economy spool down a bit, with our clients holding off on projects and wanting to carry less inventory. All are complaining about a lack of skilled workers, but we are not having issues finding them when we need them. The workforce buildup prior to the end of the first quarter is over for us.

Nonmetallic Mineral Product Manufacturing

  • Inflation pressures are increasing substantially.

Primary Metal Manufacturing

  • The plant's provider of feed material is on a planned 40-day outage.
  • Sanctions on Russian aluminum may put some of our competitors out of business. There is not enough capacity short term in the USA or the world to make up the shortfall.
  • Shipping to California has become a cost nightmare. The pricing is up dramatically, and availability of trucks is very challenging. Apart from the elevated cost of raw material (steel scrap), we are seeing for the first time in years significant price increases across the array of industrial supplies and materials that we buy. This has the feel of a return of true price inflation.

Fabricated Metal Product Manufacturing

  • Section 232 [tariff action] has had a significant impact in advancing orders in March and April. In addition, it has created uncertainty with regard to steel availability and pricing.
  • Tariff discussions have stimulated immediate increases in all materials, with plate increasing the most.

Machinery Manufacturing

  • We are just not seeing any improvement of the economy from our sales or our customers.
  • Chinese imports have dramatically impacted our product line for the worse. Rising steel costs are another burden.
  • Prices of metals are a big concern going forward. Additionally, freight costs are going to rise. Fuel costs are increasing, and new data logging requirements are feeding the fire. Basically, inflationary pressures are mounting.
  • We have seen an increase in booked orders in April compared to the first quarter. We are expecting orders to continue to rise through the summer months.

Computer and Electronic Product Manufacturing

  • Lead times for raw materials are significantly hurting deliveries. The shortage of talented labor is limiting the ability to grow. The trade war is creating uncertainty.
  • The value of the dollar still is the main factor of our customer’s ability to sell and export.

Transportation Equipment Manufacturing

  • I’m not sure if our outlook downturn is a lull or beginning of a trend when previous indicators were all favorable. There appears to be too much political turmoil for consumers to stay on an upward and positive trajectory.
  • We’re starting to see more difficulty finding additional employees. This is surprising when you consider the lower level of activity in the oil patch.

Printing and Related Support Activities

  • We continue to be busy from one very large project that will soon finish up, but also we are seeing increased activity to a certain point from our regular customers. The uptick in activity is unusual for this time of year, so we are hopeful that the next six to nine months will be better than normal.
  • We are very worried about President Trump’s trade actions.

Paper Manufacturing

  • Business remains strong.

Miscellaneous Manufacturing

  • Steel and aluminum tariffs and their effects (i.e., higher fabrication charges, plus tariffs from aluminum and steel mills and limited availability of metal) both domestically and internationally are harming our business tremendously as we struggle to keep up with price increases and pass them along to our customers. We sell predominately to automotive OEM (original equipment manufacturer) customers. Most customers understand the market and are accepting price increases. One large customer is trying not to accept price increases. It is a very tumultuous time in manufacturing in the U.S. right now.

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.

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