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Texas Manufacturing Outlook Survey

Report in PDF

March 25, 2019

Texas Manufacturing Activity Continues to Grow

Texas factory activity continued to expand in MarcĀ­h, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, held fairly steady at 11.5, indicating output growth continued at about the same pace as last month.

Other measures of manufacturing activity also suggested continued expansion in March, although demand growth slowed. The new orders index fell from 6.9 to 2.4, and the growth rate of orders index slipped into negative territory for the first time since December 2016. The shipments index declined five points to 5.8, while the capacity utilization index moved up four points to 10.9.

Perceptions of broader business conditions continued to improve in March, although outlooks were less optimistic than in February. The general business activity index remained positive but fell five points to 8.3. Similarly, the company outlook index stayed in positive territory but fell from 14.2 to 6.0. The index measuring uncertainty regarding companies’ outlooks was largely unchanged at a 10-month low of 3.4.

Labor market measures suggested continued employment growth and longer workweeks in March. The employment index held steady at 13.1, a reading well above average. Twenty-two percent of firms noted net hiring, compared with 9 percent noting net layoffs. The hours worked index came in at 4.6, up slightly from February.

Upward pressure on prices and wages continued in March. The raw materials and finished goods prices indexes held fairly steady at 20.4 and 6.9, respectively. Twenty-seven percent of firms noted higher input costs this month—about twice the share noting higher selling prices. The wages and benefits index remained elevated at 30.1.

Expectations regarding future business conditions remained positive in March, although the indexes showed mixed movements. The index of future general business activity inched up two points to 19.7, while the index of future company outlook fell nine points to 17.5. Most other indexes for future manufacturing activity pushed further into positive territory this month.

Next release: Monday, April 29

Data were collected March 12–20, and 121 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.

March 25, 2019

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)
Indicator Mar Index Feb Index Change Indicator Direction* Trend** (Months) % Reporting Increase % Reporting
No Change
% Reporting Decrease

Production

11.5

10.1

+1.4

Increasing

33

28.8

53.8

17.3

Capacity Utilization

10.9

7.1

+3.8

Increasing

33

26.9

57.1

16.0

New Orders

2.4

6.9

–4.5

Increasing

29

20.7

61.0

18.3

Growth Rate of Orders

–1.9

3.4

–5.3

Decreasing

1

17.3

63.5

19.2

Unfilled Orders

0.5

0.7

–0.2

Increasing

3

14.7

71.1

14.2

Shipments

5.8

10.7

–4.9

Increasing

28

24.5

56.8

18.7

Delivery Time

4.1

–1.3

+5.4

Increasing

1

14.3

75.5

10.2

Finished Goods Inventories

1.7

–2.5

+4.2

Increasing

1

17.5

66.7

15.8

Prices Paid for Raw Materials

20.4

21.8

–1.4

Increasing

37

27.1

66.2

6.7

Prices Received for Finished Goods

6.9

5.2

+1.7

Increasing

32

13.6

79.7

6.7

Wages and Benefits

30.1

28.9

+1.2

Increasing

116

32.2

65.7

2.1

Employment

13.1

12.6

+0.5

Increasing

27

22.2

68.7

9.1

Hours Worked

4.6

1.8

+2.8

Increasing

29

18.8

67.0

14.2

Capital Expenditures

12.1

18.7

–6.6

Increasing

31

16.6

78.9

4.5

General Business Conditions
Current (versus previous month)
Indicator Mar Index Feb Index Change Indicator Direction* Trend** (Months) % Reporting Improved % Reporting
No Change
% Reporting Worsened

Company Outlook

6.0

14.2

–8.2

Improving

3

19.6

66.8

13.6

General Business Activity

8.3

13.1

–4.8

Improving

3

21.5

65.3

13.2

Indicator Mar Index Feb Index Change Indicator Direction* Trend** (Months) % Reporting Increase % Reporting
No Change
% Reporting Decrease

Outlook Uncertainty†

3.4

4.1

–0.7

Increasing

10

21.0

61.3

17.6

Business Indicators Relating to Facilities and Products in Texas
Future (six months ahead)
Indicator Mar Index Feb Index Change Indicator Direction Trend* (Months) % Reporting Increase % Reporting
No Change
% Reporting Decrease

Production

51.3

44.3

+7.0

Increasing

121

57.6

36.1

6.3

Capacity Utilization

48.2

40.1

+8.1

Increasing

121

53.4

41.4

5.2

New Orders

43.5

44.9

–1.4

Increasing

121

50.2

43.1

6.7

Growth Rate of Orders

32.6

30.8

+1.8

Increasing

121

41.0

50.6

8.4

Unfilled Orders

10.7

10.8

–0.1

Increasing

42

19.2

72.3

8.5

Shipments

45.4

44.7

+0.7

Increasing

121

53.0

39.4

7.6

Delivery Time

9.6

8.7

+0.9

Increasing

28

19.0

71.6

9.4

Finished Goods Inventories

9.1

5.4

+3.7

Increasing

17

19.1

70.9

10.0

Prices Paid for Raw Materials

28.2

23.7

+4.5

Increasing

120

35.5

57.3

7.3

Prices Received for Finished Goods

20.0

25.9

–5.9

Increasing

38

31.8

56.4

11.8

Wages and Benefits

54.4

47.0

+7.4

Increasing

178

54.9

44.6

0.5

Employment

37.9

33.2

+4.7

Increasing

76

43.9

50.1

6.0

Hours Worked

14.4

11.4

+3.0

Increasing

34

24.4

65.6

10.0

Capital Expenditures

36.2

24.0

+12.2

Increasing

112

39.8

56.6

3.6

General Business Conditions
Future (six months ahead)
Indicator Mar Index Feb Index Change Indicator Direction* Trend** (Months) % Reporting Increase % Reporting
No Change
% Reporting Worsened

Company Outlook

17.5

26.7

–9.2

Improving

38

30.8

55.9

13.3

General Business Activity

19.7

17.7

+2.0

Improving

34

32.8

54.1

13.1

*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 2019.

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.

March 25, 2019

Production Index

Downloadable chart

March 25, 2019

Comments from Survey Respondents

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

Primary Metal Manufacturing

  • The transportation sector is slowing, for both cars and tractor trucks and trailers. The nation has enough of each. Quotation volume for high-rise construction has slowed. The nation has enough tall buildings. Other areas of our business are still strong. China has taken a little of our business—not much yet—but we fear it. This makes our business reluctant to invest in long-term growth projects. We are still investing in quick payback projects but not long-term payback projects.

Fabricated Metal Product Manufacturing

  • We are a machine shop and are seeing a tremendous amount of requests for quotations for fixturing and tooling.
  • There is too much capacity chasing too few orders.
  • Our inability to hire, train and bring on new people has become increasingly problematic. We are starting to see customers pushing back on extended production times.

Chemical Manufacturing

  • International sales have decreased.

Nonmetallic Mineral Product Manufacturing

  • We continue to struggle to find qualified labor at our plants.
  • The Federal Reserve’s recent change toward a more dovish policy stance is appropriate and will support housing and our business.

Machinery Manufacturing

  • This is a hard market to read, up one month and then down the next. We are starting to see increased competitive pressure that usually indicates efforts to try to take market share in a softer market.
  • We are seeing stronger business activity because we are investing heavily in our business to meet our customers’ needs. This investment is due to the tax reductions in the federal law on my company that allowed us to afford the purchase of new equipment.
  • We need skilled workers, or even good unskilled and we will train.
  • We have seen a slight increase in orders finally. We’ll have to see what the longer-term pattern may be. It is hard to find any skilled labor.

Computer and Electronic Product Manufacturing

  • Cyclical weakness continues about as expected and is impacted by trade tensions and related uncertainties.
  • Active projects internally are underway to positively impact cash flow by reducing inventory levels and decreasing the cost of finished goods.
  • We certainly feel more certainty regarding business and industry conditions. We believe tax reform, global economic conditions and trade deals have impacted our business in a very positive way. The dollar is also stable across many different currencies.

Electrical Equipment, Appliance and Component Manufacturing

  • Business is very good.

Transportation Equipment Manufacturing

  • Spring is our busiest time. However, this year seems exceptionally strong and we are hiring to keep up with demand.

Printing and Related Support Activities

  • Turnover has increased as job opportunities for skilled labor continue to be very strong. There’s lots of recruiting activity.
  • It’s Dr. Jekyll and Mr. Hyde time as we go from being slow in February to slightly busier in March, so things are looking up. Activity is starting to pick up, and we are talking to customers about some nice larger jobs, which are all encouraging. It’s still a grind, with costs rising all around us, yet we find it difficult to raise prices without catching a bunch of grief from customers.

Food Manufacturing

  • We continue to see strong demand and expect to increase production a minimum of 25 percent over the next six months.
  • We increased capital expenditures as a result of our C-corporation election following the reduction of corporate income tax rates, freeing up more capital from earnings to invest in equipment to increase capacity and efficiency in our manufacturing plants.

Textile Product Mills

  • We continue to grow and thrive.

Paper Manufacturing

  • The overall positive outlook is on the verge of disappearing. A few more weeks of current slowness will turn our outlook negative.

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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