Texas Manufacturing Outlook Survey
August 26, 2019
Texas Manufacturing Expansion Picks Up Pace
What’s New This Month
For this month’s survey, Texas business executives were asked supplemental questions on the labor market and pricing power. Results for these questions from the Texas Manufacturing Outlook Survey, Texas Service Sector Outlook Survey and Texas Retail Outlook Survey have been released together. Read the special questions results.
Texas factory activity expanded at a faster clip in August, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, shot up nine points to 17.9, its highest reading in nearly a year.
Other measures of manufacturing activity also suggested faster expansion in August. The shipments index rose seven points to 17.6, and the capacity utilization index rose five points to 15.7, both reaching 11-month highs. The new orders index moved up from 5.5 to 9.3, while the growth rate of orders index was largely unchanged at 1.8.
Perceptions of broader business conditions improved in August. The general business activity index pushed into positive territory for the first time in four months, rising nine points to 2.7. Similarly, the company outlook index rose to 5.0 following three months in negative territory. However, the index measuring uncertainty regarding companies’ outlooks jumped nine points to 18.6, a reading well above average.
Labor market measures suggested slower growth in employment and work hours in August. The employment index remained positive but retreated 11 points to 5.5, a level closer to average. Eighteen percent of firms noted net hiring, while 12 percent noted net layoffs. The hours worked index edged down to 4.0.
Input costs and wages continued to rise in August, while selling prices declined slightly. The raw materials prices index remained positive but fell from 17.0 to 9.8. The wages and benefits index rose seven points to 27.3, an elevated level. Meanwhile, the finished goods prices index posted a second slightly negative reading in a row, suggesting a modest decline in selling prices this month.
Expectations regarding future business conditions remained positive in August. The index of future general business activity posted a second consecutive positive reading but moved down five points to 1.4. The index of future company outlook was little changed at 10.4. Both readings, while positive, remain well below average. Other indexes of future manufacturing activity moved down but stayed solidly in positive territory.
Next release: Monday, September 30
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Data were collected August 13–21, and 118 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. |
August 26, 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 | Aug Index | Jul Index | Change | Series Average | Trend* | % Reporting Increase | % Reporting No Change | % Reporting Decrease |
Production | 17.9 | 9.3 | +8.6 | 10.6 | 38(+) | 34.2 | 49.5 | 16.3 |
Capacity Utilization | 15.7 | 11.2 | +4.5 | 8.2 | 38(+) | 28.5 | 58.7 | 12.8 |
New Orders | 9.3 | 5.5 | +3.8 | 6.5 | 34(+) | 31.6 | 46.1 | 22.3 |
Growth Rate of Orders | 1.8 | 2.7 | –0.9 | 0.2 | 2(+) | 21.7 | 58.4 | 19.9 |
Unfilled Orders | –0.2 | –2.8 | +2.6 | –2.8 | 2(–) | 13.0 | 73.8 | 13.2 |
Shipments | 17.6 | 10.2 | +7.4 | 9.3 | 33(+) | 35.3 | 47.1 | 17.7 |
Delivery Time | 1.3 | –4.8 | +6.1 | –0.4 | 1(+) | 12.4 | 76.5 | 11.1 |
Finished Goods Inventories | –9.5 | –10.6 | +1.1 | –2.9 | 5(–) | 11.2 | 68.1 | 20.7 |
Prices Paid for Raw Materials | 9.8 | 17.0 | –7.2 | 24.8 | 41(+) | 21.3 | 67.2 | 11.5 |
Prices Received for Finished Goods | –2.6 | –1.7 | –0.9 | 6.5 | 2(–) | 9.7 | 78.0 | 12.3 |
Wages and Benefits | 27.3 | 20.1 | +7.2 | 18.8 | 121(+) | 28.6 | 70.1 | 1.3 |
Employment | 5.5 | 16.0 | –10.5 | 6.5 | 32(+) | 17.9 | 69.7 | 12.4 |
Hours Worked | 4.0 | 6.6 | –2.6 | 2.8 | 34(+) | 15.7 | 72.6 | 11.7 |
Capital Expenditures | 7.4 | 15.2 | –7.8 | 6.9 | 36(+) | 19.6 | 68.2 | 12.2 |
| General Business Conditions Current (versus previous month) | ||||||||
| Indicator | Aug Index | Jul Index | Change | Series Average | Trend** | % Reporting Improved | % Reporting No Change | % Reporting Worsened |
Company Outlook | 5.0 | –0.9 | +5.9 | 7.3 | 1(+) | 24.8 | 55.4 | 19.8 |
General Business Activity | 2.7 | –6.3 | +9.0 | 3.0 | 1(+) | 21.9 | 58.9 | 19.2 |
| Indicator | Aug Index | Jul Index | Change | Series Average | Trend* | % Reporting Increase | % Reporting No Change | % Reporting Decrease |
Outlook Uncertainty† | 18.6 | 9.7 | +8.9 | 9.2 | 15(+) | 27.1 | 64.4 | 8.5 |
| Business Indicators Relating to Facilities and Products in Texas Future (six months ahead) | ||||||||
| Indicator | Aug Index | Jul Index | Change | Series Average | Trend* | % Reporting Increase | % Reporting No Change | % Reporting Decrease |
Production | 25.0 | 31.9 | –6.9 | 38.9 | 126(+) | 39.8 | 45.4 | 14.8 |
Capacity Utilization | 22.1 | 32.3 | –10.2 | 35.7 | 126(+) | 35.4 | 51.3 | 13.3 |
New Orders | 23.7 | 31.8 | –8.1 | 36.7 | 126(+) | 36.1 | 51.5 | 12.4 |
Growth Rate of Orders | 14.8 | 30.7 | –15.9 | 27.0 | 126(+) | 27.1 | 60.6 | 12.3 |
Unfilled Orders | 0.0 | 2.5 | –2.5 | 4.1 | 1() | 12.0 | 76.0 | 12.0 |
Shipments | 26.2 | 39.9 | –13.7 | 37.7 | 126(+) | 37.7 | 50.8 | 11.5 |
Delivery Time | 1.6 | –0.5 | +2.1 | –1.9 | 1(+) | 8.4 | 84.8 | 6.8 |
Finished Goods Inventories | –10.3 | 2.0 | –12.3 | –0.5 | 1(–) | 10.3 | 69.2 | 20.6 |
Prices Paid for Raw Materials | 11.8 | 23.5 | –11.7 | 34.2 | 125(+) | 24.5 | 62.7 | 12.7 |
Prices Received for Finished Goods | 9.1 | 14.7 | –5.6 | 19.8 | 43(+) | 19.1 | 70.9 | 10.0 |
Wages and Benefits | 35.2 | 44.5 | –9.3 | 38.3 | 183(+) | 38.7 | 57.8 | 3.5 |
Employment | 22.9 | 28.2 | –5.3 | 22.3 | 81(+) | 31.1 | 60.7 | 8.2 |
Hours Worked | 3.5 | 15.1 | –11.6 | 9.4 | 39(+) | 12.0 | 79.5 | 8.5 |
Capital Expenditures | 17.3 | 21.9 | –4.6 | 20.1 | 117(+) | 28.7 | 59.9 | 11.4 |
| General Business Conditions Future (six months ahead) | ||||||||
| Indicator | Aug Index | Jul Index | Change | Series Average | Trend** | % Reporting Increase | % Reporting No Change | % Reporting Worsened |
Company Outlook | 10.4 | 9.1 | +1.3 | 21.3 | 43(+) | 26.1 | 58.2 | 15.7 |
General Business Activity | 1.4 | 6.0 | –4.6 | 14.8 | 2(+) | 22.5 | 56.4 | 21.1 |
*Shown is the number of consecutive months of expansion or contraction in the underlying indicator. Expansion is indicated by a positive index reading and denoted by a (+) in the table. Contraction is indicated by a negative index reading and denoted by a (–) in the table.
**Shown is the number of consecutive months of improvement or worsening in the underlying indicator. Improvement is indicated by a positive index reading and denoted by a (+) in the table. Worsening is indicated by a negative index reading and denoted by a (–) in the table.
†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.
August 26, 2019
Production Index
August 26, 2019
Comments from Survey Respondents
These comments are from respondents’ completed surveys and have been edited for publication.
Chemical Manufacturing
- International sales have decreased.
Primary Metal Manufacturing
- Truck trailer production is going down now. High-rise construction looks like it is slowing down next year. Other business is still strong, so far.
Fabricated Metal Product Manufacturing
- We are still fighting availability due to tariffs. Limited size availability is forcing waste, by having to buy the next size larger. This is because where .125 and .250 increments in aluminum and steel round bar had been available, now you may have to jump an extra .5 or an inch to be able to make the same part. Who can afford that loss? It’s more expense for the material and more time to remove the extra. Saving the turnings or chips from the manufacturing to recycle doesn’t pay as much as it used to (down by 75 percent). This is all because of China and President Trump tariff games.
- We are still seeing softness in our end-user markets, especially energy.
- We have seen an unusually high volume of quoting/estimating activity. We believe this is a result of the ongoing China–U.S. trade war and the tariffs being leveled against China. OEMs [original equipment manufacturers] are looking to cover their bases by having a domestic supplier qualified in case the trade war deepens.
- Uncertainty has remained a key ingredient in all that we are faced with. Skilled and stable labor is still a challenge, with the retirement of key employees.
- We are providing a lot of quotes, with owners pushing out start dates or our competitors pricing jobs below our costs to obtain the work.
Nonmetallic Mineral Product Manufacturing
- Heavy rains in Texas slowed construction projects in the Dallas metroplex; therefore, our customers could not take shipments of finished goods on a timely basis. As the rain abates, shipping should increase.
- Duties continue to be an issue and a problem. We are raising pricing to cover, as are our competitors. Customers have no choice but to accept the price increases. We are making more products here at our factory and moving some production to countries other than China or back to our U.S. factory.
Machinery Manufacturing
- Business is steady; however, we are watching the economy closely.
- We still feel there is a large amount of uncertainty in our market. The government has caused our industry to heavily fluctuate, as there is no stability in the forecast.
Computer and Electronic Product Manufacturing
- Tariffs remain a concern.
Transportation Equipment Manufacturing
- Activity in our drilling industry is normally busier during the summer. However, for the past several months, we have continued to lose sales in favor of China, India and South Korea.
- Although we are required to “Buy American” for material procurement, uncertainty in the import marketplace relating to tariffs continues to put upward price pressure on U.S.-sourced supplies. We are eager to see a clearer rationale behind this administration’s attempts to develop a business strategy.
- We are changing our business model to increase volume and improve capacity utilization.
Food Manufacturing
- U.S. trade policy continues to hamper our efforts to grow our export business.
- The ongoing trade dispute with China is causing structural changes in the agricultural industry that have increased uncertainty.
Textile Product Mills
- Optimism is the foundation of thought for any entrepreneur; although orders have not increased this month, I am very optimistic about the future.
Paper Manufacturing
- Production/demand has been soft in the first half of year—and now the hope/expectation that manufacturing will resume has disappeared. Plans for a new, lower level of manufacturing are driving decisions from this point on.
Printing and Related Support Activities
- We are still very worried about the economy in general and our industry in particular. We implemented a price increase that was way overdue in April and have gotten very little pushback on it.
Miscellaneous Manufacturing
- We are seeing a volume decrease in all sectors of our business with the automotive OEM [original equipment manufacturer] segment down more than 20 percent.
- The 25 percent tariff is really hurting my cash flow. Twenty-two percent of my gross sales are hit by this tariff, and my customers all refuse the upcharge.
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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