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Texas Manufacturing Outlook Survey

Report in PDF

November 25, 2019

Texas Manufacturing Activity Weakens Slightly

What’s New This Month

For this month’s survey, Texas business executives were asked supplemental questions on the labor market. 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 contracted slightly in November, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, dipped into negative territory for the first time since mid-2016, falling seven points to -2.4.

Other measures of manufacturing activity were also negative in November, suggesting declines. The new orders index remained negative for a second month in a row, coming in at -3.0. The growth rate of orders index pushed further into negative territory, falling from -5.9 to -9.3. The capacity utilization and shipments indexes turned negative after three years in positive territory, falling to -5.3 and -4.5, respectively.

Perceptions of broader business conditions worsened slightly in November. The general business activity index remained negative but moved up from -5.1 to -1.3. The company outlook index fell 11 points to -2.1. Both indexes have oscillated between positive (expansionary) and negative (contractionary) territory this year, with the latest barely-negative readings suggesting modest contraction. The index measuring uncertainty regarding companies’ outlooks moved up to 17.1, a reading well above average.

Labor market measures suggested stable employment levels and shorter workweeks this month. The employment index retreated from 11.0 to 0.9, with the near-zero reading suggesting little to no job growth on balance. Eighteen percent of firms noted net hiring, while 17 percent noted net layoffs. The hours worked index dipped from 4.7 to -4.3.

Prices and wages continued to rise in November, although growth in selling prices was quite muted. Upward pressure on raw materials eased somewhat, with the index declining five points to 17.8. The finished goods prices index retreated to 1.9, with the vast majority of manufacturers noting no change in selling prices from October. The wages and benefits index held steady at 21.1.

Expectations regarding future business conditions remained optimistic in November. The index of future general business activity rose five points to 7.3, while the index of future company outlook edged up to 17.0. Other indexes for future manufacturing showed mixed movements but remained solidly in positive territory.

Next release: Monday, December 30

Data were collected Nov. 12–20, and 115 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.

November 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)
IndicatorNov IndexOct IndexChangeSeries
Average
Trend*% Reporting Increase% Reporting No Change% Reporting Decrease

Production

–2.4

4.5

–6.9

10.5

1(–)

26.0

45.7

28.4

Capacity Utilization

–5.3

3.6

–8.9

8.1

1(–)

22.0

50.7

27.3

New Orders

–3.0

–4.2

+1.2

6.4

2(–)

25.5

46.0

28.5

Growth Rate of Orders

–9.3

–5.9

–3.4

0.1

2(–)

17.9

54.9

27.2

Unfilled Orders

–7.7

–9.4

+1.7

–2.9

5(–)

12.8

66.7

20.5

Shipments

–4.5

6.0

–10.5

9.2

1(–)

23.9

47.7

28.4

Delivery Time

–4.6

–4.2

–0.4

–0.5

2(–)

9.0

77.4

13.6

Finished Goods Inventories

–10.6

–4.5

–6.1

–3.0

8(–)

14.2

61.1

24.8

Prices Paid for Raw Materials

17.8

22.8

–5.0

24.8

44(+)

25.9

66.0

8.1

Prices Received for Finished Goods

1.9

4.8

–2.9

6.5

3(+)

10.6

80.7

8.7

Wages and Benefits

21.1

22.2

–1.1

18.9

124(+)

21.5

78.1

0.4

Employment

0.9

11.0

–10.1

6.6

35(+)

18.2

64.5

17.3

Hours Worked

–4.3

4.7

–9.0

2.8

1(–)

17.3

61.1

21.6

Capital Expenditures

4.5

13.6

–9.1

7.0

39(+)

17.8

68.9

13.3

General Business Conditions
Current (versus previous month)
IndicatorNov IndexOct IndexChangeSeries
Average
Trend**% Reporting Improved% Reporting No Change% Reporting Worsened

Company Outlook

–2.1

8.8

–10.9

7.3

1(–)

18.0

61.9

20.1

General Business Activity

–1.3

–5.1

+3.8

3.0

2(–)

16.5

65.7

17.8

IndicatorNov IndexOct IndexChangeSeries
Average
Trend*% Reporting Increase% Reporting No Change% Reporting Decrease

Outlook Uncertainty†

17.1

12.1

+5.0

9.8

18(+)

27.0

63.1

9.9

Business Indicators Relating to Facilities and Products in Texas
Future (six months ahead)
IndicatorNov IndexOct IndexChangeSeries
Average
Trend*% Reporting Increase% Reporting No Change% Reporting Decrease

Production

31.3

29.6

+1.7

38.7

129(+)

41.8

47.8

10.5

Capacity Utilization

35.8

26.8

+9.0

35.5

129(+)

42.0

51.8

6.2

New Orders

28.7

34.3

–5.6

36.5

129(+)

39.6

49.5

10.9

Growth Rate of Orders

19.3

26.1

–6.8

26.9

129(+)

29.5

60.3

10.2

Unfilled Orders

5.7

2.6

+3.1

4.0

2(+)

12.2

81.3

6.5

Shipments

26.2

29.2

–3.0

37.5

129(+)

37.0

52.2

10.8

Delivery Time

2.7

2.5

+0.2

–1.9

2(+)

6.8

89.1

4.1

Finished Goods Inventories

–0.9

1.9

–2.8

–0.5

1(–)

14.2

70.8

15.1

Prices Paid for Raw Materials

25.9

18.8

+7.1

34.0

128(+)

31.5

63.0

5.6

Prices Received for Finished Goods

7.5

7.8

–0.3

19.7

46(+)

19.6

68.2

12.1

Wages and Benefits

36.5

39.0

–2.5

38.3

186(+)

37.5

61.5

1.0

Employment

20.6

23.6

–3.0

22.3

84(+)

31.6

57.4

11.0

Hours Worked

11.1

1.9

+9.2

9.4

42(+)

18.4

74.3

7.3

Capital Expenditures

9.8

22.9

–13.1

20.1

120(+)

22.0

65.8

12.2

General Business Conditions
Future (six months ahead)
IndicatorNov IndexOct IndexChangeSeries
Average
Trend**% Reporting Increase% Reporting No Change% Reporting Worsened

Company Outlook

17.0

15.3

+1.7

21.1

46(+)

28.9

59.2

11.9

General Business Activity

7.3

2.4

+4.9

14.6

2(+)

22.6

62.1

15.3

*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.

November 25, 2019

Production Index

Downloadable chart

November 25, 2019

Comments from Survey Respondents

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

Chemical Manufacturing

  • Tariff rates continue to be hard to pass on to customers.
  • One of our customers announced a permanent plant shutdown. They stated that production would go to other facilities (all are overseas).

Fabricated Metal Product Manufacturing

  • Since policymakers, talking heads and the media have stopped talking about a recession on the horizon and shifted their focus to other topics, it’s become clear that businesses are not experiencing the predicted turmoil. Many small business owners are continuing to create jobs, raise wages and grow their businesses thanks to tax cuts and deregulation. The big thing that continues to hold us back is finding qualified workers.
  • The most significant risk is political risk that could manifest through consumer sentiment.
  • The market activity is slowish and has not changed. We are gaining a little bit of share.
  • Quote requests have remained steady to strong. However, owners seem to be delaying the award and start of projects.

Machinery Manufacturing

  • Business is steady, and if the China trade agreement gets settled soon, we think business will increase rapidly.
  • Presidential politics are playing a bigger role in how our customers are seeing the future. They are holding back on expenditures and capital projects. Once we see how this is resolved, I believe spending will either increase significantly or get far worse very fast.
  • We have received a significant increase in employee costs with respect to medical insurance premiums. This cost is unsustainable, and we therefore have to cut back on benefits and share more of the cost with our employees—very disappointing.

Computer and Electronic Product Manufacturing

  • We have seen broad-based weakness, with customers telling us they are being more cautious due to trade tensions.

Electrical Equipment, Appliance and Component Manufacturing

  • We are seeing election and political volatility along with a longer current business cycle.

Transportation Equipment Manufacturing

  • Clarity on tariffs on European imports improved visibility and removed certain risks.
  • Political uncertainty and foreign influences (tariffs) have created an environment in which intermediate and long-range planning are much more difficult than two to three years ago.

Food Manufacturing

  • Labor and raw material [cost] increases will cause prices to increase next year. Lack of available labor is the most significant impediment to growth. Continued confusion and uncertainty with export business to Mexico and Latin America are costing us significant sales.
  • The issue of tariffs and the unstable political environment—namely the shift from conservative to more liberal, Democratic elected officials, and socialistic national debate—are unsettling.
  • We see no significant change. We continue to work 13 of 14 days every two weeks. This will continue through next year.

Printing and Related Support Activities

  • The struggle continues to find qualified personnel for even entry-level positions.

Miscellaneous Manufacturing

  • Automotive customers are pushing for N90 [net 90-day] payment terms. This is just the latest tactic to gain footing in terms of profits for the automotive sector. My company continues to refuse N90 terms, and we plan to continue refusing as we are unable to push longer terms down the supply chain.
  • Tariffs and Washington unrest are not good for large growth.

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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