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June 2007
Manufacturing Activity Increases at a Slower Pace
Texas Manufacturing:
A Primer
The Texas Manufacturing Outlook Survey takes the pulse of an important segment of the nation's industrial sector. The state produced $139.7 billion worth of manufactured goods in 2006, 8.7 percent of the U.S. total. Texas ranks second behind California in factory production and first as an exporter of manufactured products.
According to 2005 estimates, Texas turns out 19 percent of U.S. petroleum and coal products and nearly 15 percent of chemical products. The state also produces just over 13 percent of the nation's output of computer and electronics products, nearly 10 percent machinery, and 10 percent nonmetallic mineral products, such as brick, glass and cement. |
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The Texas Manufacturing Outlook Survey suggests growth in the state's manufacturing activity cooled in June after holding steady over the previous two months. Nearly all indicators of current factory activity remained positive but recorded lower levels compared with last month.
Indexes for production, capacity utilization, growth rate of orders, volume of orders and volume of shipments edged down, and indicators for unfilled orders and materials inventories turned negative in June. In contrast, the indicators for average employee workweek and capital expenditures improved during the month.
The index for the current level of general business activity remained positive but slipped from 20.9 to 10.8 in June, with nearly a quarter of the respondents saying conditions are improving and 13 percent citing a decline in activity. Sixty-four percent of business leaders reported no change. The company outlook index eased for the fourth consecutive month since peaking in February.
Upward price pressures continue, but index values were slightly lower in June. The raw materials price index drifted downward from 40.8 to 30.7 in June, with 34 percent of the manufacturers reporting higher costs compared with 44 percent in May. The finished goods prices index also edged down, posting 11.6 in June compared with its previous reading of 20. Despite the deceleration in current cost pressures, inflationary expectations remain elevated, with a substantially higher share of manufacturers expecting an increase in future finished goods and raw material prices compared with those anticipating a decrease.
The outlook for future business activity remains positive, with nearly all indicators of activity six months from now continuing to register higher levels than current values.
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. Readings above zero point to expansion, while negative levels indicate contraction.
For additional perspective
on the survey, see
"The Texas Manufacturing Outlook Survey: A Tool
for Understanding the Economy" and "Made
in Texas: The Natural Selection of Manufacturing."
- Click on links in the table for greater details,
including historical data.
| Questions
regarding the Texas Manufacturing Outlook
Survey can be addressed to Fiona Sigalla at
Fiona.Sigalla@dal.frb.org
or 214-922-5166.
Note
The Texas Manufacturing
Outlook Survey has not been produced for
a long enough time period to assess the
appropriateness of seasonal adjustment.
Thus, while respondents are asked to adjust
for normal seasonal variation, the month-to-month
values of these indexes June include some
normal seasonal variation that is not indicative
of changes in the business cycle. Other
Federal Reserve Bank business outlook indexes
benefit from seasonal adjustment, and the
Texas indexes will be seasonally adjusted
if appropriate. |
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