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September 2007
Texas Manufacturing Expands 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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After posting a strong rebound in August, Texas factory activity expanded at a slower pace in September, according to the 112 business executives who responded to the Texas Manufacturing Outlook Survey. Nearly all indicators of current production continued their positive readings in September, but most were weak, suggesting a return to the decelerating trend that began in the second quarter.
Excluding July, when weather disrupted companies’ operations, key September indexes remained positive but retreated to their lowest levels since December 2006. The production index dipped from 21.6 to 4.5. Capacity utilization fell from 19.2 to 1.8. The index for volume of new orders weakened from 14.4 to 2.7, and the index for volume of shipments downshifted from 27 to 5.4.
The index for capital expenditures continued to rise in September, with a quarter of respondents reporting increases in the past month.
The labor market improved slightly, according to survey respondents. The index for number of employees strengthened to 3.5 after spending two months at zero, the point at which an equal number of firms report increases and decreases. Twenty-one percent of factories reported increases in employment in September. The average employee workweek was essentially unchanged.
Texas manufacturers remain cautious about general business conditions. The company outlook index remained essentially unchanged, near zero. The index for the current level of general business activity fell from –1.8 to –4.6, the lowest reading since December 2006.
Upward price pressures persist but lessened on raw materials. The raw materials price index edged down from 21.6 to 17.9, with 30 percent of the manufacturers reporting higher costs in September. The finished goods prices index rose slightly to 10.8 in September, compared with its previous reading of 7.2. Nearly 20 percent of factories reported increases in finished goods prices in September.
The Dallas Fed conducts the Texas Manufacturing Outlook Survey monthly to obtain a timely assessment of the state’s factory activity. Data for the latest survey were collected between September 11 and 19. 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 may 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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