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March 30 , 2009
Texas’ Factory Activity
Remains Weak but Outlook Turns Up Slightly
Texas’ factory activity
continued to contract in March, according to firms
responding to the Texas Manufacturing Outlook Survey.
Indexes for production, capacity
utilization, new
orders and shipments
ticked upward but remained overwhelmingly negative,
with more than 80 percent of respondents reporting
no change or declines in these measures.
The business
activity index, the survey’s broadest
measure of state manufacturing trends, revealed widespread
downbeat sentiment. Fifty-three percent of responding
manufacturing executives reported worsening market
conditions, and 43 percent indicated no improvement
from the prior month. Several
indicators of future activity suggest that the
region’s manufacturers expect declines in
factory activity to ease over the next six months.
Indexes for future production, capacity
utilization,
shipments, new
orders and growth rate
of orders improved
modestly for the fourth consecutive month, and 40 percent
of manufacturing executives foresee increases in production
six months from now. Consistent with shrinking domestic demand and ebbing
overseas sales, manufacturers continued to draw down
inventories. The index for materials
inventories plunged
to its lowest reading since the start of the survey
in 2004, and 30 percent of manufacturers noted declines
in their finished goods inventories. Manufacturers’ demand
for labor remained weak. More than half of surveyed
firms reported job cuts, and the average
workweek index plummeted. The sluggish demand kept wage
pressures subdued, with 82 percent of respondents
noting no changes in wages
and benefits.
Manufacturers
continued to report downward prices pressures.
Fifty percent noted falling input prices, and
34 percent cited lower prices for their goods.
Firms’ expectations for future price increases
were subdued as well. The index for raw
materials prices over the next six months remained negative, and manufacturers
expecting declines in finished
goods prices outnumbered
those foreseeing increases by more than three-to-one. 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 Mar. 17–25, and 103 Texas
manufacturers responded to the survey. 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 question. Each index
is calculated by subtracting the percentage reporting
a decrease from the percentage reporting an increase.
When all firms report that activity has increased,
an index will register 100. An index will register –100
when all firms report a decrease. An index will be
zero when the number of firms reporting an increase
or decrease is equal. Next release: April 27, 2009
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 Laila Assanie at laila.assanie@dal.frb.org.
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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