Note
Beginning with the August 2009 release, the Dallas Fed will be reporting its Texas Manufacturing Outlook Survey on a seasonally adjusted basis. The change enhances the survey’s value by making it easier to discern underlying economic trends. Read more» |
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August 31, 2009
Declines in Texas Factory Activity Continue to Moderate, Six-Month Outlook Positive
Results of the Texas Manufacturing Outlook Survey suggest that factory activity continued to contract at a slower pace in August.
The production index dipped slightly. Indexes for capacity utilization, new orders and growth rate of orders ticked upward, but they remained negative. For the most part, the changes reflect fewer companies seeing declines in these measures.
The August survey echoes the broad signal from the previous five months that Texas factory output and employment is still receding but at a slower pace. The signal for a recovery will be positive readings in key current indexes.
Although still negative, the business activity index saw significant improvement as the share of companies reporting better market conditions rose and the share reporting weaker conditions declined from July to August. The company outlook index also strengthened, recovering ground lost since May 2008.
The indexes for employment and average work week were negative but ticked upward in August, as a larger share of manufacturers than last month reported increases in these measures. Wage pressures were nonexistent, with 88 percent of producers noting no changes in compensation.
Manufacturers continued to draw down inventories. The index for materials inventories plunged to its lowest reading in five months, and 30 percent of manufacturers noted declines in their finished goods inventories.
Price pressures were mixed. The index for finished goods prices remained negative, and producers receiving lower prices for their products outstripped those receiving higher prices by 8-to-1. In contrast, the raw materials price index turned positive for the first time in 11 months, and producers paying higher prices for raw materials outnumbered those paying lower prices by nearly 2-to-1. Expectations for future raw material price increases were elevated as well, and the six-month raw materials price index rose to its highest reading since last September.
Most indexes of future activity were positive and rose in August, suggesting more manufacturers now expect better conditions over the next six months. The future general business activity index climbed to its highest reading since May 2007. The share of firms foreseeing an improvement in their firm’s six-month outlook exceeded those expecting deterioration by more than 2-to-1. Forty-seven percent of manufacturing executives expect increases in production, capacity utilization and new orders six months from now.
The Dallas Fed conducts the Texas Manufacturing Outlook Survey monthly to obtain a timely assessment of the state’s factory activity. Data were collected August 18-26, and 99 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. Where appropriate, the indexes are seasonally adjusted.
Next release: Sept. 28, 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.
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