Texas factory activity held steady in January, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, came in at zero, suggesting output was unchanged from December. Other measures of current activity signaled continued growth in manufacturing, albeit at a slower pace.

The capacity utilization and shipments indexes fell but remained in positive territory. The new orders index improved, edging up from 11 to 13, with 30 percent of manufacturers reporting increased order volumes.

Indexes reflecting general business conditions fell but remained positive for the fourth month in a row. The general business activity index decreased from 16 to 11, and the company outlook index moved down from 17 to 13. Eighty-eight percent of respondents said business activity was unchanged or improved from the prior month.

Labor market indicators continued to reflect expansion, although increases in employment and hours worked abated. The employment index came in at a reading of 9, with 21 percent of firms reporting hiring compared with 12 percent reporting layoffs. The hours worked index fell from 14 to 4, while the wages and benefits index rose.

Prices climbed again in January. The raw materials price index jumped from 43 to 62, reaching its highest level since mid-2008. The share of manufacturers who saw an increase in input costs surged to 64 percent, compared with only 2 percent who saw a decrease. Finished goods prices rose for the third month in a row, although the great majority of respondents continued to note no change. Sixty percent of respondents anticipate further increases in raw materials prices over the next six months, while 40 percent expect higher finished goods prices.

Although several of the current activity indexes fell from December levels, all future activity indexes rose this month. The future indexes for production and shipments moved up to their highest levels in four years. The future new orders index reached its highest level since 2005, with 56 percent of manufacturers expecting an increase in order volumes over the next six months. The future general business activity index advanced to a six-year high of 39, and the future company outlook index rose to 41.

The Dallas Fed conducts the Texas Manufacturing Outlook Survey monthly to obtain a timely assessment of the state’s factory activity. Data were collected January 18–26, and 97 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 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 of firms 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.

Next release:  February 28, 2011

January 31, 2011

Business Indicators Relating to Facilities and Products in Texas Current (versus previous month)

Indicator Jan Index Dec Index Change Indicator Direction* Trend** (months) % Reporting Increase % Reporting No Change % Reporting Decrease Production 0.2 15.3 -15.1 Increasing 15 23.5 53.1 23.3 Capacity Utilization 4.1 18.8 -14.7 Increasing 5 24.2 55.7 20.1 New Orders 12.7 11.3 +1.4 Increasing 3 30.3 52.1 17.6 Growth Rate of Orders 8.3 5.0 +3.3 Increasing 3 23.0 62.3 14.7 Unfilled Orders -3.1 -2.2 -0.9 Decreasing 8 11.3 74.3 14.4 Shipments 4.6 16.0 -11.4 Increasing 3 26.2 52.2 21.6 Delivery Time -4.1 -2.1 -2.0 Decreasing 8 6.3 83.3 10.4 Materials Inventories -1.0 -0.7 -0.3 Decreasing 10 16.8 65.4 17.8 Finished Goods Inventories -8.3 -1.1 -7.2 Decreasing 4 12.5 66.7 20.8 Prices Paid for Raw Materials 61.6 42.6 +19.0 Increasing 18 63.7 34.2 2.1 Prices Received for Finished Goods 19.4 11.9 +7.5 Increasing 3 23.7 72.0 4.3 Wages and Benefits 14.6 9.5 +5.1 Increasing 14 15.6 83.3 1.0 Employment 9.3 16.1 -6.8 Increasing 3 21.2 66.8 11.9 Hours Worked 3.6 14.3 -10.7 Increasing 3 18.4 66.7 14.8 Capital Expenditures 1.0 4.2 -3.2 Increasing 3 11.3 78.4 10.3

General Business Conditions Current (versus previous month)

Indicator Jan Index Dec Index Change Indicator Direction* Trend** (months) % Reporting Improved % Reporting No Change % Reporting Worsened Company Outlook 13.0 17.1 -4.1 Improving 4 23.0 66.9 10.0 General Business Activity 10.9 15.8 -4.9 Improving 4 23.3 64.3 12.4

Business Indicators Relating to Facilities and Products in Texas Future (six months ahead)

Indicator Jan Index Dec Index Change Indicator Direction* Trend** (months) % Reporting Increase % Reporting No Change % Reporting Decrease Production 54.9 47.7 +7.2 Increasing 23 57.5 39.9 2.6 Capacity Utilization 52.5 48.0 +4.5 Increasing 23 54.7 43.1 2.2 New Orders 53.7 47.4 +6.3 Increasing 23 56.2 41.4 2.5 Growth Rate of Orders 42.6 42.0 +0.6 Increasing 23 46.6 49.4 4.0 Unfilled Orders 15.6 14.9 +0.7 Increasing 6 21.9 71.9 6.3 Shipments 53.1 50.5 +2.6 Increasing 23 57.3 38.5 4.2 Delivery Time 0.0 3.2 -3.2 Unchanged 1 9.4 81.3 9.4 Materials Inventories 11.5 28.8 -17.3 Increasing 4 21.9 67.7 10.4 Finished Goods Inventories 5.2 22.3 -17.1 Increasing 3 18.9 67.4 13.7 Prices Paid for Raw Materials 56.2 46.2 +10.0 Increasing 22 60.4 35.4 4.2 Prices Received for Finished Goods 34.4 28.7 +5.7 Increasing 6 39.6 55.2 5.2 Wages and Benefits 31.3 34.5 -3.2 Increasing 80 32.5 66.3 1.2 Employment 38.6 36.2 +2.4 Increasing 17 41.7 55.2 3.1 Hours Worked 28.1 22.3 +5.8 Increasing 23 30.2 67.7 2.1 Capital Expenditures 20.9 23.4 -2.5 Increasing 14 24.0 72.9 3.1

General Business Conditions Future (six months ahead)

Indicator Jan Index Dec Index Change Indicator Direction* Trend** (months) % Reporting Improved % Reporting No Change % Reporting Worsened Company Outlook 40.7 38.5 +2.2 Improving 20 43.9 53.0 3.2 General Business Activity 39.1 35.0 +4.1 Improving 5 42.1 54.9 3.0

*Indicator direction refers to this month's index. If index is positive (negative), indicator is increasing (decreasing) or improving (worsening). If zero, indicator is unchanged.
**Number of months moving in current direction.
Data have been seasonally adjusted as necessary.

January 31, 2011

Downloadable chart: Low-res (72 dpi)

January 31, 2011

Comments from Survey Respondents

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

Chemical Manufacturing
We just ended a record year, and thus far we are surpassing last year’s numbers for revenue and bookings.

The last half of December is usually quiet for us as our customers concentrate on inventory control for property tax purposes. January has actually come back weaker than what we normally would have expected. We think we will see an uptick in business in the second quarter when the weather warms and optimism and confidence in the economy strengthen.

Plastics and Rubber Products Manufacturing
Uncertainty regarding tax and health care costs has led us to add people cautiously and more aggressively invest in automation and productivity projects.

Nonmetallic Mineral Product Manufacturing
Modest economic improvement is expected in the second half of the year, which we believe will translate into slightly higher demand for our products.

Primary Metal Manufacturing
We are now heading into our third month of increased activity. Raw materials have increased, causing some of the growth in demand as customers are getting ahead of price increases. It appears real demand is picking up in Texas. Because it looks like federal and state spending may level out or decrease over the next year or two due to debt and budget cuts, we need private industry demand to take up the slack and propel us to more steady and stable growth in the economy.

Fabricated Metal Product Manufacturing
We are cautiously optimistic about increased activity. We are overwhelmed with requests for quotations. However, margins are still very compressed, even though we are experiencing significant increases in steel prices. Another increase in steel prices is likely in February, which will follow increases in two of the last three months. We are still experiencing a great deal of push back from our bank when we have asked them to relax terms and conditions in order to expand our business model and fund new money for purchasing materials.

Machinery Manufacturing
We are cautiously optimistic. We have seen some modest market improvement, and we expect more throughout the year. We feel like the general economy will also continue to improve modestly.

Orders for new equipment since mid-November have been very slow with just a slight increase since the beginning of 2011.

Food Manufacturing
We are being hurt by very high prices for dairy ingredients, sugar and diesel.

Paper Manufacturing
We are in a traditionally slow period, but our outlook is positive for 2011. We are seeing a bit more order activity this year over last year.

We are off to a slow start in 2011; however, we are still optimistic about growing our business in coming months.

Historical Data

Historical data can be downloaded dating back to June 2004.

Indexes

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Seasonally adjusted

All Data

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