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Texas Manufacturing Outlook Survey


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March 26, 2012

Texas Manufacturing Expansion Continues

What's New This Month

For this month's survey, manufacturers were asked supplemental questions on hiring plans. More than half of respondents expect their firm to increase employment over the next six to twelve months. Read Special Questions.

Texas factory activity continued to increase in March, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, held steady at 11.1, suggesting growth continued at about the same pace as last month.

Most other measures of current manufacturing conditions also indicated continued expansion in March, although new orders stagnated. The shipments index rose from 4.2 to 8.6, with more than a quarter of manufacturers noting an increase in shipment volumes. Capacity utilization increased further in March; the index edged up from 10 to 12.3. The new orders index meanwhile fell from 5.8 in February to zero this month, suggesting demand stalled.

Perceptions of broader economic conditions remained positive in March. The general business activity index was positive for the third month in a row, although it fell from 17.8 to 10.8. Twenty-three percent of firms noted improvement in the level of business activity, while 12 percent noted a worsening. The company outlook index posted a sixth consecutive positive reading, but it also retreated slightly, falling to 9.5 from 15.8 last month.

Labor market indicators reflected higher labor demand. Strong employment growth continued in March, although the index edged down from 25.2 to 21.7. Twenty-nine percent of firms reported hiring new workers, while 7 percent reported layoffs. The hours worked index continued to suggest average workweeks lengthened.

Input prices and wages continued to increase in March, while selling prices reversed course and declined slightly. The raw materials price index was 27.7, marginally higher than in February. The March wages and benefits index edged up to 21, its highest reading since mid-2008. In contrast, the finished goods price index dropped to -1.3 in March after two months of sharp increases. The lower index was largely due to a marked decline in the share of manufacturers noting price increases. Looking ahead, 57 percent of respondents anticipate further increases in raw materials prices over the next six months, while 35 percent expect higher finished goods prices.

Expectations regarding future business conditions were more optimistic in March. The index of future general business activity has been positive for six months and rose from 15.9 to 19.1 this month. The index of future company outlook came in at 26.2, up slightly from 24.2 in February. Other indexes for future manufacturing activity also increased.

The Dallas Fed conducts the Texas Manufacturing Outlook Survey monthly to obtain a timely assessment of the state’s factory activity. Data were collected Mar. 13–21, and 88 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 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: April 30, 2012

March 26, 2012
 

Click on links in the table for greater details. Historical data are available from June 2004 to the most current release month.

Business Indicators Relating to Facilities and Products in Texas
Current (versus previous month)
Indicator Mar
Index
Feb
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Increase
%
Reporting
No Change
%
Reporting
Decrease
Production
11.1
11.2
-0.1
Increasing
4
25.7
59.7
14.6
Capacity Utilization
12.3
10.0
+2.3
Increasing
4
25.6
61.1
13.3
New Orders
-0.3
5.8
-6.1
Decreasing
1
21.2
57.3
21.5
Growth Rate of Orders
-0.8
6.6
-7.4
Decreasing
1
18.8
61.6
19.6
Unfilled Orders
0.3
-12.7
+13.0
Increasing
1
16.0
68.3
15.7
Shipments
8.6
4.2
+4.4
Increasing
3
26.2
56.2
17.6
Delivery Time
6.8
3.6
+3.2
Increasing
3
12.5
81.8
5.7
Materials Inventories
-0.3
2.0
-2.3
Decreasing
1
17.6
64.5
17.9
Finished Goods Inventories
-8.0
-5.8
-2.2
Decreasing
2
13.6
64.8
21.6
Prices Paid for Raw Materials
27.7
25.2
+2.5
Increasing
32
31.6
64.5
3.9
Prices Received for Finished Goods
-1.3
16.2
-17.5
Decreasing
1
6.7
85.3
8.0
Wages and Benefits
21.0
18.4
+2.6
Increasing
28
22.0
77.0
1.0
Employment
21.7
25.2
-3.5
Increasing
17
29.0
63.7
7.3
Hours Worked
2.9
7.1
-4.2
Increasing
7
13.5
75.9
10.6
Capital Expenditures
6.3
12.1
-5.8
Increasing
6
14.5
77.3
8.2
General Business Conditions
Current (versus previous month)
Indicator Mar
Index
Feb
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Improved
%
Reporting
No Change
%
Reporting
Worsened
9.5
15.8
-6.3
Improving
6
22.8
63.9
13.3
10.8
17.8
-7.0
Improving
3
23.0
64.8
12.2
Business Indicators Relating to Facilities and Products in Texas
Future (six months ahead)
Indicator Mar
Index
Feb
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Increase
%
Reporting
No Change
%
Reporting
Decrease
Production
44.0
40.8
+3.2
Increasing
37
48.9
46.2
4.9
Capacity Utilization
41.8
39.1
+2.7
Increasing
37
47.5
46.7
5.7
New Orders
44.0
37.0
+7.0
Increasing
37
50.4
43.2
6.4
Growth Rate of Orders
37.2
32.1
+5.1
Increasing
37
41.6
54.0
4.4
Unfilled Orders
15.1
10.9
+4.2
Increasing
9
22.1
70.9
7.0
Shipments
42.8
42.8
0.0
Increasing
37
48.8
45.2
6.0
Delivery Time
1.2
-1.2
+2.4
Increasing
1
7.0
87.2
5.8
Materials Inventories
11.8
3.7
+8.1
Increasing
5
22.4
67.1
10.6
Finished Goods Inventories
7.0
1.3
+5.7
Increasing
3
16.3
74.4
9.3
Prices Paid for Raw Materials
55.8
45.8
+10.0
Increasing
36
57.0
41.9
1.2
Prices Received for Finished Goods
29.1
22.9
+6.2
Increasing
20
34.9
59.3
5.8
Wages and Benefits
40.3
39.9
+0.4
Increasing
94
40.3
59.7
0.0
Employment
36.9
32.9
+4.0
Increasing
31
40.5
56.0
3.6
Hours Worked
9.6
10.0
-0.4
Increasing
36
17.6
74.4
8.0
Capital Expenditures
25.6
30.5
-4.9
Increasing
28
32.6
60.5
7.0
General Business Conditions
Future (six months ahead)
Indicator Mar
Index
Feb
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Improved
%
Reporting
No Change
%
Reporting
Worsened
26.2
24.2
+2.0
Improving
35
34.6
57.0
8.4
19.1
15.9
+3.2
Improving
6
27.6
63.9
8.5

*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.

March 26, 2012

Current and future production

Downloadable chart: Low-res (72 dpi) | Hi-res (300 dpi)

March 26, 2012

Comments from Survey Respondents

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

Fabricated Metal Product Manufacturing
We have seen a modest improvement in our overall nonresidential markets, led by industrial manufacturing and energy-related projects.

In general, people feel more secure. Manufacturing opportunities continue to improve for U.S. companies. Challenges in finding skilled workers, high employment taxes and medical insurance affect competitiveness and limit small- to mid-size company growth.

Pricing for new work remains very competitive, with little or less margin on newly awarded contracts. Requests for quotations are still plentiful, indicating increased activity. However, some desired work is being awarded to competitors at amounts below profitable levels for our company. We are experiencing difficulty adding new workers at all skill levels.

Machinery Manufacturing
Demand in our line of business (maintenance services for downstream/midstream energy facilities) remains fairly strong. We expect active turnaround seasons both this spring and next fall. Regarding the general economy, we are confused by conflicting data. The employment data look good, but how is that sustainable with low GDP growth? We are maintaining a cautious overall market outlook.

Higher gasoline and diesel prices will increase cost of service crews, salesmen travel and freight of raw material and finished goods. These fuel costs will reduce profits. Higher gas prices effectively reduce all of our associates’ take-home pay. This is not good for associates' spirits and morale when they are working more and seeing less disposable income.

The agricultural machinery business is very good. We are currently increasing our manufacturing capacity to try to meet demand.

Business activity continues to grow slowly; however, rising gas prices may again stall retail spending.

Chemical Manufacturing
We feel like the level of business activity, which appeared to be picking up in the latter half of 2011, is softening some and has lost momentum. It could be that higher oil prices are tempering enthusiasm and clouding the future outlook.

If our customers are correct, we are in for a very strong year.

Plastics and Rubber Products Manufacturing
We are encouraged by the number of companies who are bringing molding back from China to the U.S. There appears to be a growing desire to have more products manufactured in the U.S.

Nonmetallic Mineral Product Manufacturing
We are seeing some modest improvement in business levels, which appear to be seasonal in nature. Mild weather conditions appear to have helped business levels in both February and early March. We are guarded in our expectations, although we are more positive than in recent months. Concern for the impact of oil prices on raw material and delivery costs weighs on our margin expectations, as demand has not improved enough to provide any pricing leverage.

Computer and Electronic Product Manufacturing
The first quarter of 2012 has been disappointing relative to volume of new orders. Our outlook for the third quarter and beyond appears to be a bit brighter.

Food Manufacturing
A very short supply of cattle is limiting our supply.

The cost of diesel shows up in everything we buy.

Historical Data

Historical data can be downloaded dating back to June 2004.

Indexes

Download indexes for all indicators. For the definitions of all variables, see Data Definitions.

Unadjusted excel
Seasonally adjusted excel

All Data

Download indexes and components of the indexes (percentage of respondents reporting increase, decrease, or no change). For the definitions of all variables, see Data Definitions.

Unadjusted excel
Seasonally adjusted excel

Questions regarding the Texas Manufacturing Outlook Survey can be addressed to Emily Kerr at emily.kerr@dal.frb.org.

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