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Texas Manufacturing Outlook Survey


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October 29, 2012

Texas Manufacturing Activity Expands but at a Slower Pace

What's New This Month

For this month's survey, manufacturers were asked supplemental questions on credit availability. Read Special Questions.

Texas factory activity increased in October, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, dipped from 10 to 7.9, indicating slightly slower growth.

Most other measures of current manufacturing activity also suggested growth in October, although new orders declined. The capacity utilization index edged up from 9.3 to 11.4, with more than one-quarter of manufacturers noting an increase. The shipments index held steady at 4.7, suggesting shipments rose at about the same pace as in September. The new orders index fell from 5.3 to –4.5, reaching its lowest level this year and indicating a decrease in demand.

Perceptions of general business conditions improved slightly in October. The general business activity index rose to 1.8, registering its first positive reading since June. The company outlook index was positive for the sixth month in a row and remained unchanged at 2.4.

Labor market indicators reflected slow but steady labor demand growth and shrinking workweeks. The employment index was 5.2 in October, largely unchanged from last month but well below the higher levels seen earlier in the year. About 15 percent of firms reported hiring new workers, while 10 percent reported layoffs. The hours worked index fell back into negative territory with a reading of –5.9, down from 2.8 in September.

Prices and wages increased in October. The raw materials price index reached its highest level since May 2011; it jumped 13 points to 35.6, indicating a sharp rise in input costs. After seven months of negative readings, the finished goods price index rose to 4.2, suggesting selling prices rose. The wages and benefits index decreased from 15.4 to 11, although the great majority of manufacturers continued to note no change in compensation costs. Looking ahead, 40 percent of respondents anticipate further increases in raw materials prices over the next six months, while 29 percent expect higher finished goods prices.

Expectations regarding future business conditions were more optimistic in October. The index of future general business activity jumped from 5.5 to 16.8. The index of future company outlook also rose sharply from 9.2 to 20.9. With the exception of new orders, indexes for future manufacturing activity were stronger than in September.

The Dallas Fed conducts the Texas Manufacturing Outlook Survey monthly to obtain a timely assessment of the state’s factory activity. Data were collected Oct. 16–24, and 101 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. Data have been seasonally adjusted as necessary.

Next release: November 26, 2012

October 29, 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 Oct
Index
Sep
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Increase
%
Reporting
No Change
%
Reporting
Decrease
Production
7.9
10.0
-2.1
Increasing
11
28.1
51.7
20.2
Capacity Utilization
11.4
9.3
+2.1
Increasing
11
26.8
57.8
15.4
New Orders
-4.5
5.3
-9.8
Decreasing
1
22.4
50.7
26.9
Growth Rate of Orders
-13.5
-0.4
-13.1
Decreasing
4
15.0
56.5
28.5
Unfilled Orders
-16.5
-6.9
-9.6
Decreasing
4
10.8
61.9
27.3
Shipments
4.7
4.5
+0.2
Increasing
2
28.3
48.2
23.6
Delivery Time
-11.9
-8.2
-3.7
Decreasing
3
7.9
72.3
19.8
Materials Inventories
-6.8
0.2
-7.0
Decreasing
1
20.6
52.0
27.4
Finished Goods Inventories
-8.9
-3.1
-5.8
Decreasing
2
11.9
67.3
20.8
Prices Paid for Raw Materials
35.6
22.5
+13.1
Increasing
39
42.2
51.2
6.6
Prices Received for Finished Goods
4.2
-1.3
+5.5
Increasing
1
17.5
69.2
13.3
Wages and Benefits
11.0
15.4
-4.4
Increasing
35
12.8
85.4
1.8
Employment
5.2
5.9
-0.7
Increasing
24
15.1
75.0
9.9
Hours Worked
-5.9
2.8
-8.7
Decreasing
1
13.1
67.9
19.0
Capital Expenditures
9.9
8.6
+1.3
Increasing
3
17.9
74.1
8.0
General Business Conditions
Current (versus previous month)
Indicator Oct
Index
Sep
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Improved
%
Reporting
No Change
%
Reporting
Worsened
2.4
2.4
0.0
Improving
6
19.1
64.2
16.7
1.8
-0.9
+2.7
Improving
1
22.6
56.6
20.8
Business Indicators Relating to Facilities and Products in Texas
Future (six months ahead)
Indicator Oct
Index
Sep
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Increase
%
Reporting
No Change
%
Reporting
Decrease
Production
30.3
26.4
+3.9
Increasing
44
41.4
47.5
11.1
Capacity Utilization
30.4
24.5
+5.9
Increasing
44
40.6
49.1
10.2
New Orders
24.8
25.3
-0.5
Increasing
44
37.1
50.6
12.3
Growth Rate of Orders
17.0
4.2
+12.8
Increasing
44
31.2
54.6
14.2
Unfilled Orders
0.0
-6.5
+6.5
Unchanged
1
10.3
79.4
10.3
Shipments
32.4
26.9
+5.5
Increasing
44
43.5
45.3
11.1
Delivery Time
-2.0
-5.4
+3.4
Decreasing
7
8.2
81.6
10.2
Materials Inventories
10.2
-1.1
+11.3
Increasing
1
26.5
57.1
16.3
Finished Goods Inventories
0.0
-6.5
+6.5
Unchanged
1
15.5
69.1
15.5
Prices Paid for Raw Materials
37.1
47.3
-10.2
Increasing
43
40.2
56.7
3.1
Prices Received for Finished Goods
18.4
21.7
-3.3
Increasing
4
28.6
61.2
10.2
Wages and Benefits
33.8
34.4
-0.6
Increasing
101
35.3
63.2
1.5
Employment
21.4
15.1
+6.3
Increasing
38
30.6
60.2
9.2
Hours Worked
9.7
0.2
+9.5
Increasing
43
16.7
76.3
7.0
Capital Expenditures
21.7
20.6
+1.1
Increasing
35
32.0
57.7
10.3
General Business Conditions
Future (six months ahead)
Indicator Oct
Index
Sep
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Improved
%
Reporting
No Change
%
Reporting
Worsened
20.9
9.2
+11.7
Improving
42
32.5
55.9
11.6
16.8
5.5
+11.3
Improving
2
31.9
53.0
15.1

*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.

October 29, 2012

Current and future production

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

October 29, 2012

Comments from Survey Respondents

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

Food Manufacturing

  • Expansion plans have been on hold for three years. Hopefully after the election these plans can be implemented.
  • Commodity price increases have hurt us. It's difficult to plan when there is so much uncertainty.
  • The price of raw goods will lower the volume of output and the need for employees in the future. We are expecting large increases in the price of raw milk. As the price of corn goes up, everything else follows.

Paper Manufacturing

  • Business has improved, partly due to the cyclicality of our business. Our continued push in the sales department is expected to pay off in six months. The environment we live in has not improved.

Chemical Manufacturing

  • Business is pretty flat. We are not seeing anyone doing anything to increase production.
  • We are starting to see a falloff in new orders. It is hard to tell at this time whether it is a temporary situation, but we will be monitoring it over the next month. The backlog is still higher than it was in the spring.

Plastics and Rubber Products Manufacturing

  • We think there are two factors affecting our volume of sales. First, we have a seasonal reduction with several of our large customers from August to November. Second, we strongly feel the uncertainty of the election outcome has small businesses and their customers holding their breath.

Primary Metal Manufacturing

  • Our order rate has drastically reduced. Most of our customers have a very uncertain outlook on the economy. It seems that during the past eight weeks our orders have consistently decreased at least 20 percent.

Fabricated Metal Product Manufacturing

  • We are desperate for skilled machinists who will show up for work and have the technical skills to complete the necessary tasks. We continue to be optimistic about the overall economy and the manufacturing segment specifically. We could increase our sales if we had additional qualified employees.
  • The refinery market is doing well both domestically and internationally.
  • The level of uncertainty is largely driven by the concerns of our customers, who are predominantly Subchapter S corporations and limited liability companies, regarding tax increases and the current administration’s actions through the Environmental Protection Agency, National Labor Relations Board, Department of Justice, etc.

Machinery Manufacturing

  • We are seeing some tightening in our labor markets (mechanical maintenance/construction). We expect that to continue. Generally, demand in our business segments remains steady.
  • Current activity is slightly stronger than our normal seasonal increase. Our outlook for next year is negative, primarily due to the crippling effect that the implementation of health care reform will have on our customer base. Increased costs from health care reform will severely restrict our customers from expanding or replacing capital equipment for 12–24 months until costs and pricing can be brought into balance.

Computer and Electronic Product Manufacturing

  • Our new orders slowed significantly in September to the lowest level in the past year, and October so far is on track to be even lower. Third quarter revenues came in significantly below normal seasonal levels, with broad weakness across all major product lines and geographies. Fourth quarter revenue estimates point to another quarter significantly below normal seasonal levels, down 8 percent versus flat sequentially. In response, factory starts and utilization have been brought down again to keep inventories aligned with demand. In addition, capital expenditure has been lowered for the year, and normal expense controls continue to be tightened. On the positive side, we believe customers’ and distributors’ inventories continue to remain lean. We believe the weakness in our revenue is a reflection of slowing end demand, not inventory adjustments by our customers or distributors. As an indication, our revenue in the third quarter came in slightly above our expectation. Although weak at an absolute level, this demonstrates that customers continue to pull product for their manufacturing lines; therefore, indicating inventory of our product continues to remain lean. We believe this will continue to result in any changes in end demand being reflected in our orders and shipments quickly.

Transportation Equipment Manufacturing

  • It is hard to predict future business due to election uncertainty.

Furniture and Related Product Manufacturing

  • Our outlook depends upon the small steady growth of housing starts, along with oil prices remaining somewhat constant.

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 Laila Assanie at laila.assanie@dal.frb.org.

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