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Texas Manufacturing Outlook Survey


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April 28, 2014

Texas Manufacturing Picks Up and Outlook Improves Notably

Texas factory activity increased for the 12th month in a row in April, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, rose from 17.1 to 24.7, reaching its highest level in four years and indicating stronger output growth.

Some other measures of current manufacturing activity also reflected more robust growth. The new orders index posted a four-year high, rising to 21.3. The capacity utilization index rose to a multiyear high as well, climbing from 13.1 to 18.7, with a third of manufacturers noting an increase. The shipments index fell 7 points to 12.4, indicating the volume of shipments grew but at a slower pace than in March.

Perceptions of broader business conditions were markedly more optimistic in April. The general business activity index rose for a second consecutive month, increasing from 4.9 to 11.7. The company outlook index jumped nearly 15 points to a four-year high of 23.4, reflecting a sharp rise in optimism among manufacturers.

Labor market indicators reflected stronger employment growth and longer workweeks. The April employment index rose to 19.7, its highest reading in more than two years. Twenty-eight percent of firms reported net hiring compared with 8 percent reporting net layoffs. The hours worked index spiked from 5.3 to 13.9, indicating a sizeable increase in workweek length.

Upward pressure on input prices eased somewhat in April, while pressure ticked up for selling prices and wages. The raw materials price index declined sharply from 23.1 to 10.2, reaching an 8-month low. Meanwhile, the finished goods price index edged up to a reading of 8. Looking ahead, 36 percent of respondents anticipate further increases in raw materials prices over the next six months, while 25 percent expect higher finished goods prices. The wages and benefits index increased slightly to 21.3. This index has been consistently elevated since December, suggesting strong upward pressure on compensation costs for five months.

Expectations regarding future business conditions remained optimistic in April. The index of future general business activity rose 7 points to 24.5, while the index of future company outlook was largely unchanged at 26.9. Indexes for future manufacturing activity pushed further into positive territory.

The Dallas Fed conducts the Texas Manufacturing Outlook Survey monthly to obtain a timely assessment of the state’s factory activity. Data were collected Apr. 15–23, and 109 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: May 27, 2014

April 28, 2014
 

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 Apr
Index
Mar
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Increase
%
Reporting
No Change
%
Reporting
Decrease
Production
24.7
17.1
+7.6
Increasing
12
40.7
43.3
16.0
Capacity Utilization
18.7
13.1
+5.6
Increasing
17
33.5
51.7
14.8
New Orders
21.3
14.7
+6.6
Increasing
12
36.5
48.3
15.2
Growth Rate of Orders
13.4
8.6
+4.8
Increasing
4
29.8
53.8
16.4
Unfilled Orders
3.1
0.9
+2.2
Increasing
3
17.2
68.8
14.1
Shipments
12.4
19.5
-7.1
Increasing
12
32.2
48.0
19.8
Delivery Time
3.2
1.7
+1.5
Increasing
3
14.9
73.4
11.7
Materials Inventories
10.2
9.6
+0.6
Increasing
6
26.3
57.6
16.1
Finished Goods Inventories
5.6
9.1
-3.5
Increasing
2
17.6
70.4
12.0
Prices Paid for Raw Materials
10.2
23.1
-12.9
Increasing
57
19.2
71.8
9.0
Prices Received for Finished Goods
8.0
7.3
+0.7
Increasing
9
14.6
78.8
6.6
Wages and Benefits
21.3
20.8
+0.5
Increasing
57
24.3
72.7
3.0
Employment
19.7
15.0
+4.7
Increasing
11
28.0
63.7
8.3
Hours Worked
13.9
5.3
+8.6
Increasing
4
22.6
68.7
8.7
Capital Expenditures
14.3
14.1
+0.2
Increasing
31
19.1
76.1
4.8
General Business Conditions
Current (versus previous month)
Indicator Apr
Index
Mar
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Improved
%
Reporting
No Change
%
Reporting
Worsened
23.4
9.1
+14.3
Improving
11
31.4
60.6
8.0
11.7
4.9
+6.8
Improving
11
24.7
62.3
13.0
Business Indicators Relating to Facilities and Products in Texas
Future (six months ahead)
Indicator Apr
Index
Mar
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Increase
%
Reporting
No Change
%
Reporting
Decrease
Production
47.1
46.4
+0.7
Increasing
62
52.4
42.3
5.3
Capacity Utilization
39.1
39.0
+0.1
Increasing
62
45.9
47.4
6.8
New Orders
43.9
42.1
+1.8
Increasing
62
51.1
41.7
7.2
Growth Rate of Orders
37.0
33.5
+3.5
Increasing
62
44.1
48.8
7.1
Unfilled Orders
5.9
8.1
-2.2
Increasing
9
16.5
72.9
10.6
Shipments
43.3
42.3
+1.0
Increasing
62
50.3
42.7
7.0
Delivery Time
-2.6
-0.1
-2.5
Decreasing
2
9.6
78.2
12.2
Materials Inventories
2.9
9.6
-6.7
Increasing
9
19.4
64.1
16.5
Finished Goods Inventories
1.0
-5.3
+6.3
Increasing
1
15.7
69.6
14.7
Prices Paid for Raw Materials
31.4
32.6
-1.2
Increasing
61
36.3
58.8
4.9
Prices Received for Finished Goods
21.2
28.4
-7.2
Increasing
22
25.0
71.2
3.8
Wages and Benefits
39.8
47.6
-7.8
Increasing
119
41.1
57.6
1.3
Employment
30.8
35.1
-4.3
Increasing
56
38.5
53.8
7.7
Hours Worked
10.3
8.8
+1.5
Increasing
11
20.0
70.3
9.7
Capital Expenditures
17.7
15.8
+1.9
Increasing
53
27.5
62.7
9.8
General Business Conditions
Future (six months ahead)
Indicator Apr
Index
Mar
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Improved
%
Reporting
No Change
%
Reporting
Worsened
26.9
27.4
-0.5
Improving
61
34.0
58.9
7.1
24.5
17.6
+6.9
Improving
11
33.6
57.3
9.1

*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.

April 28, 2014

Current and future production

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

April 28, 2014

Comments from Survey Respondents

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

Fabricated Metal Manufacturing

  • Wage pressure is getting very intense due to all the major capital projects starting in the Gulf Coast. Union contracts are resulting in 5 to 7 percent per year increases.
  • We believe that the politicization of economic decisions, such as whether to create the Keystone XL oil pipeline, undermines overall economic growth.
  • Our six-month view remains positive, but it is subject to negative revision if the winter slowness is not resolved with better weather.

Machinery Manufacturing

  • We expect our business to expand this fall with heavier than normal maintenance schedules and new construction activities related to the low-cost energy environment.

Computer and Electronic Product Manufacturing

  • We are starting to see a mild retraction or slowdown in the capital equipment manufacturing forecast for the second half of 2014.

Chemical Manufacturing

  • We are seeing more of our clients increase their inventories as a result of increased market activity compared with this time last year. We are also anticipating increased raw material pricing and payroll costs in the third quarter that will put downward pressure on profits.

Printing and Related Support Activities

  • We hope to increase production and improve our business by adding new services. We will be adding equipment and improving our current technology to better serve our customers’ needs.

Transportation Equipment Manufacturing

  • We continue to be fully booked through 2015 with a modest increase in overall business. The growth rate of new orders is requiring increasingly aggressive pricing actions due to foreign competitors pricing below traditional market prices.
  • Our largest distributor reported a year-over-year sales increase of 30 percent in March.

Food Manufacturing

  • We believe that increasing federal regulations will force all manufacturing overseas.
  • We are being hurt by record high dairy prices. We have announced a price increase effective June 1.
  • World affairs, such as the tension in Ukraine, have created some pressure on grains and other food products, and costs have climbed significantly in the past 30 days.

Beverage and Tobacco Product Manufacturing

  • First quarter sales were bad, down 6 percent year over year, with March being down 10 percent year over year. April is up 6 percent year over year, but we are still down 3.5 percent year to date. We have cut some employees and other costs, but profits are at a decade low.

Wood Product Manufacturing

  • Multifamily building is good but has very poor margins. Single-family building is in a confused state momentarily.

Miscellaneous Manufacturing

  • Our business faces a secular decline for commemorative scholastic products such as yearbooks and class rings.

 

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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