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Texas Manufacturing Outlook Survey


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August 25, 2014

Texas Manufacturing Expands but at a Slower Pace

What's New This Month

For this month's survey, manufacturers were asked supplemental questions on health care costs and the impact of the Affordable Care Act. Read Special Questions.

Texas factory activity increased again in August, albeit at a slower pace than in recent months, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, fell from 19.1 to 6.8, indicating output growth slowed from July.

Other measures of current manufacturing activity also reflected notably slower growth in August. The new orders index fell 11 points to 2.2 after surging in July. The capacity utilization index also posted a sharp decline, moving down from 18 to 3.6. The shipments index experienced the largest fall, from 22.8 to 6.4, reaching its lowest reading in eight months.

Perceptions of broader business conditions were less optimistic this month. The general business activity index remained positive but fell to a five-month low of 7.1. The company outlook index fell from 11.3 to 1.5, due to a smaller share of firms noting an improved outlook in August than in July.

Labor market indicators reflected continued employment growth and longer workweeks. The August employment index posted a third robust reading, holding steady at 11.1. Twenty-one percent of firms reported net hiring compared with 10 percent reporting net layoffs. The hours worked index slipped from 6.3 to 2.9, indicating a smaller rise in hours worked than last month.

Upward pressure on input prices continued at about the same pace in August as in July, while pressure increased for selling prices and wages. The raw materials price index held fairly steady at 26.4. The finished goods price index edged up from 7.3 to 9.1, reaching its highest level in six months. The wages and benefits index rose 5 points to 23.7, also posting a six-month high.

Expectations regarding future business conditions remained optimistic in August. The index of future general business activity inched down 1 point to 18.7, while the index of future company outlook rose 6 points to 30.1. Indexes for future manufacturing activity showed mixed movements in August but remained in solidly 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 Aug. 12–20, and 113 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: September 29, 2014

August 25, 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 Aug
Index
Jul
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Increase
%
Reporting
No Change
%
Reporting
Decrease
Production
6.8
19.1
-12.3
Increasing
16
26.0
54.8
19.2
Capacity Utilization
3.6
18.0
-14.4
Increasing
21
21.7
60.2
18.1
New Orders
2.2
13.0
-10.8
Increasing
16
23.7
54.8
21.5
Growth Rate of Orders
-9.6
15.2
-24.8
Decreasing
1
10.4
69.6
20.0
Unfilled Orders
3.8
3.6
+0.2
Increasing
3
16.5
70.8
12.7
Shipments
6.4
22.8
-16.4
Increasing
16
30.7
45.0
24.3
Delivery Time
4.8
3.3
+1.5
Increasing
3
11.0
82.8
6.2
Materials Inventories
0.0
-1.1
+1.1
Unchanged
1
18.0
64.0
18.0
Finished Goods Inventories
-6.2
-7.0
+0.8
Decreasing
2
11.5
70.8
17.7
Prices Paid for Raw Materials
26.4
25.4
+1.0
Increasing
61
28.5
69.4
2.1
Prices Received for Finished Goods
9.1
7.3
+1.8
Increasing
13
16.4
76.3
7.3
Wages and Benefits
23.7
18.8
+4.9
Increasing
61
24.6
74.5
0.9
Employment
11.1
11.4
-0.3
Increasing
15
20.7
69.7
9.6
Hours Worked
2.9
6.3
-3.4
Increasing
8
16.0
70.9
13.1
Capital Expenditures
6.6
13.3
-6.7
Increasing
35
15.2
76.2
8.6
General Business Conditions
Current (versus previous month)
Indicator Aug
Index
Jul
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Improved
%
Reporting
No Change
%
Reporting
Worsened
1.5
11.3
-9.8
Improving
15
13.3
74.9
11.8
7.1
12.7
-5.6
Improving
15
17.0
73.1
9.9
Business Indicators Relating to Facilities and Products in Texas
Future (six months ahead)
Indicator Aug
Index
Jul
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Increase
%
Reporting
No Change
%
Reporting
Decrease
Production
44.5
40.1
+4.4
Increasing
66
53.2
38.1
8.7
Capacity Utilization
39.8
40.2
-0.4
Increasing
66
49.4
41.0
9.6
New Orders
45.3
41.2
+4.1
Increasing
66
52.7
39.9
7.4
Growth Rate of Orders
30.0
32.0
-2.0
Increasing
66
39.0
52.0
9.0
Unfilled Orders
4.5
10.3
-5.8
Increasing
13
13.7
77.1
9.2
Shipments
44.6
43.8
+0.8
Increasing
66
51.1
42.4
6.5
Delivery Time
-1.6
2.1
-3.7
Decreasing
1
6.2
86.0
7.8
Materials Inventories
0.0
-3.7
+3.7
Unchanged
1
17.6
64.8
17.6
Finished Goods Inventories
-1.8
-1.8
0.0
Decreasing
4
13.9
70.4
15.7
Prices Paid for Raw Materials
43.5
34.2
+9.3
Increasing
65
45.4
52.8
1.9
Prices Received for Finished Goods
22.2
24.7
-2.5
Increasing
26
29.6
63.0
7.4
Wages and Benefits
43.8
46.0
-2.2
Increasing
123
43.8
56.2
0.0
Employment
24.1
20.4
+3.7
Increasing
60
32.4
59.3
8.3
Hours Worked
11.7
9.8
+1.9
Increasing
15
18.2
75.3
6.5
Capital Expenditures
16.3
14.8
+1.5
Increasing
57
26.9
62.5
10.6
General Business Conditions
Future (six months ahead)
Indicator Aug
Index
Jul
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Improved
%
Reporting
No Change
%
Reporting
Worsened
30.1
24.4
+5.7
Improving
65
33.1
63.9
3.0
18.7
19.8
-1.1
Improving
15
25.2
68.3
6.5

*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.

August 25, 2014

Current and future production

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

August 25, 2014

Comments from Survey Respondents

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

Primary Metal Manufacturing

  • We continue to see strong indicators in the energy sector. Lead times are again being pushed out two weeks on all casting lines dues to a heavy backlog and material inventory in process.

Fabricated Metal Manufacturing

  • Capital expenditure in the Gulf Coast remains high, but most of the equipment is being purchased offshore.
  • Quoting remains consistent with no orders being placed. Orders have not been lost to competitors; customers are just not cutting any orders.
  • We are currently experiencing mid-single-digit growth in sales volumes. We expect that nonresidential new construction starts will continue to grow at a mid-single-digit pace over the next six months.

Machinery Manufacturing

  • We have problems with exportation to Brazil due to duties, tariffs and bureaucracy. We have requested assistance from the U.S. Commerce Department in the U.S. and Brazil. We were disappointed when we were referred to local brokers for assistance. We believe support of exporters should be a priority.
  • We are starting our seasonal peak, and it looks like a potential increase over the prior year.

Chemical Manufacturing

  • Expected growth over the next 12 months may be tempered by lower margins due to higher raw material costs and labor charges.
  • We have seen an increase in new business (products and volume). We are making capital improvements to handle the new business.

Computer and Electronic Product Manufacturing

  • We are seeing a slowdown in several industries of capital equipment manufacturing.
  • This is the first time we have seen strength carry into the second half since 2010. We have heard some reports of peer lead times starting to stretch, as well as some spot shortages. Distributor and customer inventories remain lean, and demand appears to be stable.

Food Manufacturing

  • Record-high prices for dairy products continue to compress our margins. We got some relief from lower diesel prices.

Wood Product Manufacturing

  • We are hoping the slowdown we are experiencing is simply a hot August slump.

Printing and Related Support Activities

  • We had record sales and shipments in July. We’ll come close in August but not to the level of July. Business for us typically ebbs lower in the fourth quarter and surges every January.
  • We see continued strong demand from our customers (consumer packaged goods producers). Vendors of goods and services indicate their business is strong, and prompt availability of contractors for construction activities has disappeared, extending lead times for capital project work. Availability of skilled/semiskilled labor has declined significantly over the last seven to eight months.

Miscellaneous Manufacturing

  • The increases we are seeing in our business are smaller than historical.

 

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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