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Texas Manufacturing Outlook Survey


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October 27, 2014

Texas Manufacturing Activity Continues to Increase, Outlooks Improve

What's New This Month

For this month’s survey, Texas business executives were asked supplemental questions on credit availability. Results for these questions from the Texas Manufacturing Outlook Survey (TMOS), Texas Service Sector Outlook Survey (TSSOS) and Texas Retail Outlook Survey (TROS) have been released together. Read Special Questions results.

Texas factory activity increased again in October, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, fell from 17.6 to 13.7, indicating output grew but at a slightly slower pace than in September.

Other measures of current manufacturing activity also reflected continued growth in October. The new orders index rose notably from 7.5 to 14.2, reaching a six-month high. The capacity utilization index edged down to 18.1 and the shipments index slipped to 12.8, although still more than a quarter of firms noted increases in these measures over September levels.

Perceptions of broader business conditions remained optimistic this month and outlooks improved markedly. The general business activity index held steady at a solid reading of 10.5. The company outlook index surged more than 12 points to 18.2, reaching its highest level in six months.

Labor market indicators reflected continued employment growth and longer workweeks. The October employment index posted a fifth robust reading, holding steady at 10.2. Nineteen percent of firms reported net hiring, compared with 9 percent reporting net layoffs. The hours worked index also held fairly steady, coming in at 8.3 after rising to 9.5 last month.

Upward pressure on prices and wages continued at about the same pace in October. The raw materials prices index was 19.7, nearly unchanged from its September reading. The finished goods prices index also held steady, at a reading of 7.1, with more than 80 percent of manufacturers noting no change in selling prices this month. The wages and benefits index showed little movement as well, edging down from 26.2 to 24.5.

Expectations regarding future business conditions remained optimistic in October. The index of future general business activity inched up to 13.3. Indexes for future manufacturing activity showed mixed movements in October but remained in solidly positive territory. The index for future employment shot up 13 points to 31.7, suggesting an increase in headcounts six months from now.

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. 14–22, and 111 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 24, 2014

October 27, 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 Oct
Index
Sep
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Increase
%
Reporting
No Change
%
Reporting
Decrease
Production
13.7
17.6
-3.9
Increasing
18
27.8
58.1
14.1
Capacity Utilization
18.1
20.2
-2.1
Increasing
23
25.4
67.3
7.3
New Orders
14.2
7.5
+6.7
Increasing
18
30.2
53.8
16.0
Growth Rate of Orders
7.4
-3.2
+10.6
Increasing
1
21.3
64.8
13.9
Unfilled Orders
0.8
-0.9
+1.7
Increasing
1
13.6
73.6
12.8
Shipments
12.8
15.9
-3.1
Increasing
18
27.4
58.0
14.6
Delivery Time
4.2
1.5
+2.7
Increasing
5
11.5
81.2
7.3
Materials Inventories
9.4
-0.7
+10.1
Increasing
1
19.8
69.8
10.4
Finished Goods Inventories
4.5
-6.8
+11.3
Increasing
1
18.0
68.5
13.5
Prices Paid for Raw Materials
19.7
19.5
+0.2
Increasing
63
28.5
62.7
8.8
Prices Received for Finished Goods
7.1
7.0
+0.1
Increasing
15
12.3
82.5
5.2
Wages and Benefits
24.5
26.2
-1.7
Increasing
63
25.9
72.7
1.4
Employment
10.2
10.6
-0.4
Increasing
17
19.0
72.2
8.8
Hours Worked
8.3
9.5
-1.2
Increasing
10
17.5
73.3
9.2
Capital Expenditures
10.8
4.4
+6.4
Increasing
37
14.3
82.2
3.5
General Business Conditions
Current (versus previous month)
Indicator Oct
Index
Sep
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Improved
%
Reporting
No Change
%
Reporting
Worsened
18.2
5.8
+12.4
Improving
17
25.2
67.8
7.0
10.5
10.8
-0.3
Improving
17
20.3
69.9
9.8
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
41.2
40.0
+1.2
Increasing
68
50.2
40.8
9.0
Capacity Utilization
33.9
34.7
-0.8
Increasing
68
42.7
48.6
8.8
New Orders
38.1
34.6
+3.5
Increasing
68
49.9
38.4
11.8
Growth Rate of Orders
22.3
30.8
-8.5
Increasing
68
38.2
45.9
15.9
Unfilled Orders
3.5
3.4
+0.1
Increasing
15
13.9
75.7
10.4
Shipments
34.2
38.6
-4.4
Increasing
68
45.7
42.9
11.5
Delivery Time
1.7
0.5
+1.2
Increasing
2
10.0
81.7
8.3
Materials Inventories
6.7
5.3
+1.4
Increasing
2
22.1
62.5
15.4
Finished Goods Inventories
-1.0
-1.0
0.0
Decreasing
6
14.4
70.2
15.4
Prices Paid for Raw Materials
31.4
36.4
-5.0
Increasing
67
39.0
53.3
7.6
Prices Received for Finished Goods
15.2
29.3
-14.1
Increasing
28
21.9
71.4
6.7
Wages and Benefits
40.8
40.7
+0.1
Increasing
125
42.1
56.6
1.3
Employment
31.7
18.4
+13.3
Increasing
62
42.3
47.1
10.6
Hours Worked
6.3
11.6
-5.3
Increasing
17
15.6
75.1
9.3
Capital Expenditures
20.6
23.5
-2.9
Increasing
59
29.4
61.8
8.8
General Business Conditions
Future (six months ahead)
Indicator Oct
Index
Sep
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Improved
%
Reporting
No Change
%
Reporting
Worsened
23.6
32.3
-8.7
Improving
67
36.7
50.2
13.1
13.3
12.1
+1.2
Improving
17
27.8
57.7
14.5

*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.

October 27, 2014

Current and future production

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

October 27, 2014

Comments from Survey Respondents

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

Fabricated Metal Manufacturing

  • We are getting squeezed very hard by high turnover and the general level of activity increasing wages rapidly. In addition, we have just seen knee-jerk reaction to projects as a result of the recent collapse of oil prices. Customers are delaying some projects to see how things shake out over the next several months.
  • There is a lot of uncertainty due to global concerns.
  • Our business profits and capacity utilization are suffering from the lack of available skilled machinists. We are continually training and at present involved with a training grant through a local community college. However, the lack of skilled labor is impacting our business. We have been recruiting and searching for the last six months.
  • We are beginning to witness during our 2015 budget process additional health care costs resulting from Affordable Care Act legislation. There is increased apprehension about the lack of strength in the economic recovery from our customers and dealers.
  • We just received our health insurance renewal. The premium increased by 15 percent. We are going to have to reevaluate our coverage.

Machinery Manufacturing

  • While most businesses are hoarding cash, we have chosen to aggressively grow shop space, equipment and people. We are expecting business sentiment to improve after Nov. 2.
  • Business in our space (primarily industrial maintenance services for downstream and mid-stream energy facilities) remains steady. We have a positive outlook. We wonder whether the energy price softness will impact demand in the future, but expect the impact to be fairly modest for our customers.
  • The drop in the price of oil has adversely affected our customer base. We are pessimistic about the next 12 to 18 months as a result.

Chemical Manufacturing

  • Lack of rail car availability is hampering our deliveries.
  • We are seeing the effects of the continued contraction in Europe with delayed and canceled orders. Also, the strengthening dollar has caused reduced exports to growing economies, such as India.

Computer and Electronic Product Manufacturing

  • We have seen several companies in our industry pre-announce negative results this month. We have seen some minor weakening in demand in some product areas, but this seems to be very isolated. With China on holiday (National Day of China) for a week, there has been some expected slowing. We remain cautious, as we don’t see other signs of weakening (yet).

Electrical Equipment, Appliance and Component Manufacturing

  • Dropping oil prices and the potential negative effect on capital spending in that segment are major concerns for us.

Transportation Equipment Manufacturing

  • We have had six new hires this month and 21 year to date.
  • With the lower gas prices recently, truck sales are improving, which puts increased pressure on our production to maintain inventory levels.

Food Manufacturing

  • We have established our new premiums and expected health care costs for 2015 based on the last 12 months data. The impact of the Affordable Care Act continues to have no emphasis on “affordable.” Our premiums/costs are rising 6–7 percent, which continues the trend of squeezing real wages for employees.
  • There has been a lot of publicity given to both falling oil prices and a rising dollar as of late. Both of those trends, if they were to continue, would greatly benefit our company. We import raw materials but have no international sales. In addition to our own distribution costs, lower oil prices benefit many of our suppliers.
  • Our key inputs (milk, cream) are showing signs of finally beginning to descend from record highs seen just a few weeks ago. But that has only been in the last week or so.

Beverage and Tobacco Product Manufacturing

  • Cost pressures and decreased sales industrywide make conditions tough.

Textile Product Mills

  • There is a lot of interest in companies trying to move production from China to Mexico.

Miscellaneous Manufacturing

  • Our industry is still sluggish, and growth is half what it was a few years ago, but we are growing again.

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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