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Texas Manufacturing Outlook Survey


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February 23, 2015

Texas Manufacturing Activity Remains Flat

What's New This Month

For this month’s survey, Texas business executives were asked supplemental questions on employment expectations and the labor market. 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 posted a second month of no growth in February, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, remained near zero (0.7) and indicated output was essentially unchanged from January levels.

Other measures of current manufacturing activity reflected contraction in February. The new orders index pushed further into negative territory, coming in at -12.2, its lowest reading since June 2009. The shipments index fell to -3.3, also reaching a low not seen since 2009. The capacity utilization index turned negative as well, dropping from 5.1 to -4.9.

Perceptions of broader business conditions remained rather pessimistic this month. The general business activity index moved further negative to -11.2, posting its lowest reading in nearly two years. The company outlook index remained slightly negative and edged down from -3.8 to -4.4.

Labor market indicators reflected only minor employment growth and slightly shorter workweeks. The February employment index moved down from 9 to 1.3. Fifteen percent of firms reported net hiring, compared with 14 percent reporting net layoffs. The hours worked index edged further into negative territory, coming in at -1.6.

Prices fell slightly in February and upward pressure on wages continued to ease. The raw materials prices index held steady at -1.7, indicating marginal downward pressure on input costs. The finished goods prices index was also slightly negative but edged up from -6.7 to -4.4. Manufacturers are no longer expecting sizeable price increases six months ahead, as the indexes of future prices were in single digits this month, down markedly from 2014 readings. The wages and benefits index edged down for a second month in a row and came in at 16.8.

Expectations regarding future business conditions rebounded somewhat in February. The index of future general business activity shot up 12 points to 5.5 after posting a negative reading in January. The index of future company outlook rose nearly 10 points to 11.8, although it remains well below the index level seen throughout 2014. Indexes for future manufacturing activity showed mixed movements in February 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 Feb. 10–18, and 108 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: March 30, 2015

February 23, 2015
 

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 Feb
Index
Jan
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Increase
%
Reporting
No Change
%
Reporting
Decrease
Production
0.7
0.7
0.0
Increasing
22
26.0
48.6
25.3
Capacity Utilization
-4.9
5.1
-10.0
Decreasing
1
20.0
55.1
24.9
New Orders
-12.2
-7.7
-4.5
Decreasing
2
21.5
44.7
33.7
Growth Rate of Orders
-16.3
-18.0
+1.7
Decreasing
4
15.1
53.5
31.4
Unfilled Orders
-17.3
-9.3
-8.0
Decreasing
3
8.8
65.1
26.1
Shipments
-3.3
6.0
-9.3
Decreasing
1
24.6
47.4
27.9
Delivery Time
-3.8
1.0
-4.8
Decreasing
1
11.1
74.0
14.9
Materials Inventories
-1.0
15.6
-16.6
Decreasing
1
21.0
57.0
22.0
Finished Goods Inventories
-3.8
7.6
-11.4
Decreasing
1
16.8
62.6
20.6
Prices Paid for Raw Materials
-1.7
-1.7
0.0
Decreasing
2
15.4
67.4
17.1
Prices Received for Finished Goods
-4.4
-6.7
+2.3
Decreasing
2
7.8
80.0
12.2
Wages and Benefits
16.8
19.1
-2.3
Increasing
63
20.3
76.2
3.5
Employment
1.3
9.0
-7.7
Increasing
21
15.4
70.6
14.1
Hours Worked
-1.6
-0.1
-1.5
Decreasing
2
15.7
67.0
17.3
Capital Expenditures
-4.8
0.0
-4.8
Decreasing
1
9.4
76.4
14.2
General Business Conditions
Current (versus previous month)
Indicator Feb
Index
Jan
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Improved
%
Reporting
No Change
%
Reporting
Worsened
-4.4
-3.8
-0.6
Worsening
2
16.0
63.6
20.4
-11.2
-4.4
-6.8
Worsening
2
10.8
67.2
22.0
Business Indicators Relating to Facilities and Products in Texas
Future (six months ahead)
Indicator Feb
Index
Jan
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Increase
%
Reporting
No Change
%
Reporting
Decrease
Production
24.9
22.1
+2.8
Increasing
72
42.8
39.4
17.9
Capacity Utilization
17.4
20.4
-3.0
Increasing
72
38.3
40.7
20.9
New Orders
25.3
25.9
-0.6
Increasing
72
45.0
35.2
19.7
Growth Rate of Orders
12.8
12.9
-0.1
Increasing
72
31.6
49.6
18.8
Unfilled Orders
-6.1
-2.0
-4.1
Decreasing
3
14.7
64.5
20.8
Shipments
24.0
19.8
+4.2
Increasing
72
44.4
35.2
20.4
Delivery Time
-12.5
-5.5
-7.0
Decreasing
4
9.5
68.5
22.0
Materials Inventories
-3.9
2.0
-5.9
Decreasing
1
20.4
55.3
24.3
Finished Goods Inventories
-6.8
-5.0
-1.8
Decreasing
2
13.6
66.0
20.4
Prices Paid for Raw Materials
5.9
10.1
-4.2
Increasing
71
26.5
52.9
20.6
Prices Received for Finished Goods
3.9
5.0
-1.1
Increasing
32
24.3
55.3
20.4
Wages and Benefits
37.2
28.2
+9.0
Increasing
129
41.0
55.2
3.8
Employment
9.2
15.3
-6.1
Increasing
27
29.4
50.4
20.2
Hours Worked
-0.8
0.7
-1.5
Decreasing
1
15.6
68.0
16.4
Capital Expenditures
14.0
3.0
+11.0
Increasing
63
30.0
54.0
16.0
General Business Conditions
Future (six months ahead)
Indicator Feb
Index
Jan
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Improved
%
Reporting
No Change
%
Reporting
Worsened
11.8
2.5
+9.3
Improving
71
31.6
48.6
19.8
5.5
-6.4
+11.9
Improving
1
24.5
56.6
19.0

*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.

February 23, 2015

Current and future production

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

February 23, 2015

Comments from Survey Respondents

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

Primary Metal Manufacturing

  • The price of copper has dropped dramatically in the last month.
  • Health insurance costs are really high.
  • There has been a rapid decline in orders over the past 30 days, primarily in energy-related work. Overall, business has declined by 30 percent in the past month, and our forecasts, based on customer feedback and order volumes, indicate further decline in overall business. Materials prices continue to decline as well, and a further decline is expected for most of the raw materials used in our processes.
  • Imported steel continues to be a major issue into Houston and other ports. It has very low prices, often subsidized.

Fabricated Metal Manufacturing

  • Our work is generally energy related, and the decrease in capital budgets for 2015 and 2016 will have a short- and long-term effect on our production and profitability. We are not adding to our backlog from the fourth quarter.
  • We are starting to feel a slowdown with our oil and gas production equipment customers. We anticipate the slowdown has just started and it will not hit both until another six months because the current backlog is hiding the immediate slowdown that had already started three months ago in well drilling.
  • We are very much affected by the crash in oil prices.
  • At the beginning of the month there was a wave of projects that were either cancelled or placed on hold by the customer.
  • A slowdown in capital spending is happening quickly. Maintenance spending is on hold due to the strike.
  • We are starting our fifth year of recovery in nonresidential construction, but new construction volumes are still below 50-year troughs. The recovery is occurring but it is at a modest pace.

Machinery Manufacturing

  • Oil at $50 per barrel is painful. We laid off 25 percent of our workforce to match labor with demand. The current thinking is if we can get through the first half of 2015 unscathed, we will be okay in the second half. We're optimistic that things will be better in the second half of the year in the offshore energy market.
  • The oil price is driving down drilling activity in North America, and our business is strongly correlated to the number of active drilling rigs. We have a tough couple of quarters ahead.
  • Customer order activity has slowed a little more than is seasonally normal. We do not know if it is temporary and primarily winter weather related, or a future planning disruption caused by the sharp drop in oil prices.
  • Oil prices have not affected backlog or sales yet. But we assume that they will in the future.

Computer and Electronic Product Manufacturing

  • We believe we need to provide incentives for U.S.-based manufacturing, especially small business.
  • Business is stable to improving slightly. Not hot, but good.

Food Manufacturing

  • Our export business has slowed significantly due to the high value of the U.S. dollar. The lower cost of energy is helping decrease production and transportation expenses.

Wood Product Manufacturing

  • So far, the downtrend in oil production (and related employment) has not translated into reduced construction.

Paper Manufacturing

  • So far business has been steady and a little behind the January 2014 level.

Printing and Related Support Activities

  • We have unleashed the hounds of capital spending, finally. We are transitioning to newer, more productive technology while expanding capacity. Hiring will go flat once the new equipment is in (for the past year we've been increasing throughput by throwing labor at it), as less labor is required for higher unit output.

Electrical Equipment, Appliance, and Component Manufacturing

  • Our business new orders, volume, capacity, inventories and so forth are heavily influenced by large project construction work overseas, principally in Asia and the Middle East. We see this continuing and are waiting for the U.S. market new construction to pick up meaningfully.

Miscellaneous Manufacturing

  • We are being bogged down by regulatory issues and tax planning that is taking critical resources away from growing the core business. We expect it will take at least six months to work through issues associated with having over 50 employees, more intense regulation in general, high costs with no increase to revenue, and being in a highly regulated industry. Regulation seems to stifle innovation and benefit the biggest companies in the industry at the expense of smaller and younger firms. We will consider selling to a larger firm if we can’t work through nonbusiness issues due to not being able to focus on our vision and serving our customers.
  • The West Coast labor problems in off-shore shipping are hurting our cash flow, inventory and labor hours. This may aid in some more manufacturing being returned to the U.S.

 

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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