Texas manufacturing activity expands at slower pace, uncertainty increases in March, says Dallas Fed survey
For Immediate Release: March 26, 2018
DALLAS—Texas factory activity continued to expand in March but at a slower pace, according to the Federal Reserve Bank of Dallas’ Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, fell 15 points to 12.7, signaling a deceleration in output growth.
“Growth in the Texas manufacturing sector eased a bit this month from the red-hot pace seen since mid-2017,” said Emily Kerr, Dallas Fed senior business economist. “It’s important to note, however, that the March indexes across the board remain well above average readings since the Great Recession.”
Earlier this year, the Dallas Fed added a new index to its Texas Business Outlook Surveys that gauges business executives’ uncertainty regarding their company’s outlook. That measure pointed to increased uncertainty among manufacturers in March, Kerr said.
“Outlooks remain quite positive, although nearly 20 percent of firms said uncertainty regarding their outlook increased from last month—the highest share since we added this new question in January,” she said. “Commentary from firms suggests the tariffs on steel and aluminum are prompting some of the increased uncertainty.”
Here are some key takeaways from this month’s report:
Other measures of manufacturing activity remained positive but posted double-digit declines. The new orders and growth rate of orders indexes fell to 8.3 and 3.8, respectively. The capacity utilization index dropped to 9.6, and the shipments index plunged 23 points to 9.3.
Perceptions of broader business conditions remained positive, but the share of firms reporting an improvement declined. The general business activity index fell 16 points to 21.4, and the company outlook index declined 12 points to 19.6.
Labor market measures suggested weaker growth. The employment index came in at 10.8, down eight points from February. The hours worked index moved down to 9.4.
Price and wage pressures remained elevated. The raw materials prices index ticked up to 41.4, its highest reading since mid-2011. The finished goods prices index edged down to 18.5. The wages and benefits index retreated 10 points to 22.9 but remained above its 2017 average and well above its postrecession average.
Texas produces more than 11 percent of total manufactured goods in the United States, ranking second behind California in factory production.
The Dallas Fed conducts the Texas Manufacturing Outlook Survey monthly to obtain a timely assessment of the state’s factory activity.
-30-
Media contact:
Jennifer Chamberlain
Federal Reserve Bank of Dallas
Phone: (214) 922-6748
E-mail: jennifer.chamberlain@dal.frb.org