Texas Economy

Texas Manufacturing Outlook Survey

November 27, 2017

Manufacturing Expansion Slows but Remains Solid

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 the Special Questions results.

Texas factory activity continued to expand in November, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, fell 10 points from its October reading but remained elevated at 15.1.

Other measures of manufacturing activity also pointed to November growth that was slightly slower than in October but still well above average. The new orders index moved down five points to 20.0, and the capacity utilization and shipments indexes similarly fell to 17.3 and 16.7, respectively. Meanwhile, the growth rate of orders index signaled a stronger pickup in demand, climbing six points to 18.1. This represents the index’s highest reading since 2010.

Perceptions of broader business conditions remained highly positive in November. The general business activity index came in at 19.4, down eight points from October. The company outlook index posted its 15th consecutive positive reading but dipped to 18.5.

Labor market measures suggested slower employment growth and longer workweeks this month. The employment index fell 10 points from October to 6.3, reflecting a more normal index level after several months of elevated readings. Nineteen percent of firms noted net hiring, compared with 13 percent noting net layoffs. The hours worked index edged down but remained positive at 11.5, indicating a continued lengthening of workweeks.

Upward pressure on prices and wages continued in November. The raw materials prices and finished goods prices indexes held steady at 32.2 and 15.1, respectively. The wages and benefits index moved down eight points to 14.2, slightly below the average reading for that index.

Expectations regarding future business conditions remained highly optimistic. The index of future general business activity held steady at 39.0, while the index of future company outlook edged up to 40.8. Other indexes for future manufacturing activity showed mixed movements but remained solidly in positive territory.

Next release: Tuesday, December 26

Data were collected Nov. 13–21, and 101 Texas manufacturers responded to the survey. The Dallas Fed conducts the Texas Manufacturing Outlook Survey monthly to obtain a timely assessment of the state’s factory activity. 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.

November 27, 2017

Results Summary

Business Indicators Relating to Facilities and Products in Texas Current (versus previous month)
Indicator	Nov Index	Oct Index	Change	Indicator Direction*	Trend** (Months)	% Reporting Increase	% Reporting No Change	% Reporting Decrease
Production	15.1	25.6	–10.5	Increasing	17	32.2	50.7	17.1
Capacity Utilization	17.3	22.5	–5.2	Increasing	17	29.4	58.5	12.1
New Orders	20.0	24.8	–4.8	Increasing	13	36.5	47.0	16.5
Growth Rate of Orders	18.1	12.3	+5.8	Increasing	11	30.3	57.5	12.2
Unfilled Orders	11.4	10.4	+1.0	Increasing	11	21.3	68.8	9.9
Shipments	16.7	20.9	–4.2	Increasing	12	35.0	46.8	18.3
Delivery Time	4.8	3.0	+1.8	Increasing	5	15.4	74.0	10.6
Materials Inventories	6.8	10.6	–3.8	Increasing	5	23.1	60.6	16.3
Finished Goods Inventories	0.0	9.9	–9.9	Unchanged	1	18.8	62.4	18.8
Prices Paid for Raw Materials	32.2	32.3	–0.1	Increasing	21	34.8	62.6	2.6
Prices Received for Finished Goods	15.1	15.3	–0.2	Increasing	16	21.8	71.5	6.7
Wages and Benefits	14.2	22.5	–8.3	Increasing	96	18.1	78.0	3.9
Employment	6.3	16.7	–10.4	Increasing	11	19.3	67.7	13.0
Hours Worked	11.5	13.7	–2.2	Increasing	13	22.8	65.9	11.3
Capital Expenditures	15.8	13.3	+2.5	Increasing	15	22.1	71.6	6.3

General Business Conditions Current (versus previous month)
Indicator	Nov Index	Oct Index	Change	Indicator Direction*	Trend** (Months)	% Reporting Improved	% Reporting No Change	% Reporting Worsened
Company Outlook	18.5	25.8	–7.3	Improving	15	28.8	60.9	10.3
General Business Activity	19.4	27.6	–8.2	Improving	14	28.3	62.8	8.9

Business Indicators Relating to Facilities and Products in Texas Future (six months ahead)
Indicator	Nov Index	Oct Index	Change	Indicator Direction*	Trend** (Months)	% Reporting Increase	% Reporting No Change	% Reporting Decrease
Production	46.1	46.0	+0.1	Increasing	105	51.7	42.7	5.6
Capacity Utilization	45.4	47.2	–1.8	Increasing	105	49.4	46.6	4.0
New Orders	48.9	45.3	+3.6	Increasing	105	53.2	42.5	4.3
Growth Rate of Orders	40.9	36.7	+4.2	Increasing	105	43.9	53.1	3.0
Unfilled Orders	14.2	10.1	+4.1	Increasing	26	21.7	70.8	7.5
Shipments	43.2	50.8	–7.6	Increasing	105	49.1	45.0	5.9
Delivery Time	3.8	0.5	+3.3	Increasing	12	14.5	74.8	10.7
Materials Inventories	13.2	3.7	+9.5	Increasing	12	24.0	65.2	10.8
Finished Goods Inventories	6.2	–0.9	+7.1	Increasing	1	20.6	64.9	14.4
Prices Paid for Raw Materials	48.4	36.5	+11.9	Increasing	104	51.5	45.4	3.1
Prices Received for Finished Goods	35.8	18.9	+16.9	Increasing	22	43.2	49.5	7.4
Wages and Benefits	46.6	36.9	+9.7	Increasing	162	49.0	48.6	2.4
Employment	29.8	34.2	–4.4	Increasing	60	40.5	48.8	10.7
Hours Worked	22.1	13.8	+8.3	Increasing	18	27.0	68.1	4.9
Capital Expenditures	34.1	30.2	+3.9	Increasing	96	41.5	51.1	7.4

General Business Conditions Future (six months ahead)
Indicator	Nov Index	Oct Index	Change	Indicator Direction*	Trend** (Months)	% Reporting Increase	% Reporting No Change	% Reporting Worsened
Company Outlook	40.8	39.0	+1.8	Improving	22	46.1	48.6	5.3
General Business Activity	39.0	38.5	+0.5	Improving	18	41.5	56.0	2.5

*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.

November 27, 2017

Production Index

November 27, 2017

Comments from Survey Respondents

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

Primary Metal Manufacturing

We have unusually high order bookings for this time of the year.

Fabricated Metal Product Manufacturing

We are feeling slightly optimistic with the recent increase in the price of crude but will need to see what the refiners’ budget for maintenance work for 2018 will be.
The end of year has slipped as far as orders for goods. We are trying a new sales approach for increase in another profit area.
The global economies and U.S. economy are very weak and uncertain.
We have just completed our restoration efforts in our plant and should see full production efficiencies in November. We have our highest backlog of orders in over nine months.

Machinery Manufacturing

We have seen a 60 percent decrease in booked orders from September to October. We are anticipating the same for November.

Computer and Electronic Product Manufacturing

General activity continues to strengthen broadly.

Printing and Related Support Activities

October was a busy month, and while we are busy now, we don’t have as many temporary workers. We continue to be very concerned with low activity levels in our industry, and a competitor in New York that looked a lot like us is closing this month and auctioning off its equipment.

Apparel Manufacturing

Military apparel orders have increased exponentially.

Food Manufacturing

Lack of available labor continues to be the biggest impediment to growth. We simply cannot find manufacturing labor or technical skilled employees.
On capacity utilization, there is a shortage of labor in the area of our Mexico operation, so we are transferring more work to China and also doing some more (minor) work here in Texas.

Miscellaneous Manufacturing

We really need tax reforms based on President Trump’s plan. The Republicans and Democrats don't understand how uncompetitive the U.S. tax structure is compared to the international.
The Christmas rush in our business is over.

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

Seasonally adjusted

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

Seasonally adjusted

Questions regarding the Texas Manufacturing Outlook Survey can be addressed to Emily Kerr at emily.kerr@dal.frb.org.