Texas manufacturing slump moderates, outlook improves

RP news wires, Noria Corporation

The decline in Texas manufacturing activity slowed in April, according to the results of the Texas Manufacturing Outlook Survey, released by the Federal Reserve Bank of Dallas on April 27.

Indexes for production, capacity utilization, volume of new orders and shipments edged upward for the second consecutive month, but they remained negative, indicating manufacturers are still retrenching. For the most part, the gains reflect fewer companies seeing declines in these measures, not more firms reporting recoveries.

Although still negative, the business activity index — the survey’s broadest measure of state manufacturing trends — saw improvement as the share of companies reporting better market conditions rose from March to April. The company outlook index strengthened, recovering the ground lost since September.

Manufacturers continued to draw down inventories. The index for materials inventories remained close to the previous month’s record low, and over a third of those responding noted declines in their finished goods inventory levels.

Manufacturers’ labor demand continued to contract. Firms reporting job cuts exceeded those hiring workers by a 10-to-1 margin, and 36 percent of firms noted declines in work hours. Falling demand for factory workers kept wage pressures in check, with 84 percent of companies noting no changes in compensation.

Downward price pressures persisted. Firms paying less for raw materials outnumbered firms paying more by 6-to-1, and 34 percent cited lower prices for their goods. Firms expect deflationary price pressures to subside over the next six months. More than two-thirds of manufacturers expect no change in finished goods prices six months from now, up from just a third in July.

Most indicators of future activity continued to improve, suggesting manufacturers expect declines in factory activity to slow further over the next six months. Indexes for future capacity utilization, shipments, new orders and growth rate of orders rose notably, and more than a third of manufacturing executives foresee increases in production and capacity utilization six months from now. The six-month company outlook index turned positive for the first time since June 2008, and 32 percent of firms anticipate that their firm’s conditions will improve.

The Dallas Fed conducts the Texas Manufacturing Outlook Survey monthly to obtain a timely assessment of the state’s factory activity. Data for the latest survey were collected April 14-22, and 101 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 question. Each index is calculated by subtracting the percentage reporting a decrease from the percentage reporting an increase. When all firms report that activity has increased, an index will register 100. An index will register –100 when all firms report a decrease. An index will be zero when the number of firms reporting an increase or decrease is equal.

For additional perspective on the survey, see "The Texas Manufacturing Outlook Survey: A Tool for Understanding the Economy" and "Made in Texas: The Natural Selection of Manufacturing." 

  • Click on links in the table for greater details, including historical data.
 
April vs. March
 
Six months from now
 
Apr
Index
%
Increase
No
Change
%
Decrease
Mar
Index
 
Apr
Index
%
Increase
No
Change
%
Decrease
Mar
Index
Production
-8.9
18.8
53.5
27.7
-22.3
 
13.0
36.0
41.0
23.0
13.9
Capacity utilization
-12.9
15.8
55.4
28.7
-25.5
 
15.0
37.0
41.0
22.0
9.0
Volume of new orders
-14.8
21.8
41.6
36.6
-30.1
 
19.2
39.4
40.4
20.2
10.9
Growth rate of orders
-22.7
14.9
47.5
37.6
-35.9
 
14.1
33.3
47.5
19.2
6.0
Unfilled orders
-19.8
7.9
64.4
27.7
-27.5
 
-5.1
14.1
66.7
19.2
-11.1
Volume of shipments
-7.9
20.8
50.5
28.7
-27.2
 
18.2
37.4
43.4
19.2
10.9
Delivery time
-14.9
5.9
73.3
20.8
-20.4
 
-14.2
3.0
79.8
17.2
-16.8
Materials inventories
-26.0
13.0
48.0
39.0
-30.1
 
-17.2
13.1
56.6
30.3
-23.8
Finished goods inventories
-26.0
8.0
58.0
34.0
-10.8
 
-13.0
13.0
61.0
26.0
-18.8
Prices paid for raw materials
-34.7
5.9
53.5
40.6
-41.7
 
2.0
18.0
66.0
16.0
-10.0
Prices received for finished goods
-30.0
4.0
62.0
34.0
-30.1
 
-11.1
10.1
68.7
21.2
-21.8
Wages and benefits
0.0
7.9
84.2
7.9
-7.8
 
9.1
17.2
74.7
8.1
2.0
Number of employees
-37.4
4.0
54.5
41.4
-46.6
 
-19.4
12.2
56.1
31.6
-16.8
Average employee workweek
-27.0
9.0
55.0
36.0
-43.6
 
5.0
20.2
64.6
15.2
1.0
Capital expenditures
-18.0
11.0
60.0
29.0
-35.3
 
-7.0
15.2
62.6
22.2
-17.0
                       
 
Apr
Index
%
Improved
Remained
the Same
%
Worsened
Mar
Index
 
Apr
Index
%
Improved
Remained
the Same
%
Worsened
Mar
Index
How has the outlook for your company changed?
-19.8
9.9
60.4
29.7
-33.0
 
5.0
32.0
41.0
27.0
-4.0
What is your evaluation of the level of general business activity?
-31.6
8.2
52.0
39.8
-49.0
 
-4.0
26.0
44.0
30.0
-7.9

Production, volume of orders, shipments

Number of employees, average workweek

Company outlook, level of business activity

Capital expenditures

Subscribe to Machinery Lubrication

About the Author