Dallas Fed says Texas manufacturing activity is strong

Manufacturing activity in the state of Texas strengthened in January, according to the Dallas Federal Reserve Bank's Texas Manufacturing Outlook Survey, released on January 29. Most indexes turned positive after falling into negative territory in December. After drifting lower during the fall of 2006, most indexes have now rebounded to the levels posted in late summer 2006.

The production index increased to 13.8 in January from -5.2 in December. Sentiment on general business activity increased to 4.7 from -8.8 last month. The percentage of firms reporting improved conditions increased from last month, and a smaller percentage of firms said their evaluation of general business activity had worsened.

Manufacturers remain optimistic about future business activity, although most of those indicators were slightly lower than last month. More than half of responding firms expect increases in production, capacity utilization, shipments and volume of new orders six months from now.

In the January survey, the indexes for production, capacity utilization, volume of shipments, new orders and growth rate of orders turned positive after falling negative last month. The index for unfilled orders increased to zero. The indexes for materials and finished goods inventories remained positive and rose slightly. The index for number of employees turned positive from zero, but the average employee workweek fell further from December’s negative reading. The wages and benefits, raw materials and finished goods price indexes were positive and increased.

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.

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