Texas Manufacturing Activity & Expectations Deteriorate in February

The rate of decline in manufacturing activity in Texas accelerated in February, according to the Texas Manufacturing Outlook Survey conducted by the Federal Reserve Bank of Dallas. The General Business Activity index fell to -8.3 this month from +14.1 in January. It was the lowest level since August. The February reading compared to a low of -29.6 in May 2023. A lessened 17.8% of respondents reported improved business activity in February while an increased 26.1% of respondents reported a worsening. The company outlook index deteriorated to -5.2 this month from +18.7 in January and compared to -5.5 twelve months ago.

The production index fell sharply in February to -9.1, its lowest point since January of last year. A greatly lessened 19.3% of respondents reported higher production this month while a higher 26.1% reported a decline. Also moving lower, the growth rate of orders index weakened to -7.5 from +1.0. It was down from its recent high of 4.8 last April. The shipments index fell to 5.6 from January’s high of 8.7. The unfilled orders index fell to -9.9 from -4.7 in January. The capacity utilization index weakened to -8.7 from +5.0 in January. The delivery time index weakened to -6.3 this month, its lowest point in four months, from -4.0 in January.

Labor market indexes deteriorated. The employment index fell to -0.7 after rising to 2.2 in January. The index remained well below a high of 17.9 in January 2023. A lessened 11.7% of respondents reported an increase in net hiring in February while a greater 12.4% reported net layoffs. The hours-worked index to -14.2 from +1.9 last month. Also moving lower, the wages & benefits index fell to 16.7 this month after rising to 20.9 in January.

Inflation indicators moved higher this month. The index for prices received for finished goods rose to 7.8 after increasing to 6.2 in January. It remained well below a high of 47.4 in March 2022. A greater 15.2% of respondents reported raising prices last month while a higher 7.4% reported lowering prices. The index of prices paid for raw materials surged to 35.0 this month from 17.5 in January. The index remained up from a low of 1.0 in June 2023 but below a high of 82.2 in June 2021.

Expectations of future manufacturing activity weakened this month, and most every category was down. The future general business activity index declined to 7.7 in February from 35.5 in January. The future new orders and production measures led the decline along with future unfilled orders. The future shipments, employment and hours-worked indexes also declined. Moving slightly higher was the future wages & benefits index.

Each index is calculated by subtracting the percentage reporting a decrease in activity from the percentage reporting an increase. When all firms report rising activity, 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 equals the number reporting a decrease. Data for the Texas Manufacturing Outlook, conducted by the Federal Reserve Bank of Dallas, can be found in Haver's SURVEYS database.