Texas Manufacturing Activity & Expectations Indexes Negative Again in November

Manufacturing activity in Texas continued to contract in November, according to the Texas Manufacturing Outlook Survey conducted by the Federal Reserve Bank of Dallas. The overall measure, the general business activity index, fell to -19.9 in November from -19.2 in October and -18.1 in September; it was the lowest reading since July and below -15.7 in November 2022. The index had been negative since May 2022. An increased 12.2% of respondents reported improved business activity in November, up from 11.0% in October. A higher 32.1% of respondents reported a worsening of business conditions, up from October's 30.2%. The company outlook index declined to -18.8 in November, the 21st straight negative reading and the lowest since May, after increasing to -17.1 in October; the index was down from -15.9 in November 2022. An 11.0% of respondents expected improved business activity in November while a higher 29.8% expected deterioration. Data were collected from November 13-21 from 92 Texas manufacturers.

The production index, a key measure of state manufacturing conditions, fell to -7.2 in November, the lowest level since August, from 5.2 in October, indicating production contracted this month following two months of expansion. The index was below 0.2 in November 2022. A lessened 23.0% of respondents reported higher production while an increased 30.2% reported a decline. The growth rate of orders index slid to -25.4 in November, the 19th straight negative reading and the lowest since May 2020, from -16.8 in October; it was down from -19.5 in November 2022 and significantly below a 31.0 high in April 2021. The new orders index worsened to -20.5 this month, the 18th consecutive negative reading, from -8.8 in October, indicating a continued drop in demand at the most severe pace since November 2022’s -22.8 reading. The unfilled orders index dropped to -18.1 in November, the 15th negative reading in 16 months and the lowest since April 2020, from -12.9 in October; it was down from -5.0 in November 2022 and well below a 22.3 high in April 2021. The capacity utilization index decreased to -10.1 this month, the first negative reading since August, from 5.4 in October; it was down from -4.1 in November last year. The shipments index fell to -9.5 in November, a three-month low, from -1.4 in October, registering the 11th straight negative reading and marginally below -9.1 in November 2022. The delivery time index slipped to -8.1 this month, the lowest reading since July, from -7.8 in October; it was below -2.8 in November last year.

Labor market indexes showed slightly slower employment growth and shorter workweeks this month. The employment index declined to 5.0 in November from 6.7 in October, indicating employment expanded for the ninth successive month but at the slowest pace since August. The latest reading was below the series average of 7.8 and 5.3 in November last year. An increased 21.6% of respondents reported net hiring this month while 16.6% reported net layoffs. The wages & benefits index fell to 20.0 in November, the lowest level since July, from 24.4 in October; it was in line with its series average of 21.2 but noticeably below 35.8 in November 2022. The hours worked index dropped to -5.5 this month, the lowest reading since May 2020, from -2.3 in October; it was down from -2.5 in November 2022 and well below a 24.3 high in July 2021.

Inflation indicators declined this month. The index for prices received for finished goods fell to -6.2 in November, the lowest reading since May 2020, after falling to -2.1 in October; it was well below 12.2 in November 2022 and a 51.3 high in October 2021. A lessened 10.1% of respondents reported raising prices while a higher 16.3% reported lowering prices. The index of prices paid for raw materials declined to 12.6 in November from 13.6 in October, posting the lowest level since July and below the series average of 27.5, an indicative of more modest price growth than usual; it was down from 20.6 in November 2022 and meaningfully below an 84.1 high in November 2021.

Expectations on future manufacturing activity were mixed this month. The future general business activity index decreased to -13.4 in November, the fourth consecutive negative reading, after improving to -6.8 in October. The future company outlook index dropped to -7.4 in November, the lowest reading since March, after increasing to -2.6 in October. The future production index remained positive but fell to 13.7 in November from 20.0 in October, while the future employment index rebounded to 12.0 from October’s 11.7. Other indexes of future manufacturing activity declined this month vs. last month but remained in positive territory, notably wages & benefits (38.9 vs. 41.0), shipments (19.2 vs. 22.7), new orders (8.4 vs. 12.4), and growth rate of new orders (6.8 vs. 8.4).

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.