Texas Manufacturing Activity & Expectations Indexes Remain Negative in October

The general business activity index in the Texas Manufacturing Outlook Survey conducted by the Federal Reserve Bank of Dallas fell to -19.2 in October from -18.1 during September and has been negative since May of last year. A slightly lessened 11.0% of respondents reported improved business activity this month while a fairly steady 30.2% of respondents reported a worsening of business conditions.

The company outlook index of -17.1 in October compared to -17.5 in September. It has been negative since March 2022. A lessened 8.8% of respondents expected improved business activity and a fewer 25.9% expected deterioration. Data were collected between October 17-25 from 94 Texas manufacturers.

In the survey of current conditions, the production index fell to 5.2 from 7.9. A steady 26.8% of respondents reported higher output while a higher 21.6% reported a decline. The capacity utilization measure fell to 5.4 from 7.8. The employment reading weakened to 6.7 from 13.6. A lessened 19.2% of respondents reported more hiring while an increased 12.5% reported less. The hours-worked measure fell to -2.3. The wages & benefits index declined sharply to 24.4 from 34.8. The growth rate of new orders index of -16.8 compared to -7.7 in September as a lessened 17.9% of respondents reported higher orders growth while an increased 34.7% reported declines. The volume of new orders index weakened to -8.8 from -5.2. The delivery time series fell to -7.8 from -1.5, indicating faster product delivery speeds. The shipments series was little changed at -1.4 and has been negative for 12 months.

Inflation indicators weakened this month. The index for prices received for finished goods fell to -2.1 and was the lowest reading in three years, down from a high of 51.3 in October 2021. A steady 13.1% of respondents reported raising prices while an increased 15.2% reported lowering prices. The index of prices paid for raw materials fell to 13.6 this month from 25.0 in September, and remained well below its 84.1 high in November 2021.

Expectations for future manufacturing activity remained pessimistic. The future general business activity index of -6.8 compared to -16.5 in September. It remained up, however, from a low of -27.3 in June of last year. The future production index jumped to 20.0, but has been trending sideways for a year. The future orders growth index rose moderately. The future employment index fell to its lowest level in twelve months. The future hours-worked index series rose sharply but the future capital spending measure was little changed. The expected wages & benefits reading also rose moderately but remained well below its February 2022 high.

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.