Texas Manufacturing Activity Deteriorates in January

The general business activity index in the Texas Manufacturing Outlook Survey conducted by the Federal Reserve Bank of Dallas fell to -27.4 in January from -10.4 during December, and has been negative since May 2022. A lessened 6.2% of respondents reported improved business activity this month while an increased 33.6% of respondents reported a worsening of conditions.

The company outlook in six months index of 4.4 in January compared to 0.8 in December. An increased 19.8% of respondents expected improved business activity and a lessened 15.4% expected deterioration. Data were collected between January 16-24 from 92 Texas manufacturers.

In the survey of current conditions, the production index fell to -15.4 from +1.2. A greatly lessened 16.2% of respondents reported higher output while a higher 31.6% reported a decline. The capacity utilization measure fell to -14.9 from +0.6. The shipments series weakened sharply to -16.6, its lowest point since June, and has been negative for 15 months. The employment reading declined to -9.7 from -2.8. A lessened 13.7% of respondents reported more hiring while a greater 23.4% reported less. The hours-worked measure fell to -11.8. The wages & benefits index declined sharply to 20.8 from 25.1. The growth rate of new orders index of -14.4 in January compared to -22.4 in December. A lessened 12.2% of respondents reported higher orders growth while a lessened 26.6% reported declines. The volume of new orders index weakened to -12.5 from -10.1. The delivery time series fell to -8.1 from -3.2, indicating faster product delivery speeds.

Inflation indicators weakened this month. The index for prices received for finished goods fell to 0.1, still near the lowest reading in three years, down from a high of 51.3 in October 2021. A lessened 12.7% of respondents reported raising prices while an increased 12.6% reported lowering prices. The index of prices paid for raw materials rose to 20.2 this month from 17.8 in December, but remained well below its 84.2 high in November 2021.

Expectations for future manufacturing activity remained pessimistic. The future general business activity index of -10.4 compared to -9.3 in December. It remained up, however, from a low of -27.5 in June 2022. The future production index rose to 21.7, but has been trending sideways for a year. The future orders growth index rose sharply. The future employment index rose sharply to its highest level in six months. The future hours-worked index series fell, however, to a roughly three year low. The expected wages & benefits reading moved sideways but remained well below its February 2022 high. The future capital spending measure eased to an eight month low.

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.