Texas Manufacturing Activity Eases in July; Expectations Surge

The general business activity index in the Texas Manufacturing Outlook Survey conducted by the Federal Reserve Bank of Dallas slipped to -17.5 in July from -15.1 in June. It has been negative since May 2022. An increased 13.6% of respondents reported improved business activity this month while a higher 31.1% of respondents reported a worsening of conditions. The expectations index jumped to 21.6 in July from 12.9 in June and was increased from a low of -27.5 in June 2022. Data were collected between July 16-24 from 80 Texas manufacturers.

In the survey of current conditions, the production index fell to -1.3 this month from +0.7 in June. Twenty-eight percent of respondents reported higher production while 28.8% reported lower. The shipments series declined sharply to -16.3, its lowest point since May 2020, from +2.8 in June. The new orders growth rate fell sharply to -16.6 from -4.3. The unfilled order series plummeted to a fifteen year low of -26.6. The delivery times reading eased to -5.3 and has been trending sideways for a year. The employment index rose sharply to 7.1, its highest level since last September, from -2.9. Nineteen percent of respondents reported higher job levels while 12.2% reported a decline. The hours-worked reading fell sharply to -13.8, the lowest level since the recession, from -5.0. The wages & benefits index eased to 21.2 and reversed its June improvement.

Inflation indicators were mixed this month. The index of prices received for finished goods fell to 3.4, its lowest reading in five months, from 14.4 in June. A lessened 12.4% of respondents reported raising prices while a higher 9.0% reported lowering prices. The index of prices paid for raw materials, however, increased to 23.1 this month, its highest level since February of last year, from 21.5 in June.

Expectations for future manufacturing activity improved greatly. The future production index rose to 32.0, up from a low of 2.8 in April of last year. The future orders growth eased from its highest level since March 2022. The future employment index increased moderately while the future hours-worked index series rose sharply and recovered most of its June decline. The expected wages & benefits reading rose to the highest level in three months but remained well below its February 2022 high. The future capital spending measure surged to a 12-month 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.