Texas Manufacturing Activity Index Improves Slightly in June

Downward pressure on manufacturing sector activity in Texas eased modestly this month, according to the Manufacturing Outlook Survey conducted by the Federal Reserve Bank of Dallas. The general business activity index of -23.2 compared to -29.1 in May, but it has been negative since May of last year. An increased 11.3% of respondents reported improved business activity in June, up from 6.5% in May. A lessened 34.5% of respondents reported a worsening of business conditions.

The company outlook index of -10.7 in June compared to -22.3 in May but has been negative since March, 2022. An increased 17.2% of respondents expected improved business activity while a lessened 27.9% expected deterioration. Data were collected between June 13 and 21 from 85 Texas manufacturers.

The index of unfilled orders rose to -8.5 from -15.5 as an increased 13.4% of respondents reported an increase in backlogs while a lessened 21.9% reported a decline. The delivery time series rose to -4.3, but that failed to recover its May deterioration to -7.3, which was the lowest level in three years. The capital expenditures series rose to 0.3 from -3.7.

Most of the other series deteriorated in June. The shipments series plunged to -17.0 from -3.0 and was the lowest figure in roughly three years. The growth rate of orders index of -23.7 compared to -20.7 in May and has been negative since May of last year. The employment reading fell to 2.2 from 9.6, the lowest figure in four months. A lessened 17.0% of respondents reported more hiring while an increased 14.8% reported less. The production series declined to -4.2, down from a high of 48.8 in in March 2021.

Inflation indicators deteriorated this month. The index for prices received for finished goods fell to -1.9 from 0.4. It was the first negative rea ding in three years and was down from a high of 51.3 in October 2021. A lessened 10.6% of respondents reported raising prices while a fairly steady 12 .5% reported lowering prices. The index of prices paid for raw materials collapsed to 1.4 this month from 13.8 in May and was significantly below an 84.1 high in November 2021.

Expectations for future manufacturing activity improved this month. The future general business activity index of -4.5 compared to -12.7 in May but was its 14th consecutive negative reading. The future production index improved sharply to 24.2, up from 3.0 in April while orders expectations also strengthened. The future employment index rose to its highest level in nine months. The future shipments index series surged and the future capital spending measure rose moderately. The wages expectations series fell slightly and remained well below its February 2022 high.

Each index is calculated by subtracting the percentage reporting a decrease 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.

Global Supply Chain Pressures and U.S. Inflation from the Federal Reserve Bank of San Francisco can be found here.