Texas Manufacturing Activity Index Is Less Negative but Expectations Slide in August

The general business activity index in the Texas Manufacturing Outlook Survey conducted by the Federal Reserve Bank of Dallas rose to -17.2 during August from -20.0 in July, but it has been negative since May of last year. An increased 12.0% of respondents reported improved business activity this month, up from 6.5% in May. A lessened 29.2% of respondents reported a worsening of business conditions.

The company outlook index of -18.4 in August compared to -16.9 in July. It has been negative since March, 2022. An increased 11.8% of respondents expected improved business activity and an increased 30.2% expected deterioration. Data were collected between August 15-23 from 88 Texas manufacturers.

In the survey of current conditions, the growth rate of new orders index of -12.5 compared to -20.6 in July as an increased 20.2% of respondents reported an increase in orders while a lessened 32.7% reported a decline. The volume of new orders index rose to -15.8 from -18.1 as 19.8% of respondents reported an increase versus 17.5% in July and 35.6% reported declining orders. The delivery time series rose to -4.3, reversing the deterioration in July. The wages & benefits index surged to 34.9, its highest level in nine months as 36.4% of respondents reported higher wages and 1.5% reported a decline.

Most of the other series deteriorated in August. The production index plunged to -11.2 from -4.8. It is down from a high of 48.8 in March of 2021. The capacity utilization reading fell to -3.7 from -2.4. It was below a high of 46.2 in March 2021. The shipments series weakened to -15.8 from -2.2, down from a high of 46.2 in March 2021. It was nearly the lowest figure in roughly three years. The employment reading fell to 4.3 from 10.0, remaining below 17.6 at the beginning of this year. A lessened 17.8% of respondents reported more hiring while an increased 13.5% reported less. The hours-worked measure declined to -3.8 from 3.9. It has been trending sideways since April.

Inflation indicators were mixed this month. The index for prices received for finished goods fell to 1.8 from 2.3. It was nearly the lowest reading in three years, down from a high of 51.3 in October 2021. An increased 17.1% of respondents reported raising prices while an increased 15.3% reported lowering prices. The index of prices paid for raw materials surged to 17.4 this month from 10.5 in July but remained well below an 84.1 high in November 2021.

Expectations for future manufacturing activity weakened this month. The future general business activity index of -3.3 compared to 4.6 in July. It remained up from a low of -27.3 in June of last year. The future production index fell sharply to 6.3, nearly the lowest figure in four months, and future orders growth weakened to the lowest point since March. The future employment index plunged to the lowest level since October. The future shipments index series weakened sharply and the future capital spending measure fell moderately. The expected wages & benefits reading 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.