Texas Manufacturing Activity Index Remains Negative and Expectations Deteriorate in September

The general business activity index in the Texas Manufacturing Outlook Survey conducted by the Federal Reserve Bank of Dallas dipped to -18.1 in September from -17.2 during August and has been negative since May of last year. A fairly steady 11.7% of respondents reported improved business activity this month while a roughly steady 29.8% of respondents reported a worsening of business conditions.

The company outlook index of -17.5 in September compared to -18.4 in August. It has been negative since March, 2022. A lessened 9.8% of respondents expected improved business activity and a fewer 27.3% expected deterioration. Data were collected between September 12-20 from 89 Texas manufacturers.

In the survey of current conditions, the production index jumped to 7.9 from -11.2, the highest level since December. A raised 26.8% of respondents reported higher output while a greatly lessened 18.9% reported a decline. The capacity utilization measure also jumped to 7.8 from -3.7. The employment reading strengthened to 13.6 from 4.3. An improved 23.0% of respondents reported more hiring while a lessened 9.4% reported less. The hours-worked measure also improved. The wages & benefits index held at 34.8 after surging to 34.9 which was its highest level in nine months. The growth rate of new orders index of -7.7 compared to -12.5 in August as an increased 21.5% of respondents reported higher orders growth while a lessened 29.2% reported a decline. The volume of new orders index rose to -5.2 from -15.8 as 24.3% of respondents reported an increase and 29.5% reported a decline. The delivery time series rose to -1.5 from -4.3, indicating lower product delivery speeds. The shipments series rose to -1.1 from -15.8 but remained down from a high of 46.2 in March 2021.

Inflation indicators were mixed this month. The index for prices received for finished goods held at 1.8 and remained nearly the lowest reading in three years, down from a high of 51.3 in October 2021. A lessened 13.1% of respondents reported raising prices while a diminished 11.3% reported lowering prices. The index of prices paid for raw materials surged, however, to 25.0 this month from 17.4 in August 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 -16.5 compared to 4.6 in July. It remained up, however, from a low of -27.3 in June of last year. The future production index rose to 10.9 but remained down from a recent high of 24.2 in a June and future orders growth rose slightly. The future employment index offset some of these increases by slipping m/m to its lowest level since October of last year. The future hours-worked 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.