Texas Manufacturing Activity Remains Sluggish in November, but Expectations Improve

The rate of decline in manufacturing activity in Texas lessened in November, according to the Texas Manufacturing Outlook Survey conducted by the Federal Reserve Bank of Dallas. The General Business Activity index edged up to -2.7 this month from -3.0 in October. It was the highest level since April 2022, up from the most recent low of -19.4 in May. The November reading compared to a low of -30.1 in May 2023. Nevertheless, the index has been negative since May 2022. A slightly increased 16.2% of respondents reported improved business activity in November while a fairly steady 18.9% of respondents reported a worsening. The company outlook index surged to 5.8 this month from -3.3 in October and was increased from a low of -18.4 in July. It’s been negative since March 2022. Data were collected from November 12th through 20th from 86 Texas manufacturers.

The production index fell sharply in November to -0.9, reversing virtually all of its October surge to 14.6 from -3.2 in September. A greatly lessened 26.3% of respondents reported higher production this month while a higher 26.2% reported a decline. Also moving lower, the growth rate of orders index eased to -12.5 from -11.7 and was the seventh straight month of decline. It was down from its recent high of 3.8 in April. The unfilled orders index improved to -14.1 from -17.5 in October, after falling to -18.0 in September. It was well below a high of 6.2 in July 2022. The shipments index fell to -5.9 this month from 1.5 in October. The capacity utilization index weakened to -4.8 from +4.3 in October. The delivery time index improved, however, to -5.2 this month from -11.5, which was the lowest level since July 2023.

Labor market indexes rebounded. The employment index rose to 4.9 after falling to -5.1 in October. The latest reading stands at the highest in four months, but remained well below a high of 18.2 in January 2023. An improved 19.3% of respondents reported an increase in net hiring in November while a lessened 14.4% reported net layoffs. The hours worked index was 0.3 this month after a decline to -5.5 in October. It remained well below a high of 13.6 in August 2022. Moving down, the wages & benefits index fell to 18.6 in November after rising to 23.5 in October.

Inflation indicators moved higher this month. The index for prices received for finished goods rose to 8.8 from 7.4 in October. It remained well below a high of 47.9 in March 2022. A greater 15.2% of respondents reported raising prices in November while a higher 6.4% reported lowering prices. The index of prices paid for raw materials increased to 28.5 this month from 16.3 in October. The index remained up from a low of 1.1 in June 2023 but below 73.2 in March 2021.

Expectations of future manufacturing activity improved this month. The future general business activity index rose to 31.2 in November from 29.6 in October. It was the highest reading in over three years. The future new orders and production measures led the gain along with future unfilled orders and future wages. The future shipments, employment and hours-worked indexes, however, declined.

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.