Texas Manufacturing Outlook Survey for April 2016

Earlier today, the Federal Reserve Bank of Dallas (Dallas Fed) released the Texas Manufacturing Outlook Survey for this month (April 2016):

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Production Index: +5.8

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General Business Activity Index: -13.9

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Any figure above zero implies that manufacturing in the region is expanding, and vice versa.

• Last month, the Production Index was +3.3
  
  
• Last month, the General Business Activity Index was -13.6

From today's report:

"...Texas factory activity increased for a second month in a row in April, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, rose from 3.3 to 5.8, suggesting a slight pickup in output growth.

Most other indexes of current manufacturing activity also reflected growth this month. The new orders index rebounded into positive territory after four months of negative readings, coming in at 6.2. The growth rate of orders index jumped 11 points to -0.7. The capacity utilization and shipments indexes posted their second positive reading in a row and climbed to 8.2 and 7.1, respectively.

Perceptions of broader business conditions remained pessimistic. The general business activity index held steady at -13.9, its 16th straight negative reading. The company outlook index posted a negative reading for the fifth consecutive month but rose from -11.0 to -5.9, showing signs of additional stabilization in April.

Labor market indicators reflected persistent weakness in April. The employment and hours worked indexes remained negative for the fourth straight month but rose to -3.7 and -1.0, respectively. Fourteen percent of firms noted net hiring, and 18 percent noted net layoffs in April.

Price pressures were mixed, and wages continued to rise. Abatement in downward pressure on input costs was seen in April, as the raw materials prices index bounced back into positive territory after nine months of decline, coming in at 5.5. The finished goods prices index has been negative since January 2015 and edged up to -6.6 this month. Meanwhile, the wages and benefits index stayed positive and rose from 14.7 to 16.7, suggesting a slightly accelerated rise in compensation.

Expectations regarding future business conditions were mixed in April. The index of future general business activity fell 6 points to 0.4, while the index measuring future company outlook posted its third positive reading at 8.9. Indexes for future manufacturing activity rose and remained solidly positive..."

About this survey, from the Dallas Fed website:

"...The Texas Manufacturing Outlook Survey (TMOS) is a monthly survey of area manufacturers. Firm executives report on how business conditions have changed for a number of indicators, such as production, new orders, employment, prices and company outlook. Respondents are also asked to report on how they perceive broader economic conditions to have changed (general business activity). For all questions, participants are asked whether the indicator has increased, decreased or remained unchanged. Answers cover changes over the previous month and expectations for activity six months into the future. Participants are given the opportunity to submit comments on current issues that may be affecting their business.

About 100 manufacturers regularly participate in TMOS, which began collecting data in mid-2004. Respondents are broadly representative of manufacturing subsectors in the state economy. TMOS questionnaires are electronically transmitted to respondents in the middle of each month, and answers are collected over seven business days.

Survey responses are used to calculate an index for each indicator. Each index is calculated by subtracting the percentage of respondents reporting a decrease from the percentage reporting an increase. When the share of firms reporting an increase exceeds the share of firms reporting a decrease, the index will be greater than zero, suggesting the indicator has increased over the prior month. If the share of firms reporting a decrease exceeds the share reporting an increase, the index will be below zero, suggesting the indicator has decreased over the prior month. An index will be zero when the number of firms reporting an increase is equal to the number of firms reporting a decrease. Indexes are seasonally adjusted as needed...

...Texas is important to the nation’s manufacturing output. The state produced $159 billion in manufactured goods in 2008, roughly 9.5% of the country’s manufacturing output. Texas ranks second behind California in factory production and first as an exporter of manufactured goods.

Texas turns out a large share of the country’s production of petroleum and coal products, reflecting the significance of the region’s refining industry. Texas also produces over 10 percent of the nation’s computer and electronics products and nonmetallic mineral products, such as brick, glass and cement..."

Click here to view the full Dallas Fed report.


For a national perspective on manufacturing in the United States, check out the Institute of Supply Management's Purchasing Manager's Index (PMI).

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