Texas Manufacturing Outlook Survey for May 2016

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

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Production Index: -13.1

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General Business Activity Index: -20.8

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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 +5.8
  
  
• Last month, the General Business Activity Index was -13.9

From today's report:

"...Texas factory activity declined in May after two months of increases, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, fell from 5.8 to -13.1, hitting its lowest reading in a year.

Other measures of current manufacturing activity also reflected contraction this month. The new orders index fell more than 20 points to -14.9 after pushing into positive territory last month. The growth rate of orders index has been negative since late 2014 and fell to -14.7 in May after climbing to near zero in April. The capacity utilization and shipments indexes returned to negative territory after two months of positive readings, coming in at yearlong lows of -11.0 and -11.5, respectively.

Perceptions of broader business conditions were more pessimistic this month. The general business activity index declined from -13.9 to -20.8, and the company outlook index fell 10 points to -16.1.

Latest readings on employment and workweek length indicated a fifth consecutive month of contraction in May. The employment index moved down three points to -6.7. Sixteen percent of firms noted net hiring, and 22 percent noted net layoffs in May. The hours worked index posted a double-digit decline from its April reading, coming in at -11.8.

Price pressures were mixed, and wages continued to rise. Input costs rose for a second month in a row, as the raw materials prices index pushed up to 12.4, its highest level since October 2014. The pace of decline in selling prices has slowed in recent months according to the finished goods prices index, which edged up for a third month in a row and came in at -3.3 in May. Meanwhile, the wages and benefits index stayed positive and rose from 16.7 to 21.8, suggesting a slightly accelerated rise in compensation.

Expectations regarding future business conditions were mixed in May. The index of future general business activity fell 2 points to -1.8, while the index measuring future company outlook remained positive but moved down to 4.4 this month. Indexes for future manufacturing activity fell but 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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