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Texas Manufacturing Expands Modestly, Outlook Worsens

Texas factory activity continued to expand rather modestly in December, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, inched down one point to 7.3.

Other indexes of manufacturing activity also suggested modest growth in December, although demand growth picked up a bit. The capacity utilization index fell from 9.4 to 7.6, and the shipments index dipped to 6.1. Meanwhile, the new orders index moved up five points to 14.4, and the growth rate of new orders index edged up to 5.8.

Perceptions of broader business conditions turned slightly negative in December. The general business activity index plummeted 23 points to -5.1, hitting its lowest level since mid-2016. The company outlook index also fell markedly, dropping 17 points to -3.4, also a two-and-a-half-year low. More than 20 percent of manufacturers noted their outlook worsened this month.

Labor market measures suggested continued but slightly slower employment growth and longer workweeks in December. The employment index retreated five points to 11.0, a level still above average. Twenty-two percent of firms noted net hiring, compared with 11 percent noting net layoffs. The hours worked index held steady at 5.0.

Price increases eased further in December, while wage growth picked up slightly. The raw materials prices index slipped five points to 28.8, and the finished goods prices index ticked down one point to 6.6. Both came in near their average levels. Meanwhile, compensation costs continued to rise at a faster clip than normal. The wages and benefits index moved up four points to 29.2, with nearly 30 percent of firms noting an increase from November.

Expectations regarding future business conditions remained positive but retreated notably in December. The indexes of future general business activity and future company outlook fell 23 points to 3.2 and 8.8, respectively. Most other indexes for future manufacturing activity also posted double-digit declines this month but remained solidly in positive territory.

 

Dallas Fed

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