Research >> Economics
Texas Manufacturing Activity Expands and Conditions Improve
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Texas factory activity increased in October, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, was positive for the second consecutive month and slightly higher than its September reading.
Despite the rise in output, several other manufacturing activity indicators fell again. The new orders and shipments indexes were negative for the fifth consecutive month. The capacity utilization index dipped below zero, with more than one-quarter of respondents reporting a decrease.
Measures of general business conditions improved markedly in October, suggesting the broader economy strengthened. After four months in negative territory, the general business activity index rose sharply from –18 in September to 3 this month. The company outlook index also jumped up, rising from –4 to 13. The advance in the index was largely due to a sharp decline in the share of manufacturers reporting a worsened outlook, falling from 25 percent to 13 percent.
Labor market indicators worsened slightly in October. Hours worked fell for the fourth consecutive month, and the employment index dipped back into negative territory, with 15 percent of firms reporting layoffs compared to 11 percent reporting hiring. The wages and benefits index remained positive and edged up, although 80 percent of respondents noted no change in compensation costs.
Price pressures were mixed in October. Input costs continued to climb, with the raw materials price index rising from 24 to 30. Thirty-five percent of manufacturers saw an increase in prices paid for raw materials, compared with only five percent seeing a decrease. Finished goods prices fell as the index slipped into negative territory after a near-zero reading in September. Over the next six months, 43 percent of respondents anticipate further increases in raw materials prices, while one-quarter expect higher finished goods prices.
Manufacturers’ six-month outlook improved further in October. The future indexes for production and capacity utilization rose again, as did the future index for new orders, with more than half of firms expecting an increase in order volume six months from now. The future general business activity index advanced from 5 to 14, and the future company outlook index rose to 27, with more than 90 percent of firms anticipating flat or improved conditions six months from now.
Posted: October 25, 2010 Monday 10:30 AM