Research >> Economics
Texas Manufacturing Slump Moderates, 6-Month Outlook Improves
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The decline in Texas manufacturing activity slowed in April, according to the Texas Manufacturing Outlook Survey. Indexes for production, capacity utilization, volume of new orders and shipments edged upward for the second consecutive month, but they remained negative, indicating manufacturers are still retrenching. For the most part, the gains reflect fewer companies seeing declines in these measures, not more firms reporting recoveries.
Although still negative, the business activity index—the survey’s broadest measure of state manufacturing trends—saw improvement as the share of companies reporting better market conditions rose from March to April. The company outlook index strengthened, recovering the ground lost since September.
Manufacturers continued to draw down inventories. The index for materials inventories remained close to the previous month’s record low, and over a third of those responding noted declines in their finished goods inventory levels.
Manufacturers’ labor demand continued to contract. Firms reporting job cuts exceeded those hiring workers by a 10-to-1 margin, and 36 percent of firms noted declines in work hours. Falling demand for factory workers kept wage pressures in check, with 84 percent of companies noting no changes in compensation.
Downward price pressures persisted. Firms paying less for raw materials outnumbered firms paying more by 6-to-1, and 34 percent cited lower prices for their goods. Firms expect deflationary price pressures to subside over the next six months. More than two-thirds of manufacturers expect no change in finished goods prices six months from now, up from just a third in July.
Most indicators of future activity continued to improve, suggesting manufacturers expect declines in factory activity to slow further over the next six months. Indexes for future capacity utilization, shipments, new orders and growth rate of orders rose notably, and more than a third of manufacturing executives foresee increases in production and capacity utilization six months from now. The six-month company outlook index turned positive for the first time since June 2008, and 32 percent of firms anticipate that their firm’s conditions will improve.
Posted: April 27, 2009 Monday 10:30 AM