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Texas Manufacturing Activity remained negative but edged up
For this month’s survey, Texas business executives were asked supplemental questions on employment expectations and the labor market. Results for these questions from the Texas Manufacturing Outlook Survey (TMOS), Texas Service Sector Outlook Survey (TSSOS) and Texas Retail Outlook Survey (TROS) have been released together. Read Special Questions results.
Texas factory activity contracted again in February, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, remained negative but edged up from -10.2 to -8.5, suggesting output declined but at a slightly softer pace than in January.
Most other indexes of current manufacturing activity also indicated further contraction in February. The new orders index fell 8 points to -17.6, reaching its lowest level since May 2009, when Texas was in recession. The growth rate of orders index remained strongly negative at -17.4. The capacity utilization index was largely unchanged at -8.2. Meanwhile, the shipments index rose 10 points to -1.1 after plunging last month.
Perceptions of broader business conditions remained strongly negative in February. The general business activity index has been negative for more than a year and came in at -31.8, up slightly from the January reading. The company outlook index posted a third negative reading in a row but edged up to -17.4. More than a quarter of manufacturers noted their outlook had worsened from January.
Labor market indicators reflected further decline in February. The employment index dropped 7 points to -11.1, hitting its lowest reading since November 2009. Eleven percent of firms noted net hiring, while 22 percent noted net layoffs. The hours worked index was fairly steady at -9.8, suggesting a continued pullback in employee hours.
The survey’s price measures remained negative in February, but wages continued to rise. The raw materials prices index declined 3 points to -12.0, although 73 percent of manufacturers noted no change in input costs. The finished goods prices index also declined three points, coming in at -12.5. Meanwhile, the wages and benefits index stayed positive but dipped from 16.5 to 12.3, suggesting a smaller rise in compensation.
Expectations regarding future business conditions were mixed in February. The index of future general business activity reversed its 22-point decline in January with a 22-point increase this month, with the index coming in at -2.1. The index for future company outlook rebounded strongly to 15.1 after dipping into negative territory last month. Indexes for future manufacturing activity pushed further into positive territory.
The Dallas Fed conducts the Texas Manufacturing Outlook Survey monthly to obtain a timely assessment of the state’s factory activity. Data were collected Feb. 16–24, and 118 Texas manufacturers responded to the survey. Firms are asked whether output, employment, orders, prices and other indicators increased, decreased or remained unchanged over the previous month.
Posted: February 29, 2016 Monday 10:30 AM