Manufacturing Activity Ticks Back Up in Texas

If you were wondering whether low oil and commodity prices were hurting manufacturers in the Texas region, they were. This last bounce in energy prices may have helped to turn things around, though. Now the question comes down to whether the recovery is sustainable. The Federal Reserve Bank of Dallas released its Texas Manufacturing Outlook Survey for the month of March and it showed a slight expansion in manufacturing activity.

Business executives in Texas signaled that the production index rebounded to positive territory in March for a reading of 3.3. What matters here is that this is fairly live data for the month of March, and it reverses what had been two consecutive months of negative readings.

Data were collected from March 15 to March 23, and 114 Texas manufacturers responded to the survey. Firms are asked each month on trends covering output, employment, orders, prices and other indicators.

While some indexes of current manufacturing activity rose in March, some remained in negative territory. Perceptions of broader business conditions remained negative but showed signs of slight stabilization in March. Labor market indicators reflected continued decline in March. Price pressures were mixed and wages continued to rise. Perhaps the best portion of the report was that the expectations regarding future business conditions improved in March, leaning toward further recovery ahead.

Some of the readings released by the Dallas Fed were seen as follows:

  • The new orders index jumped 13 points but was still negative at −4.8, suggesting demand continued to fall but at a slower pace than last month.
  • The growth rate of orders index has been negative since October 2014, although it did rise in March, to −11.7.
  • The capacity utilization index bounced back to positive territory after negative readings so far this year, coming in at 3.3.
  • Shipment volumes were largely unchanged this month as the shipments index remained near zero.
  • The general business activity index jumped 18 points but remained negative for a 15th month, posting a reading of −13.6.
  • The company outlook index posted a fourth negative reading in a row but edged up to −11.0.
  • The employment index was largely unchanged at −10.3, with 12% of firms noting net hiring and 22% noting net layoffs.
  • The hours worked index remained negative for a third month in a row but edged up to −5.6.
  • Abatement in downward pressure on input costs was seen in March, as the raw materials prices index moved up to zero.
  • The finished goods prices index has been negative for more than a year and edged up to −8.2 this month.
  • The wages and benefits index stayed positive and rose from 12.3 to 14.7, suggesting a slightly accelerated rise in compensation.
  • The index of future general business activity came in at 6.1, its first positive reading in four months.
  • The index for future company outlook posted a second positive reading, at 11.6.
  • Indexes for future manufacturing activity remained in solid positive territory.

This is far from strong expansion. That being said, breaking the trends of negative conditions and seeing gains for the expectations ahead might just be good enough for now.