Sometimes headlines just do not tell a full story. That was the case with the Dallas Federal Reserve’s Texas Manufacturing Outlook Survey that was reported on Monday. If you just read the headline “Texas Manufacturing Activity Continues to Expand,” you might assume that the recovery seen in oil prices in 2016 was translating to an all-clear sign or a unilateral increase. The good news is that improvements have been made; the bad news is that some of the index readings are still in the red.
The production index posted its fifth consecutive positive reading and edged up to 8.8. Unfortunately, other measures of current manufacturing activity showed mixed movements. The new orders index and growth rate of orders index both posted their third consecutive negative readings in November, while moving slightly higher, to −1.4 for new orders and −0.8 for the growth rate. The capacity utilization index rose by three points to 3.6, while the shipments index dipped slightly negative to −1.9.
It is on the broader scale that things look better. Perceptions of broader business conditions improved, with the general business activity index rising to 10.2 after nearly two years of negative readings, and the company outlook index rose by nine points to 11.0.
Labor market measures indicated increased employment levels and longer workweeks. Prices and wages both rose in November. Expectations regarding future business conditions improved notably in November. Other indexes for future manufacturing activity pushed markedly higher in to positive territory. These key index data were shown by the Dallas Fed, as follows:
- The employment index came in at 4.5 after a near-zero reading last month.
- 17% of firms noted net hiring, compared with 13 percent noting net layoffs.
- The hours worked index returned to positive territory in November, coming in at 2.5.
- Input cost increases accelerated slightly, with the raw materials prices index rising from 13.7 to 18.2.
- The finished goods prices index posted a second positive reading, climbing from 1.2 to 8.0, and indicates a likely end to the period of deflation in manufactured goods prices that began in 2015.
- Wages and benefits continued to rise, with the index edging up to 18.4.
- The index of future general business activity advanced 27 points to 31.6.
- The index of future company outlook also jumped up more than 20 points, coming in at 34.9.
As you can see, there are handy improvements in many cases for what is considered to be a measurement of manufacturing activity in and around the oil patch. Those gains just are not universal, and they are far from being robust compared with the past.
A brief not about this report: The Dallas Fed conducts the Texas Manufacturing Outlook Survey monthly and data were collected from November 14 to November 22, so all data was after the boost was starting to be seen after the election results were known. There were 111 Texas manufacturers which responded to the survey. The 11th district of the Fed covers all of Texas, northern Louisiana and southern New Mexico.
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