The Federal Reserve Bank of Dallas has released its monthly Texas Manufacturing Outlook Survey for November. This was one of the regional issues to watch from the impact of Hurricane Harvey in prior months. According to the Dallas Fed, manufacturing expansion did slow in November but was shown to have remained solid despite lower growth.

Texas factory activity continued to expand in November, with its key production index falling 10 points to 15.1 in November of 2017. The number looks like a large drop on the surface, but the Dallas Fed maintained that the reading is well above the average.

Other measures of manufacturing activity also pointed to November growth that was slightly slower than in October. The new orders index was down by five points to 20.0, and the capacity utilization fell to 17.3 and the shipments index was at 16.7.

There was a growth in the rate of orders index, rising by six to 18.1 in November. According to the Dallas Fed, this was that index’s highest reading since 2010.

Perceptions of broader business conditions remained highly positive in November. Labor market measures suggested slower employment growth and longer workweeks during November. And on the inflation front, the Dallas Fed showed that there was upward pressure on prices and wages that continued in November. There was also a highly optimistic view on expectations regarding future business conditions.

Other indexes for future manufacturing activity showed mixed movements but remained solidly in positive territory. These subindex readings were shown as follows:

• The general business activity index came in at 19.4, down eight points from October.
• The company outlook index posted its 15th consecutive positive reading but dipped to 18.5.
• The employment index fell 10 points from October to 6.3, reflecting a more normal index level after several months of elevated readings.
• Some 19% of firms noted net hiring, compared with 13%, noting net layoffs.
• The hours worked index edged down but remained positive at 11.5, indicating a continued lengthening of workweeks.
• The raw materials prices and finished goods prices indexes held steady at 32.2 and 15.1, respectively.
• The wages and benefits index moved down eight points to 14.2, slightly below the average reading for that index.
• The index of future general business activity held steady at 39.0.
• The index of future company outlook edged up to 40.8.

The impact from Hurricane Harvey is moving ever further into the past. The Fed’s data were collected from November 13 to November 21. They indicated that 101 Texas manufacturers responded to the survey. Firms are questioned about output, employment, orders, prices and other indicators, regarding whether activity has increased, decreased or remained unchanged over the previous sequential month.

Investors and economists often overlook the Federal Reserve’s Texas regional manufacturing release due to prior releases setting the tone for the broader national readings. That being said, this regional report is deemed to be a yardstick for many of the chemicals and energy businesses.

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