Manufacturing Activity Expands in Texas Region in February

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The Federal Reserve Bank of Dallas may be a regional branch of the Federal Reserve system, but it tracks regional economic reporting for the nation’s energy patch. Manufacturing factory activity in the Texas region expanded at a faster pace in February’s Texas Manufacturing Outlook Survey. This is a monthly manufacturing survey in which firms are asked whether output, employment, orders, prices and other indicators increased, decreased or remained unchanged over the previous month.

Data were collected between February 13 and 21 from 106 Texas manufacturers that responded to the survey. At the start of the survey dates, the stock market had been selling off handily and oil briefly had traded down at $58 to $59 per barrel. Oil had gone back above $62 right at the end of that survey period.

The production index rose by 11 points to 27.9, signaling a pickup in output growth. Demand growth continued at roughly the same pace as in January, but other measures of manufacturing activity indicated were slightly stronger growth for February. The new orders came in flat at 25.3 and the growth rate of orders came in flat at 15.3.

The capacity utilization index rose by five points to 19.6. One major source of strength was the important shipments index, which rose five points to 32.1, its strongest level going back all the way to 2006.

Numerous other comments and gains were shown in February’s regional report. Perceptions of broader business conditions improved further in the month. Labor market readings suggested a pickup in hiring and longer workweeks along with rising wages. Price pressures for inputs also remained elevated in February. Expectations regarding future business conditions remained rather optimistic. Some of the individual readings were shown as follows:

  • The general business activity index pushed up to 37.2, its highest reading in 12 years.
  • The company outlook index climbed four points to 31.5. This was flat with the December 2017 reading but was also the highest in 12 years.
  • The employment index rose four points to 19.1.
  • Some 30% of firms noted net hiring.
  • Some 11% of firms noted net layoffs.
  • The hours worked index rose to 16.3.
  • The raw materials prices index rose by six points to 39.8, its highest reading since 2011.
  • The finished goods prices index rose to 22.5, also the highest seen since 2011.
  • The wages and benefits index posted a nine-point increase to 32.2, an 11-year high.
  • Nearly a third of firms noted higher compensation costs from January levels, while roughly two-thirds noted no change.
  • The index of future general business activity ticked down to 40.6 and the future company outlook ticked down to 34.5, but both are said to be well above their average readings.
  • Most other indexes for future manufacturing activity also fell but remained highly positive.

For readers who wish to get a more in-depth read on the local economy, the survey comments from executives section of the report has some colorful descriptions of their own individual businesses and their own sectors.