In its monthly report on manufacturing in Texas, the Federal Reserve Bank of Dallas reported Monday that expansion is continuing but at a slower pace. A key measure of factory conditions, the production index, remained positive at 17.6 but dropped by six points, indicating slower growth.

The capacity utilization index dropped six points to 15.4, while the shipments index fell four points to 16.6. The new orders index rose, pushing up four points to 18.9, and the growth rate of orders index held steady at 11.0. Any index reading above zero indicates a month-over-month increase, while an index reading below zero indicates a sequential decline.

The Dallas Fed also reported that the general business activity index inched up to 29.4, and the company outlook index climbed seven points to 25. Less than 3% of firms noted that their outlook worsened, the lowest share since 2004. The index measuring uncertainty regarding companies’ outlooks tumbled 13 points to 6.9.

Every month the Dallas Fed asks what it calls special questions of its survey respondents. The October special questions were related to borrowing conditions, availability of credit and the effect on hiring of credit availability. A third of all companies have not sought a long-term loan in the past six months. Of those that did, more than twice as many (3.1%) said conditions were tighter than those who said conditions were easier (1.5%).

The cost of credit has “increased substantially” according to 7.3% of October respondents. That represents a difference of nearly 10 times compared with the October 2017 response (0.8%).

Credit is still widely available, however, with just 1.6% of respondents reporting “extreme difficulty” in securing a long-term loan. Short-term loans for things like acquiring inventory or paying workers were about equally easy to get as long-term loans, 39.5% compared to 40.0%, respectively.

When asked about the impact on hiring and layoffs related to securing credit, only 1.0% said this was a significant problem, but that’s double the 0.5% rate recorded in October 2017. Just over 47% of those surveyed had sought credit for this purpose and 43% said they had no difficulty getting the loans.

Here are other highlights uncovered by the monthly survey:

• The employment index rose six points to 23.9, a level well above average. Only 4% reported net layoffs compared with 28% who reported net hiring.
• The raw materials prices index posted a 10-point increase to 54.4, its highest level in seven years. The finished goods prices index also increased, rising four points to 17.5.
• Compensation costs continued to rise at a faster-than-normal pace with the wages and benefits index relatively unchanged at 32.9.
• The indexes of future general business activity and future company outlook remained well above average and came in at 35.6 and 37.3, respectively.

The full survey results are available at the Dallas Fed’s website.

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