In its monthly report on manufacturing activity in Texas, the Dallas Federal Reserve reported today that its general activity index rose sharply, from a reading of -2.8 in November to 6.8 in December. The company outlook index also rose nicely, from -4.8 in November to 9.2 in December.

The not-so-good news is that the production index remains very low, at 2.7. That is an improvement from the November reading of 1.7, but indicates that growth continues to be slow. The new orders index was also a disappointment, rising only slightly from 0.4 in November to 0.9 in December.

The Dallas Fed included several comments from the survey’s respondents. Here are a few:

• We have had a significant delay of scheduled orders from December into next calendar year. Our customers are conserving cash and asking us to delay shipments and hold the inventory. There is much uncertainty over the fiscal cliff.
• We are running at plant capacity and have been for more than a year. Nothing can change until we either increase the plant capacity or business declines.
• We believe manufacturing demand will be improving through the first quarter of 2013.
• We expect 2013 to be a very good year for us. We expect to triple our sales, with about 80 percent of the increase from foreign buyers.
• We have terminated seven employees this month to get our small business below the 49 employee threshold level for the Affordable Care Act. We see this happening across other small businesses we are in contact with. We believe unemployment will further stall the economy.

The Dallas Fed report is available here.

Paul Ausick

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