Factories should be humming in Texas based on the latest manufacturing outlook survey from the Dallas Fed. In January, the new orders index spiked to 14.4 from 1.3 in December. The shipments index also grew sharply, from barely over zero to 9.2.
“Growth in auto sales, lower energy prices and the relatively low value of the U.S. dollar are leading many tire manufacturing companies to move production to the U.S., displacing their own imported tire shipments,” said one upbeat chemical manufacturer. “We are hearing that there are more profits to be made by producing and selling in the U.S. than exporting to the U.S.”
The production index also edged up in the state, from 6 to 7.1, while capacity utilization held steady at 8.2.
Texas employers reported an uptick in hiring, though 72% continued to report no change in their workforce size. The hours worked index returned from negative territory in December to 3.4 in January.
The raw materials price index fell to 26.8 in January but the bank noted it remains high compared to most of last year. And 43% of the manufacturers polled said they anticipate more price increases over the next six months.
Texas manufacturers continue to hold a rosy view of the economy. The future general business activity index remains positive at 22.3 and the index of future company outlook rose to 33.5, its highest level in three years.
But manufacturers are still wary of the impact of the Affordable Health Care Act and other regulatory activity. “We are extremely concerned with the increasing costs of compliance and regulations that are adding to our overhead and therefore reducing our margins,” said one manufacturer. “We are trying to pass the cost to our customers but that can be difficult in a ‘quoting for every job’ environment.”