Manufacturing production in Texas grew for the eighth month in a row in December as manufacturers39 outlook for 2014 also improved

Manufacturing production in Texas grew for the eighth month in a row in December as manufacturers' outlook for 2014 also improved.

Texas' Hot Manufacturing Growth Cools in December

Factory activity expands for eighth straight month, albeit at slower pace, but outlook for 2014 brightens.

Texas factory activity continued its 2013 expansion in December, the Dallas Fed reported today, as the production index registered 7.1. That figure was down from 16.9 in November’s Texas Manufacturing Outlook Survey but still firmly in growth territory.

Texas manufacturers were feeling optimistic about general business conditions. The current general business activity index rose from 1.9 in November to 3.1 in December. And looking ahead to the next six months, manufacturers’ outlook for business rose from 7.0 in November to 22.8 in December.

“We are seeing an increase in engineering and design as more of our customers are investing in new capital equipment that involves automation,” said one fabricated metal manufacturer.

Manufacturers were also more upbeat about their own company’s outlook, with their current outlook jumping from 8.0 in November to 15.5 in December. And looking into 2014, they raised their outlook by 4 points to 24.1.

The new orders index slowed from 5.4 in November to -0.5 in December, indicating little change in demand from the past month. But looking out six months, manufacturers were more optimistic, forecasting in December a rise to 44.9 after registering 33.6 in November.

Employment edged up in December to 6.8 from 5.0 in November. Seventeen percent of the manufacturers polled reported hiring new workers while 10% reported layoffs. The hours worked index dipped slightly to -2.0.

Costs were up for manufacturers in December, with the wages and benefits index up 7 points in December to 21.6. Raw materials costs also rose, from 22.6 in November to 32.8 in December. A third of the companies polled reported an increase in input costs. Looking out six months, nearly 46% of manufacturers expected further increases in raw materials prices, while 44% anticipate higher finished goods prices, the highest mark since 2008.

Despite the increasing optimism about their companies’ prospects, manufacturers continued to voice uncertainty about the coming year. One manufacturer told the Dallas bank: “Business is OK but very uncertain due to all that is currently affecting the refining industry. Exporting of refined product is certainly helping our customers and our business.”

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