Texas Manufacturing Activity Grows for Fourth Consecutive Month

The future new orders index rose to its highest level in four years

Factory activity increased in December, according to the Texas Manufacturing Outlook Survey released on Dec. 27. The production index, a key measure of state manufacturing conditions, was positive for the fourth consecutive month.

Manufacturers' six-month outlook continued to improve. The future indexes for production and shipments edged up further; more than half of respondents expect increases in these measures in coming months. The future new orders index rose to its highest level in four years, with all firms anticipating either increased or stable order volumes.

The future general business activity index advanced from 26 to 37, and the future company outlook index rose to 38, with 94% of firms anticipating similar or improved conditions six months from now.

Other indicators of current activity also remained positive, signaling continued growth in manufacturing. The shipments index held steady at a reading of 8, and the capacity utilization index rose from 10 to 15, with 29% of manufacturers reporting an increase.

The new orders index declined in December but stayed in positive territory, with more than three-fourths of firms noting increased or unchanged order volumes.

Measures of general business conditions remained positive in December. The general business activity index came in at 13, with nearly a quarter of respondents noting improved activity. The company outlook index edged down to 15, although the share of manufacturers who said their outlook improved rose to its highest level since May.

Labor market indicators improved notably this month. The employment index rose from 6 in November to 15 in December, reaching its highest level since early 2007. Twenty-four percent of firms reported hiring new workers, compared with 9% reporting layoffs. Hours worked increased again this month, and the wages and benefits index rose from 5 to 10.

Prices climbed again in December. Input costs remained on an upward trend, with the raw materials price index rising from 35 to 44. Forty-six percent of manufacturers saw an increase in prices paid for raw materials, compared with only 2% who saw a decrease. Finished goods prices rose for the second month in a row, although the great majority of respondents continued to note no change. More than half of respondents anticipate further increases in raw materials prices over the next six months, while 37% expect higher finished goods prices.

The Dallas Fed conducts the Texas Manufacturing Outlook Survey monthly to obtain a timely assessment of the states factory activity. Data were collected Dec. 1421, and 96 Texas manufacturers responded to the survey. Firms are asked whether output, employment, orders, prices and other indicators increased, decreased or remained unchanged over the previous month.

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