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Economy in Brief

Texas Factory Sector Activity Eases
by Tom Moeller  September 30, 2019

The Federal Reserve Bank of Dallas reported in its Texas Manufacturing Outlook Survey that the General Business Activity Index fell to 1.5 during September from 2.7 in July. It remained down sharply from the February 2018 high of 38.2 and near the lowest level in three years. During the last ten years, there has been a 67% correlation between the index level and the q/q change in year GDP.

The production diffusion index declined to 13.9 and remained well below the May 2018 high of 35.4. The wages & benefits reading declined to a two-year low of 17.4. The shipments index fell slightly to 14.7 but remained up from 1.7 in June. It was nearly the highest level in 12 months. Offsetting these declines, the diffusion index for new orders growth improved to the highest level since April. The employment index also strengthened to 18.8, up from April's low of 4.6. It was the highest level since October, 2018.

Inflation pressures remained contained. The finished goods prices received index rose to 1.0, but remained well below the reading of 13.3 one year earlier. It was well below the June 2018 high of 26.2. The prices paid index for raw materials gained slightly m/m to 20.3, but remained below the high of 54.3 in June 2018.

The index of expected business conditions in six months suggested coming deterioration with a decline to -6.8. It was the lowest level since January 2016, down from the January 2018 high of 45.7. The future shipments and employment readings collapsed. Hours-worked fell sharply while expected wages & benefits remained weak. Capital spending intentions stabilized after declining sharply versus the August 2018 high.

Each index is calculated by subtracting the percentage reporting a decrease from the percentage reporting an increase. When all firms report rising activity, an index will register 100. An index will register -100 when all firms report a decrease. An index will be zero when the number of firms reporting an increase or decrease is equal. Items may not add up to 100% because of rounding. Data for the Texas Manufacturing Outlook can be found in Haver's SURVEYS database.

Texas Manufacturing Outlook Survey (SA, % Balance) Sep Aug Jul Sep'18 2018 2017 2016
Current General Business Activity Index 1.5 2.7 -6.3 27.5 25.8 20.6 -8.9
   Production 13.9 17.9 9.3 22.7 21.4 20.2 2.4
   Growth Rate of New Orders 4.4 1.8 2.7 11.4 14.8 11.4 -7.3
   Employment 18.8 5.5 16.0 18.0 20.0 11.4 -4.9
   Wages & Benefits 17.4 27.3 20.1 33.4 29.7 22.2 17.6
   Prices Received for Finished Goods 1.0 -2.6 -1.7 13.3 17.6 12.7 -1.6
General Business Activity Index Expected in Six Months -6.8 1.4 6.0 36.8 31.6 34.5 8.9
   Production 25.4 25.0 31.9 44.2 48.5 46.8 35.8
   Growth Rate of New Orders 18.8 14.8 30.7 37.3 35.9 37.7 24.3
   Employment 15.9 22.9 28.2 39.3 37.6 35.2 16.7
   Wages & Benefits 35.6 35.2 44.5 57.3 50.4 43.4 34.9
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