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Economy in Brief

Texas Factory Sector Activity and Pricing Power Diminish
by Tom Moeller  November 25, 2019

The Federal Reserve Bank of Dallas reported in its Texas Manufacturing Outlook Survey that the General Business Activity Index of -1.3 during November compares to October's -5.1. It remained down sharply from the February 2018 high of 38.2. During the last ten years, there has been a 67% correlation between the index level and the q/q change in year GDP. The company outlook measure also was negative at -2.1, the first month below zero since July and weaker than +11.9 in November 2018.

The production measure fell sharply to -2.4, the first negative reading since May 2016. The new orders growth rate index declined further into negative territory with a reading of -9.3. The employment index weakened sharply to the lowest level since late-2016. Shipments, unfilled orders and hours-worked also were below zero. The wages & benefits reading added to these declines and remained in a sharp downward trend indicating weakened growth. The level of 21.1 compared to a high of 33.8 in August of last year.

Price measures deteriorated as well. The finished goods prices received index fell to 1.9 and reversed most of October's increase, remaining below the June 2018 high of 26.2. The prices paid index for raw materials also weakened.

The index of expected business conditions in six months showed improved prospects for activity overall. It increased to 7.3, the highest level in six months and improved from the negative readings recorded a few months ago. Future hours-worked rose sharply and production improved slightly, but there was weakness elsewhere in the report. Expected shipments, new orders, employment and capital spending intentions weakened.

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) Nov Oct Sep Nov'18 2018 2017 2016
Current General Business Activity Index -1.3 -5.1 1.5 16.1 25.8 20.6 -8.9
   Production -2.4 4.5 13.9 7.7 21.4 20.2 2.4
   Growth Rate of New Orders -9.3 -5.9 4.4 4.7 14.8 11.4 -7.3
   Employment 0.9 11.0 18.8 15.5 20.0 11.4 -4.9
   Wages & Benefits 21.1 22.2 17.4 24.8 29.7 22.2 17.6
   Prices Received for Finished Goods 1.9 4.8 1.0 7.2 17.6 12.7 -1.6
General Business Activity Index Expected in Six Months 7.3 2.4 -6.8 24.1 31.6 34.5 8.9
   Production 31.3 29.6 25.4 53.6 48.5 46.8 35.8
   Growth Rate of New Orders 19.3 26.1 18.8 31.7 35.9 37.7 24.3
   Employment 20.6 23.6 15.9 41.4 37.6 35.2 16.7
   Wages & Benefits 36.5 39.0 35.6 44.3 50.4 43.4 34.9
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