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Economy in Brief

Texas Factory Activity Improvement Led by Production
by Tom Moeller  February 24, 2020

The Federal Reserve Bank of Dallas reported in its Texas Manufacturing Outlook Survey that the General Business Activity Index increased to 1.2 this month from -0.2 in January. The figure is a diffusion index with readings above zero indicating positive growth. The amount of growth last month was limited, but improved versus the negative readings of the prior four months.

The production measure strengthened to 16.4 for February and was the highest reading in six months. The wages & benefits reading strengthened as well to 22.6. New orders growth slowed, however, and the employment index eased to -0.9, the first negative reading since December 2016. It was below September's 18.8. Shipments held m/m at 8.5, but were about half the level six months earlier.

Pricing power remained weak. The finished goods prices received index improved to -0.1 from -1.9, but remained below the June 2018 high of 26.2. The raw materials prices paid index of 12.8 similarly has moved erratically sideways since early last year.

The index of expected business conditions in six months continued to show expected improvement in activity. The index level of 18.0 was its highest point since April of last year. The expectations index for new orders growth strengthened, while both expected production and shipments fell. The trend in expected employment reading has moved sideways, but wages & benefits on average have recently improved.

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

An Assessment of Economic Conditions and the Stance of Monetary Policy from Robert S. Kaplan, President, Federal Reserve Bank of Dallas can be found here.

Texas Manufacturing Outlook Survey (SA, % Balance) Feb Jan Dec Feb'19 2019 2018 2017
Current General Business Activity Index  1.2 -0.2 -3.2 11.6 -0.7 25.8 20.6
   Production 16.4 10.5 3.6 9.2 9.0 21.4 20.2
   Growth Rate of New Orders 3.6 6.1 -5.0 3.5 -0.8 14.8 11.4
   Employment -0.9 1.9 6.2 11.7 9.4 20.0 11.4
   Wages & Benefits 22.6 16.3 14.6 28.8 24.0 29.7 22.2
   Prices Received for Finished Goods -0.1 -1.9 0.7 4.8 2.4 17.6 12.7
General Business Activity Index Expected in Six Months 18.0 7.6 6.4 16.4 7.2 31.6 34.5
   Production 35.0 38.9 36.9 44.5 36.1 48.5 46.8
   Growth Rate of New Orders 30.0 27.0 26.8 30.4 25.6 35.9 37.7
   Employment 20.4 25.3 17.8 32.9 26.7 37.6 35.2
   Wages & Benefits 39.7 42.4 28.4 46.8 39.9 50.4 43.4
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