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Economy in Brief

Texas Factory Sector Outlook Continues to Improve
by Gerald D. Cohen  October 26, 2020

• Texas Manufacturing Outlook survey rose to a 19.8% balance; third consecutive positive reading.

• Expectations measure edges up.

The Federal Reserve Bank of Dallas Texas Manufacturing Outlook Survey General Business Activity Index increased to a 19.8% balance in October from 13.6% in September. This measure hit a record low -74.0% in April (data goes back to June 2004) and has been in positive territory for three months, though remains well below the previous cyclical peak of 37.6% in February 2018.

The production and new orders measures improved 3.2 and 5.2 percentage points (ppt) respectively, while growth in new orders gained 1.1 ppt. Meanwhile, the employment index fell 5.8 ppt, though still remains in positive territory. Pricing power improved 1.6 ppt to a still-low 6.8% balance.

The index of expected business conditions in six months increased to 28.4% in October from 28.0%. Expectations for production declined 0.6 ppt while new orders fell 11.1 ppt. However, the growth in new orders edged up 0.3 ppt.

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 October 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) Oct Sep Aug Oct '19 2019 2018 2017
Current General Business Activity Index 19.8 13.6 8.0 -5.4 -1.1 25.8 20.6
   Production 25.5 22.3 13.1 4.4 8.9 21.4 20.2
   Growth Rate of New Orders 14.3 13.2 11.8 -6.4 -1.1 14.8 11.4
   Employment 8.7 14.5 10.6 11.0 9.5 20.0 11.4
   Wages & Benefits 16.5 15.9 15.2 21.0 23.5 29.7 22.2
   Prices Received for Finished Goods 6.8 5.2 0.9 4.7 2.5 17.6 12.7
General Business Activity Index Expected in Six Months 28.4 28.0 20.4 1.1 6.4 31.6 34.6
   Production 47.2 47.8 43.0 29.3 35.6 48.6 46.9
   Growth Rate of New Orders 37.9 37.6 39.2 25.7 25.2 35.8 37.7
   Employment 23.1 23.3 27.6 22.7 26.1 37.7 35.3
   Wages & Benefits 29.9 38.1 28.1 38.8 39.7 50.4 43.4
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