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Economy in Brief

Texas Manufacturing Activity Weakens Further During January
by Tom Moeller  January 25, 2021

• General business conditions deteriorate to six-month low.

• Weakening is broad-based amongst subindexes.

• Expectations reading improves.

The Federal Reserve Bank of Dallas reported that its Texas Manufacturing Outlook Survey General Business Activity Index fell to 7.0 during January from 10.5 in December, revised from 9.7. The index was below its October high of 21.2. Data were collected from January 12-20.

The production measure fell sharply to 4.6 from 26.8, its lowest point since May. A greatly lessened 27% of respondents reported an increase in production in January while an higher 23% reported a decline. The new orders growth measure fell sharply to 5.9, a six-month low. The shipments reading weakened to 13.5 from a December high of 23.4, while the unfilled orders measure fell moderately.

The employment reading declined to a still-strong 16.6 in January from 20.9 in December. A lessened 27% of respondents reported increased hiring while a fairly steady 11% indicated a decline. The wages and benefits also eased to 17.6, but it remained near the recent high.

The prices received measure eased to 13.9 in January after strengthening in December to its highest reading since July 2018. More than 20% of respondents reported receiving higher prices while seven percent indicated a decline. The raw materials price measure surged to 55.0, up from -21.2 nine months ago.

The headline index of expectations for overall business activity rebounded and was just below its October 2018 high. Most of the subindexes deteriorated, however, including production, new orders growth and employment. Nevertheless, expectations for wages & benefits improved to the highest level since March 2019. Capital spending expectations remained firm.

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. Data for the Texas Manufacturing Outlook can be found in Haver's SURVEYS database.

Texas Manufacturing Outlook Survey (SA, % Balance) Jan Dec Nov Jan '20 2020 2019 2018
Current General Business Activity Index 7.0 10.5 12.9 -0.5 -10.6 -1.2 25.8
   Production 4.6 26.8 8.7 11.2 3.7 8.9 21.4
   Growth Rate of New Orders 5.9 15.9 9.3 7.4 -5.3 -1.1 14.8
   Employment 16.6 20.9 13.0 1.1 1.6 9.5 20.0
   Wages & Benefits 17.6 19.6 14.0 15.1 11.5 23.5 29.7
   Prices Received for Finished Goods 13.9 19.0 6.2 -2.4 -1.7 2.5 17.6
General Business Activity Index Expected in Six Months 29.6 17.8 26.7 6.2 6.6 6.4 31.6
   Production 43.7 47.3 40.9 38.9 31.3 35.6 48.6
   Growth Rate of New Orders 29.8 34.9 37.6 27.2 23.9 25.2 35.8
   Employment 31.9 33.4 28.6 24.4 15.5 26.0 37.7
   Wages & Benefits 48.3 46.2 37.6 41.3 26.7 39.7 50.4
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