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Economy in Brief

Texas Manufacturing Growth & Outlook Continue to Weaken in September
by Tom Moeller  September 27, 2021

• Current new orders growth & order backlogs decline.

• Production & employment improve.

• Pricing strength picks up.

The Texas Manufacturing Outlook Survey, conducted by the Federal Reserve Bank of Dallas, indicated that its September General Business Activity Index fell to 4.6 from 9.0 in August. A lessened 21.1% of respondents reported improved business activity this month, down from 22.5% in August. An increased 16.5% of respondents reported a worsening of business conditions, up from 8.6% in April. The survey was conducted from September 14 to 22 amongst 92 Texas manufacturers.

The new orders growth index fell to 2.5 this month, the lowest level since July 2020, and the unfilled orders series dropped sharply to 14.9, a seven-month low. Despite these declines, the shipments index edged higher to 18.7. It remained, however, below the 33.1 March high. The production index improved slightly to 24.2. (These series date back to June 2004.)

The employment index strengthened to 26.3 in September, the highest level since April. An increased 35.5% of firms reported more hiring this month while a slightly higher 9.2% reported less. The wages & benefits index fell to 42.7 this in September, but remained up from 16.5 twelve months earlier, as 42.9% of respondents paid higher wages, up from 17.0% six months ago. Virtually none reported wage declines.

The finished goods prices measure rose to a record 44.0 in September, up from 5.7 twelve months ago. It reflected a record 46.7% of respondents reporting higher prices while a lessened 2.7% reported price declines. The index of prices paid for raw materials rose modestly m/m to a near-record 80.4 in September, up from 27.8 twelve months ago.

The headline reading of expectations for overall business activity in six months weakened to 11.5 in September, down from a recovery high of 37.3 reached just three months ago. Most of the component readings weakened except future employment and future delivery times which surged to 10.2, indicating the slowest delivery speeds since early-2018.

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

Texas Manufacturing Outlook Survey (SA, % Balance) Sep Aug Jul Sep '20 2020 2019 2018
Current General Business Activity Index 4.6 9.0 27.3 14.6 -10.6 -1.2 25.8
   Production 24.2 20.8 31.0 23.5 3.7 8.9 21.4
   Growth Rate of New Orders 2.5 10.7 25.8 13.5 -5.3 -1.1 14.8
   Employment 26.3 21.9 23.7 15.9 1.6 9.5 20.0
   Wages & Benefits 42.7 43.4 46.0 16.5 11.5 23.5 29.7
   Prices Received for Finished Goods 44.0 38.1 40.9 5.7 -1.7 2.5 17.6
General Business Activity Index Expected in Six Months 11.5 15.1 37.1 28.8 6.6 6.4 31.6
   Production 41.8 44.3 48.4 48.1 31.3 35.6 48.6
   Growth Rate of New Orders 25.9 29.0 31.5 38.7 23.9 25.2 35.8
   Employment 49.8 44.5 43.5 24.0 15.5 26.0 37.7
   Wages & Benefits 50.4 60.6 52.6 38.7 26.7 39.7 50.4
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