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Economy in Brief

Texas Manufacturing Index Fell Again in January
by Sandy Batten  January 31, 2022

• Third consecutive monthly decline in current general business activity index although outlook index rose for third time in past four months.

• Production slipped for second month.

• Current employment and prices slipped while wages and hours worked rose.

• New Covid wave adversely impacting activity and lack of available applicants restraining employment.

The pace of manufacturing activity in Texas continued to slow in January with the headline current general business conditions index falling to 2.0, the lowest reading since July 2020, from 7.8 in December, according to the Texas Manufacturing Outlook Survey conducted by the Federal Reserve Bank of Dallas. In the details, 20.8% of respondents reported an increase in activity, down from 23.0% in December while 18.8% reported a decrease in activity versus 15.2% in December. By contrast, the future general business activity index rose to 16.5 from 14.5 in December. Data were collected from 95 Texas manufacturers between January 18 and 26.

The production index, a key measure of state manufacturing activity, fell to 16.6 in January, its lowest reading since last May, from 26.0 in December. The new orders index edged up to 20.0 from 19.8 in December but the growth of new orders slowed to 12.6 from 13.4. Shipments slumped to 8.6 in January, the lowest reading since June 2020, from 20.5. The delivery times index fell to 17.9 in January from 25.9, suggesting slightly faster deliveries.

The employment index in January gave back its December gain, falling to 27.7 in January from 31.1. However, hours worked increased to 21.3, its highest reading in five months, from 19.6. Labor-market tightening was evident in the wages and benefits index, which rose to 49.6 in January, a record high dating back to 2004, from 46.5 in December. In the wages detail, 49.6% of respondents reported paying higher wages while none reported paying lower wages.

This month's survey contained special questions concerning the impact of Covid and labor-market conditions on activity. Seventy percent of respondents reported that Covid had adversely impacted them over the past month, mainly in the form of increased absenteeism (indicated by 83.3% of respondents). As for labor-market conditions, 45.1% percent of respondents said that the availability of job applicants had worsened over the past month with 73.3% indicating that the lack of available applicants was the primary impediment to hiring.

Indications of price inflation pressures continued to ease in January. The prices paid for raw materials index fell to 62.1, its second consecutive monthly decline, from 67.4 in December and a series high of 83.3 in November. And the prices received for finished goods index slid to 37.1 in January, its third consecutive monthly decline, from 42.2 in December.

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 equals the number reporting a decrease. Data for the Texas Manufacturing Outlook can be found in Haver's SURVEYS database.

Texas Manufacturing Outlook Survey (SA, % Balance) Jan Dec Nov Jan '21 2021 2020 2019
Current General Business Activity Index 2.0 7.8 11.5 7.7 19.6 -10.7 -1.2
   Production 16.6 26.0 26.7 5.3 24.8 3.8 8.9
   Growth Rate of New Orders 12.6 13.4 16.8 5.8 16.3 -5.3 -1.1
   Employment 27.7 31.1 28.7 16.9 24.0 1.6 9.5
   Wages & Benefits 49.6 46.5 48.6 17.4 38.7 11.5 23.5
   Prices Received for Finished Goods 37.1 42.2 42.5 14.4 38.1 -1.7 2.5
General Business Activity Index Expected in Six Months 16.5 14.6 29.4 30.0 27.5 6.6 6.4
   Production 38.0 41.0 52.3 44.2 46.0 31.3 35.6
   Growth Rate of New Orders 18.3 32.4 29.4 30.3 32.3 23.8 25.2
   Employment 52.2 44.2 36.6 31.9 42.1 15.4 26.0
   Wages & Benefits 54.4 62.2 63.0 49.1 55.3 26.7 39.7
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