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Economy in Brief

Texas Manufacturing Activity Index Is Negative Again
by Tom Moeller  September 26, 2022

• Company outlook remains bleak.

• Employment & wages weaken.

• Pricing power continues to decline.

Texas manufacturing activity in September continued to fall, according to the Texas Manufacturing Outlook Survey conducted by the Federal Reserve Bank of Dallas. The general business activity index declined to -17.2 this month from -12.9 in August. It was the fifth consecutive negative reading and remained below the high of 38.1 in April 2021. A roughly steady 12.8% of respondents reported improved business activity in September but an increased 30.0% of respondents reported a worsening. The company outlook index remained negative at -10.7, the seventh straight negative reading. Data were collected from September 13-21 from 89 Texas manufacturers.

Labor market strength continued to wane this month. The employment index eased to 15.0 in September, down from a high of 31.1 in December. A greatly lessened 24.4% of respondents reported more hiring this month while a lessened 9.4% reported fewer hires. The wages & benefits index fell to 36.6 from 45.8 in August. It reached a high of 55.2 six months ago. The hours worked index fell to 8.0 from 14.4, down from a high of 24.5 in July of last year.

Many of the other individual series improved this month. The production index rose to 9.3, its highest level in four months. It nevertheless remained below the March 2021 high of 48.6. An increased 32.6% of respondents reported higher production while a lessened 23.3% reported a decline. The capacity utilization measure also rose. The growth rate of orders improved to -1.7 in September, though it was negative for the fifth straight month and down from a high of 31.6 last April. The unfilled orders index rose to -0.1, negative for the third month in the last four.

Also working higher, the shipments index improved to 7.1 in September, its highest level in four months. It remained below the April 2021 high of 33.5. The delivery times index also increased to 0.9 after its August decline to -3.5. It's been suggesting faster delivery speeds since a reading of 30.2 in April of last year.

On the inflation front, the index for prices received for finished goods fell to 18.1 in September, the lowest reading since January 2021 and down from the March 2022 high of 47.8. A greatly lessened 24.4% of respondents reported higher prices while A raised 6.3% reported a decline. The index of prices paid for raw materials edged up to 37.1 after declining sharply to 34.4 in August. It reached a high of 83.3 last November.

The future general business activity index fell sharply to -22.4 in September, its fifth consecutive negative reading. The future production index rose, however, to 28.3, up from 4.0 in June and the highest level since April. Other indexes of future manufacturing activity such as shipments and employment also improved.

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, conducted by the Federal Reserve Bank of Dallas, can be found in Haver's SURVEYS database.

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