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Economy in Brief

Texas Manufacturing Activity Index Remains Limp in October
by Tom Moeller  October 31, 2022

• Index is negative for sixth straight month.

• New orders & shipments decline.

• Pricing power stabilizes.

Texas manufacturing activity in October weakened, according to the Texas Manufacturing Outlook Survey conducted by the Federal Reserve Bank of Dallas. The general business activity index fell to -19.4 this month from -17.2 in September. It was the sixth consecutive negative reading and remained below the high of 38.1 in April 2021. An increased 16.1% of respondents indicated improved business activity in October but a higher 35.5% of respondents reported a worsening. The company outlook index remained negative at -9.1, the eighth straight negative reading. Data were collected from October 18-to-26 from 96 Texas manufacturers.

The growth rate of orders reading fell sharply to -13.2 in October and reversed most of its September improvement. It was negative for the sixth straight month and down from a high of 31.6 last April. The shipments measure turned negative, now standing at -1.6, the first reading below zero since May 2020. The production measure fell to 6.0 from 9.3. A lessened 27% of respondents reported higher production while a smaller 21% reported a decline. The unfilled orders index eased to -0.4, negative for the third straight month. The capacity utilization index fell to 9.1 after improving to 13.4 in September. These were the highest readings since May.

The labor market improved. The employment index rose to 17.1 in October from 15.0 in September, but remained down from a high of 31.1 in December. A higher 26.4% of respondents reported more hiring this month while a steady 9.3% reported fewer hires. The wages & benefits index was fairly steady m/m at 36.7. It reached a high of 55.2 in March. The hours worked index fell to -0.1 from 8.0, down from a high of 24.5 in July of last year.

On the inflation front, the index for prices received for finished goods rose to 22.2 in October after declining to 18.1 in September. That reading was down from the October 2021 high of 50.9. A higher 31.6% of respondents reported raising prices while an increased 9.4% reported a decline. The index of prices paid for raw materials fell to 32.0, its lowest level in two years. It reached a high of 83.3 last November.

The future general business activity index rose slightly to -21.2, its sixth consecutive negative reading. The future production index collapsed to 3.1 from 28.3. Future shipments and employment similarly declined.

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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