Texas Manufacturing Activity Index Remains Negative; Expectations Deteriorate in October

Texas manufacturing activity weak, according to the Texas Manufacturing Outlook Survey conducted by the Federal Reserve Bank of Dallas. The General Business Activity index of -5.0 in October compared to September’s -8.7, staying well under its high of +14.1 in January. It has been negative in all but one month since January. Eighteen of respondents reported improved business activity in October while a lessened 23.4% reported a worsening. The Future Business Activity index fell to 7.0 this month, its lowest level since May. The data were collected October 14-22 from 73 manufacturing firms.

The production index held steady this month at 5.2 after falling from 21.3 in July. A lessened 24.0% of respondents reported increasing production as a lessened 18.8% reported it lower. The employment index improved to 2.0 in October from -3.4 as a greater 17.7% of respondents reported higher employment for the month and a lesser 15.7% reported lower. The hours worked measure, however, weakened to -5.5 from +3.4. It was the lowest reading since June. The shipments reading declined to 5.8 after falling to 6.7. The growth rate of new orders remained negative at -3.7 after falling to -6.4 in September. The unfilled orders measure also remained negative at -6.4 after falling to -8.4 in September. The capital expenditures index weakened sharply to 4.8 after falling to 13.3 in September. It was the lowest level since May.

Inflation indicators weakened this month. The index for prices received for finished goods declined to 7.7 after weakening to 11.7 in September. It was the lowest reading since March and below a June high of 26.1. A lessened 16.0% of respondents reported raising prices this month while a little-changed 8.3% reported lower prices. The index of prices paid for raw materials fell to a nine-month low of 33.4. The wages & benefits index of 14.2 this month compared to 15.9 in September and has been trending lower since a high of 55.0 in March 2022. A slightly higher 17.0% of respondents reported an increase while a greater 2.8% reported a decline in wages & benefits.

The Future Manufacturing Activity Index declined to -7.0 in October. It reflected a much smaller expected gain in production, shipments & new orders. Expected new orders growth reversed five months of increase. Expected employment edged higher after falling sharply in September while expected hours-worked also improved moderately. The future wages & benefits reading reversed its September decline and has improved sharply from a May low. The future capital spending reading reversed earlier declines and rose to the highest level since January.

Each index is calculated by subtracting the percentage reporting a decrease in activity 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.

Monetary Policy Report: Using Rules for Benchmarking from the Federal Reserve Bank of Philadelphia is available here.