Texas Manufacturing Activity Index Turns Negative & Expectations Weaken in September

Texas manufacturing activity weakened this month, according to the Texas Manufacturing Outlook Survey conducted by the Federal Reserve Bank of Dallas. The General Business Activity index declined to -8.7 during September from -1.8 in August, and remained below a high of +14.1 in January. A lessened 17.9% of respondents reported improved business activity in September while a higher 26.6% reported a worsening. The Future Business Activity index fell to 8.4 this month, its lowest level since May. The data were collected September 16-24 from 72 manufacturing firms.

The production index declined to 5.2 this month from 15.3 in August. A lessened 25.9% of respondents reported increasing production while an increased 20.7% reported lower. The employment index in September declined to -3.4 from +8.8 as a lessened 12.7% of respondents reported higher employment for the month and a higher 16.1% reported lower. The hours worked measure weakened to 3.4 from 15.0. The shipments reading declined to 6.7 after surging to a three-year high of 14.2 in August. The growth rate of new orders weakened to -6.4 after strengthening to 2.6 in August. The unfilled orders measure weakened to -8.4 from -5.1. The capital expenditures index remained positive at 13.3 after surging to 14.6 in August.

Inflation indicators eased this month. The index for prices received for finished goods declined to 11.17 after rising to 15.1 in August. It was below a June high of 26.1. A lessened 20.5% of respondents reported raising prices this month while a little-changed 8.8% reported lower prices. The index of prices paid for raw materials eased to 43.4 from 43.7, but remain well above a low of 1.0 in June 2023. The wages & benefits index of 15.9 this month compared to 15.4 in August and has been trending lower since a high of 55.0 in March 2022.

The Future Manufacturing Activity Index declined to 8.4 in September from 24.8 in August. It was the lowest reading since May. It reflected a smaller expected gain in production & shipments. Expected new orders growth continued to strengthen to its highest level since January. Expected employment declined sharply to its lowest level since June of last year while expected hours worked also declined. The future wages & benefits reading fell sharply after surging in each of the prior three months. The future capital spending reading eased to its lowest level in six months.

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.