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Economy in Brief

Texas Manufacturing Activity & Expectations Weaken in May
by Tom Moeller  June 1, 2021

• Current production, new orders growth and employment ease.

• Pricing power remains strong.

The Texas Manufacturing Outlook Survey, conducted by the Federal Reserve Bank of Dallas, indicated that its General Business Activity Index fell to 34.9 in May from 37.3 in April. A strengthened 47.8% of respondents reported improved business activity, up from 29.0% three months earlier. A higher 12.9% of respondents reported that conditions had worsened versus 11.8% three months ago. The survey was conducted from May 18-26 amongst 103 employers.

The growth rate of the new orders reading weakened to 19.5 from April's record of 32.3. (The series dates back to June 2004.) A near-record 44.5% of respondents reported faster new orders growth, up from 22.1% twelve months earlier. The employment index fell to 22.7 from 31.3 as a lessened 29.0% of firms reported more hiring. Wages & benefits increased to a record 39.0. The production index reading to 15.7, the lowest point since January. The shipments measure fell to a three-month low as did unfilled orders.

The finished goods prices measure eased to 38.4 from the record 39.1. The May decrease reflected 43.0% of respondents reporting higher prices while 4.6% reported price declines. The index of prices paid for raw materials surged to a record 79.9, up from 2.9 twelve months earlier.

The headline reading of expectations for overall business activity in six months eased to 31.4 after rising to 36.6 in April. The expected employment measure backed away slightly from April's record high, while expected hours-worked fell. Expectations for production were strong and little changed versus April but expectations for new orders growth fell. Expected wages strengthened to a near-record high.

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 or a decrease is equal. Data for the Texas Manufacturing Outlook can be found in Haver's SURVEYS database.

Texas Manufacturing Outlook Survey (SA, % Balance) May Apr Mar May '20 2020 2019 2018
Current General Business Activity Index 34.9 37.3 28.9 -47.6 -10.6 -1.2 25.8
   Production 15.7 34.0 48.0 -26.9 3.7 8.9 21.4
   Growth Rate of New Orders 19.5 32.3 22.7 -29.9 -5.3 -1.1 14.8
   Employment 22.7 31.3 18.8 -10.3 1.6 9.5 20.0
   Wages & Benefits 39.0 37.1 28.0 0.2 11.5 23.5 29.7
   Prices Received for Finished Goods 38.4 39.1 32.2 -18.8 -1.7 2.5 17.6
General Business Activity Index Expected in Six Months 31.4 36.6 33.7 -17.9 6.6 6.4 31.6
   Production 47.6 47.2 38.3 29.8 31.3 35.6 48.6
   Growth Rate of New Orders 34.4 43.2 34.0 14.0 23.9 25.2 35.8
   Employment 47.6 48.2 38.4 -2.6 15.5 26.0 37.7
   Wages & Benefits 56.4 49.9 42.4 13.2 26.7 39.7 50.4
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