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Economy in Brief

Texas Manufacturing Growth Slows and Outlook Weakens in July
by Tom Moeller  July 26, 2021

• Current shipments & unfilled orders ease; production & new orders improve.

• Expected employment weakens.

• Price & wage strength eases.

The Texas Manufacturing Outlook Survey, conducted by the Federal Reserve Bank of Dallas, indicated that its General Business Activity Index fell to 27.3 in July from 31.1 in June. A lessened 36.4% of respondents reported improved business activity this month, down from May's high of 45.9%. A lessened 9.1% of respondents reported that conditions had worsened in July, a three-year low. The survey was conducted between July 13-21 amongst 104 Texas manufacturers.

The growth rate of shipments as well as unfilled orders indexes weakened slightly. Offsetting these declines, the growth rate of production picked up to 31.0 after strengthening to 29.4 in June. The reading remained well below the March high of 48.0. The new orders growth index rose to 25.8 from 23.4 in June. Both figures remained below April's record of 32.3. (These series date back to June 2004.) A steady 37.1% of respondents reported faster new orders growth. The employment index improved slightly to 23.7, the highest reading in three months. A steady 31.3% of firms reported more hiring this month while a diminished 7.6% reported less. The wages & benefits index slipped to 46.0 from June's record 48.1 as 46.4% of respondents paid higher wages, up from 18.4% six months ago. The production index reading of 31.0 was the highest level in three months.

The finished goods prices measure eased to 40.9 in July from the record 42.8. The figure reflected a near-record 43.8% of respondents reporting higher prices while a slightly increased 2.9% reported price declines. The index of prices paid for raw materials fell moderately to 73.5 from the record 80.8 in June.

The headline reading of expectations for overall business activity in six months remained strong at 37.1, the highest level since early-2018. Each of the component readings weakened, however, including expected new orders, production, employment & wages. Nonetheless, all remained at high levels.

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) Jul Jun May Jul '20 2020 2019 2018
Current General Business Activity Index 27.3 31.1 34.9 -1.9 -10.6 -1.2 25.8
   Production 31.0 29.4 15.7 17.6 3.7 8.9 21.4
   Growth Rate of New Orders 25.8 23.4 19.5 1.7 -5.3 -1.1 14.8
   Employment 23.7 22.9 22.7 4.2 1.6 9.5 20.0
   Wages & Benefits 46.0 48.1 39.0 9.6 11.5 23.5 29.7
   Prices Received for Finished Goods 40.9 42.8 38.4 -0.8 -1.7 2.5 17.6
General Business Activity Index Expected in Six Months 37.1 37.3 31.4 11.2 6.6 6.4 31.6
   Production 48.4 56.6 47.6 37.7 31.3 35.6 48.6
   Growth Rate of New Orders 31.5 40.6 34.4 31.8 23.9 25.2 35.8
   Employment 43.5 48.2 47.6 12.0 15.5 26.0 37.7
   Wages & Benefits 52.6 59.2 56.4 22.8 26.7 39.7 50.4
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