December 27, 2022
Texas Manufacturing Growth Rebounds, Though Demand Continues to Decline
What’s New This Month
For this month’s survey, Texas business executives were asked supplemental questions on wages, prices and outlook concerns. Results for these questions from the Texas Manufacturing Outlook Survey, Texas Service Sector Outlook Survey and Texas Retail Outlook Survey have been released together. Read the special questions results.
Growth in Texas factory activity resumed in December, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, rose nine points to 9.7, suggestive of a pickup in output growth.
Other measures of manufacturing activity showed mixed signals this month. The new orders index was negative for a seventh month in a row—suggesting a continued decrease in demand—though it moved up from -20.9 to -9.2. The growth rate of orders index rose nearly 11 points to -9.3. The capacity utilization index turned positive, rising from -3.4 to 8.5, and the shipments index pushed up nine points to 1.9 following two consecutive negative readings.
Perceptions of broader business conditions continued to worsen in December. The general business activity index pushed down further, from -14.4 to -18.8. The company outlook index posted its 10th straight negative reading but moved up two points to -12.8. The outlook uncertainty index retreated five points to 15.6, in line with its average reading of 16.6.
Labor market measures pointed to stronger employment growth and longer workweeks. The employment index climbed eight points to 14.0, a reading significantly above its series average of 7.9. Twenty-four percent of firms noted net hiring, while 10 percent noted net layoffs—on par with the average share of respondents noting layoffs this year. The hours worked index pushed up eight points to 7.2.
Price and wage indexes saw little movement in December. The raw materials prices index was largely stable at 23.7, remaining below its series average of 28.1 for the second month in a row. The finished goods prices index was little changed at 12.5, still slightly above its series average of 9.0. The wages and benefits index ticked down from 36.5 to 35.0.
Expectations regarding future manufacturing activity were mixed in December. The future production index remained positive at 10.2, signaling that respondents expect output growth to continue. The future general business activity index remained negative, though it pushed up nine points to -8.3. Most other measures of future manufacturing activity were positive this month.
Next release: Monday, January 30
Data were collected Dec. 13–21, and 90 Texas manufacturers responded to the survey. The Dallas Fed conducts the Texas Manufacturing Outlook Survey monthly to obtain a timely assessment of the state’s factory activity. Firms are asked whether output, employment, orders, prices and other indicators increased, decreased or remained unchanged over the previous month.
Survey responses are used to calculate an index for each indicator. Each index is calculated by subtracting the percentage of respondents reporting a decrease from the percentage reporting an increase. When the share of firms reporting an increase exceeds the share reporting a decrease, the index will be greater than zero, suggesting the indicator has increased over the prior month. If the share of firms reporting a decrease exceeds the share reporting an increase, the index will be below zero, suggesting the indicator has decreased over the prior month. An index will be zero when the number of firms reporting an increase is equal to the number of firms reporting a decrease. Data have been seasonally adjusted as necessary.
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