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July 2007
Manufacturing Activity Cools
Texas Manufacturing:
A Primer
The Texas Manufacturing Outlook Survey takes the pulse of an important segment of the nation's industrial sector. The state produced $139.7 billion worth of manufactured goods in 2006, 8.7 percent of the U.S. total. Texas ranks second behind California in factory production and first as an exporter of manufactured products.
According to 2005 estimates, Texas turns out 19 percent of U.S. petroleum and coal products and nearly 15 percent of chemical products. The state also produces just over 13 percent of the nation's output of computer and electronics products, nearly 10 percent machinery, and 10 percent nonmetallic mineral products, such as brick, glass and cement. |
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The Texas Manufacturing Outlook Survey points to weakening factory activity in July. Most indexes of current activity declined from their June levels and fell into negative territory. Despite July's slowdown, the six-month outlook remained optimistic.
Measures for production, capacity utilization, volume of new orders, growth rate of orders, volume of shipments and average employee workweek turned negative in July, with more respondents reporting softening in business activity than in June. The weak July numbers pushed these indexes to their lowest levels since the survey began in 2004.
The general business activity index dropped from 10.8 in June to –3.6 in July. Firms reporting worsening conditions increased from 12.6 percent in June to 16.2 percent in July, and a smaller share of respondents said general business activity had improved. The current company outlook index also turned negative in July.
Upward price and cost pressures remained prevalent in July. The raw materials price index was mostly unchanged. The index for prices received for finished goods moved higher, with a fifth of respondents reporting an increase in selling prices. The wages and benefits index rose as well; 25 percent of respondents cited an increase and less than 2 percent reported a decrease.
Expectations for future manufacturing activity remained positive. The indexes for future capacity utilization, growth rate of orders and volume of shipments improved slightly, with a larger share of respondents expecting increases in these measures six months from now. Additionally, more than 50 percent of reporting firms anticipate a pickup in production and volume of orders in six months.
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.
For additional perspective
on the survey, see
"The Texas Manufacturing Outlook Survey: A Tool
for Understanding the Economy" and "Made
in Texas: The Natural Selection of Manufacturing."
- Click on links in the table for greater details,
including historical data.
| Questions
regarding the Texas Manufacturing Outlook
Survey can be addressed to Fiona Sigalla at Fiona.Sigalla@dal.frb.org or 214-922-5166.
Note
The Texas Manufacturing
Outlook Survey has not been produced for
a long enough time period to assess the
appropriateness of seasonal adjustment.
Thus, while respondents are asked to adjust
for normal seasonal variation, the month-to-month
values of these indexes may include some
normal seasonal variation that is not indicative
of changes in the business cycle. Other
Federal Reserve Bank business outlook indexes
benefit from seasonal adjustment, and the
Texas indexes will be seasonally adjusted
if appropriate. |
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