This article was originally written by Jill Mislinski. Starting in January 2023, AP Charts pages will be maintained by Jennifer Nash at Advisor Perspectives/VettaFi.
The Dallas Fed released its Texas Manufacturing Outlook Survey (TMOS) for February. The latest general business activity index came in at -13.5, down 5.1 from last month. All figures are seasonally adjusted.
Here is an excerpt from the latest report:
Texas factory activity declined in February for the first time since May 2020, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, edged down from 0.2 to -2.8, a reading suggestive of a modest contraction in output.
Other measures of manufacturing activity also indicated contraction this month. The new orders index was negative for a ninth month in a row and moved down nine points to -13.2. The growth rate of orders index fell from -12.3 to -16.9. The capacity utilization index returned to negative territory after two positive readings, falling 10 points to -4.1, while the shipments index was largely unchanged at -5.0.
Perceptions of broader business conditions worsened in February as pessimism increased. The general business activity index pushed down from -8.4 to -13.5. The company outlook index has been negative for a full year and plummeted 15 points this month to -17.5. The outlook uncertainty index moved up to 25.0, a four-month high.
Labor market measures suggest relatively flat employment and longer workweeks. The employment index dipped below zero to -1.0 after tracking above average for more than two years. Fifteen percent of firms noted net hiring, while 16 percent noted net layoffs. The hours worked index held fairly steady at 4.9.
Price and wage pressures increased in February. The raw materials prices index moved up five points to 25.1, though it remained slightly below its series average of 28.0 for the fourth month in a row. The finished goods prices index rose from 9.9 to 15.8, elevated relative to its series average of 9.0. The wages and benefits index remained well above average and inched up two points to 32.7.
Background on the Texas Manufacturing Outlook Survey (TMOS)
Monthly data for this indicator only dates back to 2004, so it is difficult to see the full potential of this indicator without several business cycles of data. Nevertheless, it is an interesting and important regional manufacturing indicator. The TMOS is a monthly survey of 100 Texas manufacturers that provides an assessment on the state's factory activity. The survey asks firms to whether output, employment, orders, prices, and other indicators have increased, decreased, or remained unchanged over the previous month. Results are aggregated into balance indexes where negative readings indicator contractions while positive ones indicate expansion.
The Dallas Fed on the TMOS importance:
Texas is important to the nation’s manufacturing output. The state produced $159 billion in manufactured goods in 2008, roughly 9.5 percent of the country’s manufacturing output. Texas ranks second behind California in factory production and first as an exporter of manufactured goods.
Texas turns out a large share of the country’s production of petroleum and coal products, reflecting the significance of the region’s refining industry. Texas also produces over 10 percent of the nation’s computer and electronics products and nonmetallic mineral products, such as brick, glass and cement.
Here is a snapshot of the complete TMOS.
Future Outlook
Expectations regarding future manufacturing activity were mixed in February. The future production index pushed further positive to 21.3, signaling output growth is expected over the next six months. The future general business activity index was slightly negative, moving up from -9.1 to -2.9. Most other measures of future manufacturing activity were positive this month.
The next chart is an overlay of the general business activity index and the future outlook index — the outlook six months ahead. Future general business activity increased to -2.9.
For comparison, here is the latest ISM Manufacturing survey.
Let's compare all five regional manufacturing indicators. Here is a three-month moving average overlay of each since 2004 (for those with data).
Here is the same chart including the average of the five for the latest month with complete data.
Here are the remaining four monthly manufacturing indicators that we track:
Kansas City Manufacturing Survey
Empire State Manufacturing Survey
Fifth District Manufacturing Survey (Richmond)
Philadelphia Fed Manufacturing Business Outlook Survey
Regional Fed Overview
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