The Dallas Fed released its Texas Manufacturing Outlook Survey (TMOS) for May. The latest general business activity index came in at -29.1, down 5.7 from last month. The general business activity index has declined each of the past four months and has been in contraction territory since May of last year. All figures are seasonally adjusted.
Here is an excerpt from the latest report:
Texas factory activity remained relatively flat in May, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, inched down from 0.9 to -1.3, with the near-zero reading suggestive of little change in output from last month.
Other measures of manufacturing activity showed declines in May. The new orders index has now been in negative territory for a year and pushed down further from -9.6 to -16.1. The growth rate of orders index also fell, declining 10 points to -20.7, its lowest value since mid-2020. The capacity utilization index moved down from 3.9 to -4.9, while the shipments index was unchanged at -3.0.
Perceptions of broader business conditions continued to worsen in May. The general business activity index dropped six points to -29.1, its lowest reading in three years. The company outlook index pushed down seven points to -22.3, also a three-year low. The outlook uncertainty index retreated to 13.4, a reading below average.
Labor market measures suggest continued employment growth but flat work hours. The employment index ticked up two points to 9.6, slightly above its average reading. Twenty-three percent of firms noted net hiring, while 13 percent noted net layoffs. The hours worked index inched up to -0.9.
Price pressures dropped further below normal levels, and wage pressures also eased but remained elevated. The raw materials prices index fell six points to 13.8, further below its average reading of 27.8. The finished goods prices index fell eight points to 0.4, with the near-zero reading suggestive of flat selling prices. The wages and benefits index declined 13 points to 25.0, a reading now only slightly above its average of 21.0.
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.
Texas Manufacturing Survey Future Outlook
Expectations regarding future manufacturing activity were mixed in May. The future production index rebounded from 3.0 to 12.0, while the future general business activity index remained negative, edging up to -12.7. Most other measures of future manufacturing activity remained positive but showed mixed movements 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 inched up to -12.7.
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.
This article was originally written by Jill Mislinski. Starting in January 2023, AP Charts pages will be maintained by Jennifer Nash at VettaFi | Advisor Perspectives
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
Read more updates by Jen Nash
