The Dallas Fed released its Texas Manufacturing Outlook Survey (TMOS) for August. The latest general business activity index came in at -17.2, up 2.8 from last month. This is the third consecutive uptick in the general business activity index but marks the 16th consecutive month it has been in contraction territory. All figures are seasonally adjusted.
Here is an excerpt from the latest report:
Texas factory activity contracted again in August, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, fell six points to -11.2—its lowest level since May 2020.
Other measures of manufacturing activity also indicated contraction in August. The new orders index has been in negative territory for more than a year and posted a reading of -15.8, up slightly from July. The capacity utilization index edged down to -3.7, and the shipments index dropped 14 points to -15.8. The capital expenditures index dropped to -8.6, a three-year low.
Perceptions of broader business conditions continued to worsen in August. The general business activity index stayed negative but ticked up to -17.2, while the company outlook index was largely unchanged at -18.4. Uncertainty regarding outlooks continued to rise, with the corresponding index remaining positive, though it fell eight points in August to its lowest reading in more than two years.
Labor market measures suggest slower growth in employment and shorter workweeks in August. The employment index decreased six points to 4.3, a reading below the series average of 7.8. Eighteen percent of firms noted net hiring, while 14 percent noted net layoffs. The hours worked index slipped back into negative territory, coming in at -3.8.
Price pressures remained rather subdued in August, while wage growth accelerated. The raw materials prices index rose seven points to 17.4, still well below its average reading of 27.6. The finished goods prices index held steady at 1.8, a reading suggestive of little price growth this month. The wages and benefits index shot up 16 points to 34.9, pushing past its average reading of 21.1.
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 August. The future production index remained positive but slipped to 6.3. The future general business activity index returned to negative territory after pushing positive last month, coming in at -3.3. Most other measures of future manufacturing activity retreated this month but remained in positive territory.
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 fell to -3.3, after one month in positive territory.
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
