The Dallas Fed released its Texas Manufacturing Outlook Survey (TMOS) for September. The latest general business activity index came in at -18.1, down 0.9 from last month. This is the first monthly decline in the general business activity index in the past 4 months and marks the 17th consecutive month it has been in contraction territory. All figures are seasonally adjusted.
Here is an excerpt from the latest report:
Growth in Texas factory activity resumed in September, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, rebounded nearly 20 points to 7.9—its highest reading of the year.
Other measures of manufacturing activity also moved up this month, though some remained in negative territory. The new orders index pushed up 11 points to -5.2, a reading still indicative of falling demand though not at the pace seen in the past several months. The capacity utilization index rebounded into positive territory, rising from -3.7 to 7.8, while the shipments index moved up to near zero after slipping to -15.8 in August.
Perceptions of broader business conditions continued to worsen in September. The general business activity and company outlook indexes remained largely unchanged at -18.1 and -17.5, respectively. Uncertainty regarding outlooks picked up notably, with the corresponding index pushing up 14 points to 27.0, its highest reading in nearly a year.
Labor market measures suggest stronger employment growth and longer workweeks in September. The employment index rebounded nine points to 13.6, a reading well above the series average of 7.9. Twenty-three percent of firms noted net hiring, while 9 percent noted net layoffs. The hours worked index climbed back into positive territory, coming in at 5.1.
Price and wage pressures were mixed. The raw materials prices index rose again this month, to 25.0. This is after trending down in the first half of the year—all the way to a near-zero reading in June—and now trending back up to near its average reading. The finished goods prices index, however, has remained in a -2.0 to 2.0 range since retreating to zero in May. The index held steady at 1.8 this month, suggesting little price growth. The wages and benefits index remained highly elevated at 34.8.
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 September. The future production index remained positive and pushed up five points to 10.9. The future general business activity index fell further negative to -16.5. Most other measures of future manufacturing activity advanced into slightly more positive territory 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 fell to -16.5, its lowest reading since April.
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
