Dallas Fed Manufacturing: Business Conditions Continue to Worsen in February

The Dallas Fed released its Texas Manufacturing Outlook Survey (TMOS) for February. The latest general business activity index came in at -11.3, up from -27.4 from last month. This marks the 22nd consecutive month the index has been in contraction territory. All figures are seasonally adjusted.

Here is an excerpt from the latest report:

Texas factory activity stabilized in February after contracting in January, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, rebounded 16 points to 1.0. The near-zero reading suggests flat output month over month.

Other measures of manufacturing activity also indicated stability this month, and an increase in demand was seen. The new orders index—a key measure of demand—shot up 18 points in January to 5.2, its first positive reading since May 2022. The capacity utilization and shipments indexes both posted double-digit increases to push up from contractionary territory (negative readings) into neutral territory (readings near zero).

Perceptions of broader business conditions continued to worsen in February, though the indexes were less negative than in January. The general business activity index increased from -27.4 to -11.3, and the company outlook index rose from -18.2 to -8.5. The outlook uncertainty index retreated 10 points to 11.0.

Labor market measures suggested growth in employment but shorter workweeks this month. The employment index rebounded after two negative readings, rising 16 points to 5.9. Eighteen percent of firms noted net hiring, while 13 percent noted net layoffs. The hours worked index remained negative for a fifth month in a row but edged up to -7.0.

Wage and input costs continued to increase this month, while selling prices remained flat. The wages and benefits index held steady at a near-average reading of 20.1. The raw materials prices index retreated five points to 15.4, falling further below average and indicative of more modest cost growth than usual. The finished goods prices index remained near 0, suggesting prices in February were unchanged from January.