Texas Manufacturing Outlook Survey Indicates Stronger-than-Anticipated Growth, Again

The Texas Manufacturing Outlook Survey showed factory activity in the region continued to increase in August, again beating the consensus forecast. The general activity index hit 17.0, higher than the 15.8 consensus forecast and matching the highest given for the month.

The production index, a key measure of state manufacturing conditions, ticked down a bit to a still very strong 20.3, suggesting output grew but at a slightly slower pace than the previous month. The Texas Manufacturing Outlook Survey has been generally considered as overheated, thus a smaller decrease in growth is actually welcomed news.

Other measures of current manufacturing activity also indicated continued growth, as other regional surveys have, as well. National manufacturing data have also strengthened, though not at the pace of regional surveys conducted by District Federal Reserves.

The new orders and the growth rate of orders indexes both ticked down slightly but stayed solidly positive at 14.3 and 11.7, respectively. The capacity utilization index fell 6 points to 12.2, while the shipments index gained 7 points to 18.1.

The company outlook index fell 10 points to 16.3 after skyrocketing to a multiyear high last month, posting its 12th consecutive positive reading.

Labor market measures indicate strong employment gains, wage increases and increased workweeks this month. The employment index came in at 9.9, slightly below the July reading but still strong and continuing consecutive positive readings for the year.

Eighteen percent (18%) of firms noted net hiring juxtaposed to 8% reporting net layoffs. The hours worked index gained 5 points to 14.5 and wages & benefits came in at a very strong 26.9, which points to inflationary pressures.

The raw materials prices index increased 11 points to 26.9, its highest level in 6 months. The finished goods prices index gained 5 points to 10.2 and the wages and benefits index also increased 6 points to 26.9.

Expectations regarding future business conditions continued to improve. The indexes of future general business activity and future company outlook remained elevated at 29.2 and 34.5, respectively. Other indexes of future manufacturing activity showed mixed movements but remained solidly in positive territory.

Next release: Monday, September 25