Texas Manufacturing Outlook Survey Still Strong in Harvey Aftermath

The Dallas Federal Reserve said the Texas Manufacturing Outlook Survey continued to report strong factory activity growth despite the effects of Hurricane Harvey. The results stand in stark contrast to the Chicago Fed National Activity Index (CFNAI), which fell to negative territory post-Harvey.

The closely-watched production index only slightly decreased to 19.5 in September from 20.3 in August, suggesting factory output still grew at about the same pace. The general business activity index increased to 21.3, its highest reading in 7 months. The company outlook index posted its 13th consecutive positive reading, gaining 9 points to 25.6.

Labor market measures suggested faster employment growth and longer workweeks this month.

The employment index came in at 16.3, its highest level since April 2014. Twenty-eight percent (28%) of firms noted net hiring, compared with 11% noting net layoffs. The hours worked index rose 4 points to 18.4.

Upward pressure on prices increased, while wage pressures held steady in September. The raw materials prices index pushed up eight points to 34.5, its highest reading since July 2011. The finished goods prices index climbed seven points to 17.5, its highest level in 7 months. The wages and benefits index was essentially unchanged at 26.4.

Expectations regarding future business conditions continued to improve.

The indexes of future general business activity and future company outlook remained elevated at 34.5 and 39.9, respectively. Other indexes for future manufacturing activity showed mixed movements but remained solidly in positive territory.

Next release: Monday, October 30

Data were collected Sept. 12–20, and 111 Texas manufacturers responded to the survey. The Dallas Fed conducts the Texas Manufacturing Outlook Survey monthly to obtain a timely assessment of the state’s factory activity. Firms are asked whether output, employment, orders, prices and other indicators increased, decreased or remained unchanged over the previous month.

Survey responses are used to calculate an index for each indicator. Each index is calculated by subtracting the percentage of respondents reporting a decrease from the percentage reporting an increase. When the share of firms reporting an increase exceeds the share reporting a decrease, the index will be greater than zero, suggesting the indicator has increased over the prior month. If the share of firms reporting a decrease exceeds the share reporting an increase, the index will be below zero, suggesting the indicator has decreased over the prior month. An index will be zero when the number of firms reporting an increase is equal to the number of firms reporting a decrease. Data have been seasonally adjusted as necessary.