Dallas Fed: Texas Manufacturing Sector "Weak"

Following a December report that showed sharp manufacturing declines, the current report indicates further softening of the sector to continue.

NEWS RELEASE, Jan. 26, 2009 -- Texas manufacturing activity remained weak in January, according to business executives responding to the Texas Manufacturing Outlook Survey. Current activity indexes for production, capacity utilization, growth rate of orders, delivery time, volume of new orders and shipments remained at near-record lows. In addition, most indexes for future activity stayed flat, and respondents continued to report bleak six-month expectations.

After dropping to record lows in December, several indicators for current activity registered a seasonal uptick. However, seasonally adjusted data (not yet released publicly) show continued declines.

Concerns about the deepening national recession continued to depress business sentiment. Both the company outlook and general business activity indexes continued to reveal overwhelmingly downbeat sentiment, with 47 percent of respondents reporting a dismal outlook and 55 percent noting worsening market conditions.


Labor markets weakened further. The employment index fell for the sixth consecutive month, hitting an all-time low. The average workweek index improved slightly but remained negative, with 31 percent of executives reporting cutbacks in hours and only 8 percent reporting increases.

Price pressures continued to subside. Fifty-three percent of firms noted declines in input prices, and 33 percent cited lower prices for their own manufactured goods. Firms’ expectations for future price increases were subdued as well. The index for future raw material prices dropped to its lowest level since the survey began in 2004. The index for future finished goods prices was negative and virtually unchanged.

Consistent with overall weakness, the materials inventories and capital expenditures indexes slipped further into negative territory. More than 35 percent of producers reported shrinking their inventories and capital expenditure budgets in light of weak of demand.

Assessments of future activity remained generally pessimistic, suggesting that the region’s manufacturers expect their operations to contract further over the next six months. Although indexes for future production, capacity utilization, volume of new orders and shipments improved slightly, they’re still close to record lows.

The Dallas Fed conducts the Texas Manufacturing Outlook Survey monthly to obtain a timely assessment of the state’s factory activity. Data for the latest survey were collected Jan. 13–21, and 104 Texas manufacturers responded to the survey. Firms are asked whether output, employment, orders, prices and other indicators increased, decreased or remained unchanged over the previous month.