Texas Manufacturing Regains Footing After Epic Decline
Wednesday, July 1, 2020
Texas factory activity rebounded strongly in June, according to business executives responding to the Texas Manufacturing Outlook Survey by the Federal Reserve Bank of Dallas. The production index, a key measure of state manufacturing conditions, climbed from -28.0 to 13.6, indicating moderate expansion in output following three months of record or near-record declines.
Other measures of manufacturing activity also pointed to a rebound in growth this month. The new orders index advanced 34 points to 2.9, its first positive reading in four months, with nearly a third of manufacturers noting an increase in orders. The growth rate of orders index pushed up 25 points but remained negative at -5.8. The capacity utilization and shipments indexes also returned to positive territory.
Perceptions of broader business conditions were mixed in June. The general business activity index surged 43 points but stayed negative at -6.1. The company outlook index climbed back into positive territory, from -34.6 to 2.7, with 29 percent of manufacturers noting improved outlooks, up from 12 percent last month. The index measuring uncertainty regarding companies’ outlooks retreated notably again to 9.1—its lowest reading since January. The positive reading still indicates increased uncertainty.
Labor market measures indicated virtually flat employment levels and shorter workweeks this month. The employment index remained negative but rose 10 points to -1.5. Fifteen percent of firms noted net hiring, while 17 percent noted net layoffs. The hours worked index rose from -22.8 to -4.3, with the still-negative reading signaling reduced workweek length.
Prices and wages showed mixed movements in June. The raw materials prices index moved up 10 points to 12.3. The finished goods prices index, however, remained negative for the sixth straight month as it moved up from -19.4 to -4.7. The wages and benefits index returned to positive territory after two negative readings, coming in at 6.8.
Expectations regarding future business conditions were universally positive in June. The future company outlook and future general business activity indexes returned to positive territory at 16.2 and 19.7, respectively. Other indexes of future manufacturing activity pushed further positive.
Note: For this month’s survey, Texas business executives were asked supplemental questions on the impacts of COVID-19. Results for these questions from the Texas Manufacturing Outlook Survey, Texas Service Sector Outlook Survey and Texas Retail Outlook Survey have been released together. Read the special questions results. To review the Texas Manufacturing Outlook Survey's production chart, results table, and historical data, please click here.