The Federal Reserve Bank of Dallas continues to provide a mostly mixed picture on manufacturing for Texas. On the one hand, several measures of activity picked up steam in September. For instance, the index for new orders rose from 0.2 in August to 5.3 in September.
Roughly 26 percent of respondents said that their new sales were rising, with about 53 percent suggesting no change. Slightly higher index figures were also observed for production, capacity utilization, shipments, hours worked and capital expenditures. These data suggest some improvement for manufacturers in the region.
Yet, there were also some concerns. Manufacturing leaders said that their own company’s business outlook was growing at a slower rate, with the index down from 4.1 to 2.4. Sixty-two percent of them said that their outlook had not changed. Meanwhile, their perceptions about the overall economy remain negative, up from -1.6 to -0.9. Nearly 21 percent of those taking the survey say that the general business activity has worsened, with 59.1 of them saying that it was unchanged.
Job hiring continues to be positive, but has eased in the past month. The employment index declined from 14.2 to 5.9, with almost three-fourths of respondents saying that their worker levels were unchanged. Another challenge is increased pricing pressures. The index for raw material prices jumped from 10.9 to 22.5, with 27.8 percent of manufacturers indicating that their costs have risen in the past month. Almost 67 percent said no change in raw material prices. Meanwhile, the prices received for finished goods contracted, suggesting some deflation.
Moving forward, manufacturers remain cautiously optimistic. The forward-looking measures for their own company’s outlook and the regional macroeconomy saw some modest gains, even as six out of ten respondents predict no change. Forecasts for production, new orders, shipments, employment, and capital spending for the next six months remain strong, even as some of these measures eased from August’s values. Pricing pressures should also grow strongly, according to these responses.
Even with these more positive forecasts, it is clear that manufacturers in the Texas region are concerned about possible headwinds. As one chemical manufacturer put it, “The outlook six months from now will depend on the outcome of the elections.”
Anxieties remain high related to the fiscal abyss, as well, with a fabricated metal manufacturer saying, “The significant uncertainties related to the U.S. government’s tax changes, debt, etc. appears to be front and center on our customers’ minds.” Indeed, slowing global growth and political uncertainties appear to be hampering growth in the region, even with modest gains seen in this month’s survey.
Chad Moutray is chief economist, National Association of Manufacturers.
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