The Federal Reserve Bank of Dallas said that manufacturers in its District started the new year on a more-positive note. When respondents were asked about general business conditions, the composite index was negative in seven of the 12 months in 2012, including as recently as November. Since then, there has been progress. The composite index rose from 2.5 in December to 5.5 in January. Even with this reading, though, over two-thirds of those taking the survey said that conditions had not changed over the past month.
With that said, the main driver of the higher composite figure in January was increased sales – as is often the case. The index for new orders shifted from a slight contraction in December (-1) to modest growth in January (12.2), with almost 29 percent of respondents saying that their sales were higher. Shipments rose strongly, as well, up from 13.1 to 21.9. Other improvements for the month included production, capacity utilization, wages and benefits, employment, and capital spending.
The pickup in hiring and investment contrasts with other regional surveys, which have found these measures lagging in their January surveys. This could be because manufacturers in the Dallas District are surprisingly upbeat about the next six months. Almost 41 percent of respondents expect sales to be higher, a similar ratio for many of the other major indicators. With that said, there are still some signs of anxiety out there, with 54.4 percent of these businesses expecting no change in sales and 57.1 percent saying that their employee levels should not change.
Overall, the Texas Manufacturing Outlook Survey has observed some strengthening in January – a nice way to start 2013. Of course, significant challenges remain, and yet these figures suggest that some of the doldrums of the fall have started to wane.
Chad Moutray is chief economist, National Association of Manufacturers.
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