The Federal Reserve Bank of Dallas said that manufacturers in its District were more upbeat about their own company’s outlook. Indeed, the indices for production (up from 13.3 in October to 16.9 in November) and shipments (up from 13.2 to 14.8) were both higher, with almost one-third of respondents citing increased output from the previous month. With that in mind, the composite index for general business activity was positive for the sixth consecutive month, suggesting that the Texas manufacturing sector has improved from contractions in April and May.
Yet, the November survey also hinted at some weaknesses. While those taking the survey were more optimistic about their own company, perceptions about the larger macroeconomy edged lower for the month. The composite index decreased from 3.6 to 1.9, indicating only very modest growth in sentiment. Indeed, 68.5 percent of survey-takers reported no change in their views of the current business climate.
Behind this figure, there was also a slower pace of growth for new orders (down from 6.2 to 5.4), employment (down from 9.6 to 5.0), and capital expenditures (down from 11.8 to 10.6). Just 15.2 percent of respondents said that they had added workers this month, with three-quarters responding that there were no changes.
Looking ahead, manufactures in the Dallas Fed region continued to be mostly positive about future levels of activity. There were higher index values across-the-board in many of the key future-oriented areas for the next six months. This including new orders (up from 24.6 to 36.2), production (up from 26.1 to 34.8), shipments (up from 33.8 to 34.2), employment (up from 13.9 to 30.5), and capital spending (up from 17.9 to 21.0). As such, the good news here extends even to hiring, with 39.0 percent of respondents saying that they expect to add new employees in the next six months. (Just over half plan to make no changes in their hiring.)
Once again, though, the survey indicates a slight degree of caution in these figures. The forward-looking composite measure of macroeconomic conditions was off marginally from 8.1 to 7.0, with 65.0 percent indicating that they did not expect improvement over the next six months. Judging from the sample comments provided, this anxiety appears to be stemming from government uncertainty. For instance, a wood products manufacturer wrote, “Our company and the rest of `Small Business America’ seem to be gaining traction, despite a perceived lack of economic support from Washington.” Other comments mentioned challenges with the Affordable Care Act, new OSHA regulations, and the pending Farm Bill.
Chad Moutray is the chief economist, National Association of Manufacturers.
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