The Federal Reserve Bank of Dallas said that manufacturing activity picked up slightly in January. In fact, the index for new orders rose sharply from 1.3 in December to 14.4 in January, with 31.7 percent of respondents saying that their sales had increased to begin the new year. Many of the other components of the Dallas Fed’s manufacturing survey were up less robustly. For instance, the composite index of general business activity barely increased, up from 3.7 to 3.8.
Yet, the overarching theme of the Texas Manufacturing Outlook Survey was the continued expansion see in the sector in the Dallas Fed district, albeit a mostly modest one. The composite index has not reflected growth for eight straight months. Moreover, several of the key indicators expressed a somewhat faster pace of growth in January. This included production (up from 6.0 to 7.1), shipments (up from 0.4 to 9.2), employment (up from 7.4 to 8.6), hours worked (up from -1.1 to 3.4), and capital expenditures (up from 13.3 to 18.9).
Looking ahead, manufacturers in the Dallas Fed region continued to be mostly positive about future levels of activity. For example, 55.8 percent of respondents anticipate higher sales in the next six months, with just 8.0 percent predicted reductions in new orders. Similar findings can be noted for production, capacity utilization, shipments, employment, and capital spending. The index for one’s company outlook six months ahead increased from 24.6 to 33.5.
In terms of pricing pressures, they are expected to remain elevated, even as the pace of the expected growth eased for the month. The index for raw material prices edged slightly lower from 42.2 to 39.6. Nonetheless, it was still true that 42.9 percent of respondents were predicting higher input costs in the coming months, with just 3.3 percent seeing lower costs. Some of the sample comments references these pricing pressures. With that said, we have seen minimal inflationary pressures for the sector nationally, according to the latest producer price data and Federal Reserve forecasts.
Chad Moutray is the chief economist, National Association of Manufacturers.
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