June 27, 2022
Texas Manufacturing Growth Abates, Outlooks Worsen
What’s New This Month
For this month’s survey, Texas business executives were asked supplemental questions on wages, prices and revenue restraints. 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.
Growth in Texas factory activity decelerated sharply in June, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, fell from 18.8 to 2.3, reaching its lowest reading since May 2020.
Other measures of manufacturing activity also moved down notably this month. The new orders indexed dipped into negative territory for the first time in two years, falling from 3.2 to -7.3 and signaling a decline in demand. The growth rate of orders index pushed further negative, from -5.3 to -16.2. The capacity and utilization and shipments indexes remained positive but fell markedly to 3.3 and 1.2, respectively.
Perceptions of broader business conditions worsened again in June. The general business activity index declined 10 points to -17.7. The company outlook index also fell 10 points, from -10.0 to -20.2. Both indexes reached lows last seen in May 2020. The outlook uncertainty index shot up to 43.7, a 17-point jump from May.
Labor market measures continued to indicate robust employment growth and longer workweeks. The employment index moved down six points to 15.2 but remained well above its series average of 7.7. Twenty-four percent of firms noted net hiring, while 9 percent noted net layoffs. The hours worked index pushed up further, from 7.4 to 11.8.
Prices and wages continued to increase strongly. The raw materials prices index edged down to 57.5, a reading still more than twice its average of 28.0. The finished goods prices index also moved down, from 41.8 to 33.8, but remained highly elevated. The wages and benefits index came in at 49.9, unchanged from May and markedly higher than its 20.4 average.
Expectations regarding future manufacturing were notably less optimism than in May. The future production index remained only slightly positive, retreating from 19.9 to 4.0. The future general business activity index pushed further into negative territory, falling 20 points to -26.0. Other measures of future manufacturing activity also declined, though most remained positive.
Next release: Monday, July 25
Data were collected June 14–22, and 90 Texas manufacturers responded to the survey. The Dallas Fed conducts the Texas Manufacturing Outlook Survey monthly to obtain a timely assessment of the state’s factory activity. Firms are asked whether output, employment, orders, prices and other indicators increased, decreased or remained unchanged over the previous month.
Survey responses are used to calculate an index for each indicator. Each index is calculated by subtracting the percentage of respondents reporting a decrease from the percentage reporting an increase. When the share of firms reporting an increase exceeds the share reporting a decrease, the index will be greater than zero, suggesting the indicator has increased over the prior month. If the share of firms reporting a decrease exceeds the share reporting an increase, the index will be below zero, suggesting the indicator has decreased over the prior month. An index will be zero when the number of firms reporting an increase is equal to the number of firms reporting a decrease. Data have been seasonally adjusted as necessary.