Texas Manufacturing Outlook Survey Continued to Boom in July

The Texas Manufacturing Outlook Survey, a regional factory gauge by the Dallas Federal Reserve, continued to boom in July and gained for the 10th straight month. The regional manufacturing index has showed considerable strength since January and economists expected it to cool somewhat last month.

The general activity index came in at 16.8, beating the 15.0 median forecast. The production index, a key measure of state manufacturing conditions, rose 11 points to 22.8, indicating output grew at a faster pace than in June.

New orders and the growth rate of orders indexes both rose several points, 16.1 and 12.2, respectively. The capacity utilization index increased to 18.1 and the shipments index increased gained 3 points to 11.6.

Manufacturing firms not only report strong current growth but there was also a significant increase in outlooks. The company outlook index surged 15 points to 25.9, reaching its highest level since 2010.

The labor market indicators in the Texas Manufacturing Outlook Survey also showed stronger employment gains and longer workweeks in July. The employment index has been positive each month since January and increased to 11.2 in July, the highest reading since the end of 2015. Twenty-one (21%) percent of firms reported net hiring juxtaposed to just 9% reporting net layoffs.

The hours worked index increased to 9.8.

Prices and wages also continued to rise in July, though the raw materials prices index held steady at 15.5. The finished goods prices index increased slightly to 5.6, while the wages and benefits index remained high at 20.6.

Expectations regarding future business conditions continued to reflect optimism. The indexes of future general business activity and future company outlook came in at 31.6 and 34.8, respectively.

Next release: Monday, August 28

About the Index (Via Dallas Fed)

Data were collected July 18–26, and 113 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.