Monday, October 29, 2018

Dallas Fed: "Texas Manufacturing Continues to Expand, but Pace Slows"

by Bill McBride on 10/29/2018 10:36:00 AM

From the Dallas Fed: Texas Manufacturing Continues to Expand, but Pace Slows

Texas factory activity continued to expand in October, albeit at a slower pace, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, was positive but declined another six points to 17.6, indicating output growth continued to abate.

Some other indexes of manufacturing activity also suggested slower expansion in October. The capacity utilization index retreated six points to 15.4, while the shipments index fell four points to 16.6. Meanwhile, the new orders index rose—pushing up four points to 18.9—and the growth rate of orders index held steady at 11.0.

Perceptions of broader business conditions improved this month. The general business activity index inched up to 29.4, and the company outlook index climbed seven points to 25.0. Fewer than 3 percent of firms noted that their outlook worsened, the lowest share since 2004. The index measuring uncertainty regarding companies’ outlooks retreated 13 points to 6.9.

Labor market measures suggested rising employment levels and longer workweeks in October. The employment index rose six points to 23.9, a level well above average. Twenty-eight percent of firms noted net hiring, compared with 4 percent noting net layoffs. The hours worked index remained positive but moved down to 6.5.

Price increases accelerated further in October, and wage pressures remained elevated.
emphasis added
This was the last of the regional Fed surveys for October.

Here is a graph comparing the regional Fed surveys and the ISM manufacturing index:

Fed Manufacturing Surveys and ISM PMI Click on graph for larger image.

The New York and Philly Fed surveys are averaged together (yellow, through October), and five Fed surveys are averaged (blue, through October) including New York, Philly, Richmond, Dallas and Kansas City. The Institute for Supply Management (ISM) PMI (red) is through September (right axis).

Based on these regional surveys, it seems likely the ISM manufacturing index will be solid in October, but below 60 again (to be released on Thursday, November 1st).