results of the Dallas Fed’s October Manufacturing Activity survey are out.
The headline index fell to 3.6 from September’s 12.8 reading. Economists predicted a much more moderate decline to 10.0.
The drop puts the index below August’s 5.0 level, and suggests that the pace of growth in Texas manufacturing is slowing.
The Dallas Fed survey polls manufacturers across Texas, southern New Mexico, and northern Louisiana.
Below is the full text of the release:
Texas factory activity picked up further in October, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, rose from 11.5 to 13.3, suggesting output increased at a slightly faster pace than in September.
Other measures of current manufacturing activity also indicated a slightly stronger expansion in October. The new orders index came in at 6.2, slightly above its September level, and marked a sixth consecutive month of increased demand. The capacity utilization index edged up to 11.9, and the shipments index rose 3 points to 13.2.
Perceptions of broader business conditions were less optimistic in October. The general business activity index remained positive but fell to 3.6 after rising sharply to 12.8 in September. The company outlook index posted a fifth consecutive positive reading but moved down to 5.4.
Labour market indicators reflected continued employment growth and longer workweeks. The October employment index was 9.6, largely unchanged from its September level. Seventeen per cent of firms reported hiring new workers compared with 7 per cent reporting layoffs. The hours worked index turned positive for the first time in three months, coming in at 3.9, indicating an increase in average workweek length.
Upward pressure on prices continued in October, and compensation costs picked up notably. The raw materials price index moved up to 22.7, posting its highest reading in nine months. The finished goods price index remained positive for the third month in a row but fell 7 points to 3.5. The wages and benefits index rose sharply from 9.7 to 20.4, reaching its highest level since July 2012. Looking ahead, 39 per cent of respondents anticipate further increases in raw materials prices over the next six months, while 34 per cent expect higher finished goods prices.
Expectations regarding future business conditions remained optimistic in October. The indexes of future general business activity and future company outlook declined from September levels but remained in strongly positive territory. Most indexes for future manufacturing activity also fell while remaining solidly positive.
The Dallas Fed conducts the Texas Manufacturing Outlook Survey monthly to obtain a timely assessment of the state’s factory activity. Data were collected Oct. 15 — 23, and 82 Texas manufacturers responded to the survey. 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.