The Dallas Fed’s survey of manufacturing activity increased slightly to 3.8 from a revised 3.7.
Consensus was for a reading of 3.5.
The future company outlook rose 9 points to 33.5, reaching its highest level in three years.
A transportation equipment company official commented:
“Our optimistic outlook is based on a major ramp up of our advertising and marketing expense. We increased our marketing budget by 40 per cent for 2014 in order to break out of the malaise facing our business for the last five years, which have remained relatively flat. We have 47 employees, 17 of whom are direct labour. We are adding six to our direct labour workforce in anticipation of increased demand.
Employment climbed 1.2 points to 8.6.
Texas Manufacturing Outlook Survey
Texas factory activity increased for the ninth month in a row in January, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, edged up from 6 to 7.1, indicating output grew at a slightly stronger pace than in December.
Other measures of current manufacturing activity also reflected a pickup in growth. The new orders index surged from 1.3 in December to 14.4 in January, reaching a seven-month high and suggesting a sharp rise in demand. The shipments index also rebounded strongly, rising from near zero to 9.2. Growth in capacity utilization held steady, with the index remaining at 8.2.
Perceptions of broader business conditions continued to be optimistic in January. The general business activity index posted its eighth consecutive positive reading and was nearly unchanged at a reading of 3.8. Similarly, the company outlook index posted its eighth positive reading in a row and held steady at 15.9.
Labour market indicators reflected increased hiring and longer workweeks. The January employment index edged up for a second month, rising to 8.6. Eighteen per cent of firms reported net hiring compared with 10 per cent reporting net layoffs. The hours worked index returned to positive territory, rising to 3.4 after dipping to -1.1 in December.
Upward pressure on prices and wages continued in January. The raw materials price index fell to 26.8 but remained high relative to what it was most of last year. The finished goods price index rose to a four-month high of 11. Looking ahead, 43 per cent of respondents anticipate further increases in raw materials prices over the next six months, while 41 per cent expect higher finished goods prices. Compensation costs increased at about the same above-average pace this month as in December, with the wages and benefits index coming in at 21.6 after a reading of 22.2 last month.
Expectations regarding future business conditions remained optimistic in January. The index of future general business activityedged down but posted a still-robust reading of 22.3. The index of future company outlook rose 9 points to 33.5, reaching its highest level in three years. Indexes for future manufacturing activity showed mixed movements but remained in solidly positive territory.
The Dallas Fed conducts the Texas Manufacturing Outlook Survey monthly to obtain a timely assessment of the state’s factory activity. Data were collected Jan. 14 — 22, and 99 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.
Next release: February 24, 2014
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