In an unexpected turn, Texas manufacturing activity has returned to a growth trajectory as production levels experienced a rebound. Yet, expectations for the six-month horizon have soured, according to recent findings from the Federal Reserve Bank of Dallas. The manufacturing landscape in Texas has seen the general business activity index rise to a reading of 3.4 in December, a notable increase from November's reading of minus 2.7, as illustrated by data from the Dallas Fed's manufacturing outlook survey released on Monday.
Analysts who participated in a Bloomberg poll had anticipated a month-over-month decline, with expectations set at minus 3. A critical measure of the state's manufacturing conditions, production, has shifted positively, reaching 3.9 compared to the previous month’s minus 0.9. New orders have also shown signs of improvement, climbing by 11 points to achieve a reading of minus 0.9 in December.
Improvements in shipments have been observed as well, with the shipments index rising from minus 5.9 in November to minus 2 this month. Employment indicators have indicated a slight dip, with the index tracking employment falling to 0.3 this month from 4.9 in November. Approximately 16% of firms participating in the survey reported net hiring, which is on par with the percentage that reported net layoffs within their establishments.
There has been a significant drop in prices paid for raw materials, falling 18 points to 10.5, marking its lowest level in 17 months. Meanwhile, the index tracking selling prices experienced a notable decline, falling over 12 points to minus 3.4, which is the first negative reading recorded since late 2023, as per the regional Fed's data.
"Labor market measures suggested employment and workweeks held steady," commented Isabel Brizuela, a business economist at the Dallas Fed. She observed, "Upward pressure on raw material prices eased, and selling prices dipped momentarily." Looking ahead six months, expectations surrounding overall business activity have decreased, with an index value of 20.6 in December as compared to 31.2 in November.
Additionally, the future production index has declined significantly, dropping by more than 11 points to 32.7, according to the report released by the Fed branch. New orders' forward-looking indicator decreased to 35.4 from 44.9, further suggesting a cooling off in the manufacturing sector's growth, while the shipments gauge also dipped by 4.1 points to settle at 33.7.
Interestingly, the future employment index saw a modest increase of nearly three points, although price gauges exhibited signs of cooling..