The Federal Reserve Bank of Dallas’s Texas Manufacturing Outlook survey for June fell for the fifth straight month.
Texas manufacturing output growth plunged 3 percent, to -4.2 percent in June, indicating a slight contraction in output, according to the Dallas Fed survey, published on June 26.
Survey officials asked 85 regional manufacturers a series of questions on prices, wages, and revenue restraints in its June Texas Business Outlook Surveys on June 13–21.
Texas Manufacturers Face Disappointing Results
General business activity came in at -23.2, instead of -21.8, as expected by analysts, disappointing expectations.Other measures of manufacturing activity in Texas indicated an economic contraction in June.
The new orders index has been in negative territory for over a year and remained steady this month at -16.6, while the rate of orders index dropped to -23.7, its lowest value since mid-2020.
For example, primary metal manufacturers told the Dallas Fed that incoming orders were off substantially for the residential construction markets in Texas, as the industry showed signs of slowing.
The capacity utilization index edged down from -4.9 to -6.0, while the shipments index plunged 14 points, to -17.0.
Manufacturers’ perceptions of broader business conditions continued to fall in June, according to the survey.
The general business activity and company outlook indexes maintained their negative projections in May, despite easing, rising to -23.2 and -10.7, respectively.
Meanwhile, the outlook uncertainty index jumped to 16.7, in line with its series average.
The raw materials prices index dropped 12 points, to 1.4, as input costs remained relatively the same from last month.
The finished goods prices index dropped from 0.4 to -1.9, a sign that selling prices declined this month.
However, predictions of future manufacturing activity were mixed in June, as the future production index moved up 12 points, to 24.2, but the general business activity index remained negative, despite increasing from -12.7 to -4.5.
Labor Market in the Lone Star State Appears Sluggish
Labor market figures suggested a lower rise in employment and declining work hours, as economic growth began to slow due to higher hiring costs.The employment index retreated seven points, to 2.2, falling below its average reading of 7.8, while the average hours worked fell -4.3.
The wages and benefits index held at 25.3, just above its average of 21.1.
Inflationary pressures declined this month for households in the Dallas Fed region, though wage pressures remained elevated.
About 17 percent of firms in the area noted increased hiring, while 15 percent noted net layoffs.
“In June 2023, Texas manufacturing showed slight improvement with a rise in business activity index to -23.2, but still indicates worsening conditions” said Don Johnson, chief economist at Macro Edge, in a tweet.
“Production, new orders, shipments, and capacity utilization contracted. Labor market weakened with slower employment growth and reduced work hours. Raw material prices stable, but wage pressures high. Future outlook mixed,” added Johnson.
