A key barometer of general business conditions in the Texas factory sector slipped even deeper underwater in October, data from the Federal Reserve Bank of Dallas showed Monday.
The Dallas Fed’s Texas Manufacturing Outlook Survey index for general business activity declined to minus 19.4 in October from minus 17.2 in September. Economists had forecast a smaller decline to minus 18.
Negative scores indicate a decline in activity over the month.
The Dallas Fed said that factory output continued to expand, albeit only slightly. The production index—a key measure of state manufacturing conditions—decreased to 6.0 from 9.3 the previous month.
The index tracking new orders fell to minus 8.8, its fifth month in a row in negative territory. The Dallas Fed said this signaled a decline in demand. The growth rate of new orders also declined further into negative territory. The shipments index dipped into negative territory for the first time since May 2020, coming in at minus 1.6.
The capacity utilization index was positive but moved down from 13.4 to 9.1.
Employment growth remains “robust,” the Dallas Fed said. The employment index rose to 17.1, well above the long-term average of 7.8. Twenty-six percent of firms noted net hiring, while 9 percent noted net layoffs. The hours worked index fell to a near-zero reading this month, indicating that the workweek did not expand in October.
Inflationary pressures continue to be felt in the Texas manufacturing sector. The finished goods index rose four points to 22.2, far above its average of 9.0. The raw materials index fell five points to 32, near its average of 28.1
Prices and wages continued to increase at an elevated pace. The raw materials prices index moved down five points to 32.0, converging toward its series average of 28.1. The finished goods prices index, however, rose four points to 22.2, pushing further above its series average of 9.0. The wages and benefits index was unchanged from the prior month, remaining at the elevated level of 36.7.
Expectations regarding future manufacturing activity were mixed. The company outlook measure worsened significantly while the forecast for general business activity six months from now was close to unchanged at a deeply negative level. Expectations for new orders crashed from a positive 22.1 to a negative 4.5. Other measures of future manufacturing activity saw large declines in index values this month, though most remained in positive territory.