Texas Factory Output Sees Inflationary Contraction

Prices are rising for goods sold from Texas factories even though orders and output are down.

The Federal Reserve Bank of Dallas released the results of its February survey of Texas manufacturers on Monday. It showed that factory activity in the Lone Star state declined for the first time since May 2020.

The production index edged down from 0.2 to -2.8, indicating a modest contraction in output. Perceptions of broader business conditions worsened, with the general business activity falling to -13.5 from -8.4. The company outlook index has been negative for a full year and plunged 15 points in February to -17.5.

The new orders index has been negative fore nine straight months and declined further in February. The capacity utilization index fell back into negative territory after positive readings in January and December. The shipments index was largely unchanged at -5.0.

Inflationary pressures increased in the month. The finished goods price index rose from 9.9 to 15.8, a high reading relative to the series average of 9.0. The raw materials prices index rose to 25.1, the fourth month in a row below the series average of 28.

The survey’s labor market gauges suggest relatively flat employment and longer workweeks. The employment index fell below zero to -1.0 after spending more than two years above average. The hours worked index was “fairly steady” at 4.9. The wages and benefits index remained elevated and inched up two points to 32.7.