The Dallas Fed manufacturing survey manufacturing index, a key measure of state manufacturing conditions, edged down to negative 23.4 in April from -15.7 prior to the lowest reading since July. There are bright spots however despite the company outlook worsening to -15.6 vs -13.3 prior. The new orders index did improve to -9.6 vs -14.3 prior, still it was the 11th month in a row negative. The production index, a key measure of state manufacturing conditions stayed position though down to +0.9 vs +2.5 prior in March.
Prices paid fell +19.5 vs +20.3 last month and prices received rose +8.4 vs +7.0 last month giving some hope for businesses.
Dallas Fed April 2023 manufacturing index
- Manufacturing index edged down to – 23.4 in April from -15.7
- Production index inched down from 2.5 to 0.9,
- New orders index five points to -9.6, 11th month in a row negative
- Growth rate of orders rose from -15.2 to -11.1
- Capacity utilization index edged up to 3.9,
- Shipments index pushed up from -10.5 to -2.8.
- General business activity index -8 to -23.4, its lowest in nine months
- The company outlook index remained negative, ticking down two points to -15.6.
- The outlook uncertainty index pushed up to 24.7, elevated relative to its average reading of 16.9.
- Employment index down two points to 8.0 from 10.0
- 20% of firms noted net hiring, while 12% noted net layoffs.
- The hours worked index into negative territory at -2.7.
- The raw materials prices index largely unchanged at 19.5, indicative of below-average increases in input costs.
- The finished goods prices index also little changed at 8.4.
- The wages and benefits index up 7 to 37.6, a stubbornly elevated reading relative to its average of 21.0.
- The future production index plummeted from 13.5 to 3.0, with the low reading signaling little output growth over the next six months.
- The future general business activity index pushed further negative, from -11.2 to -16.6.
- Most other measures of future manufacturing activity remained positive but showed mixed movements this month.
Texas factory activity was flat in April after growing modestly in March, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, inched down from 2.5 to 0.9, with the near-zero reading suggestive of no change in output from last month.
Other measures of manufacturing activity showed mixed signals in April. The new orders index was negative for an 11th month in a row but moved up five points to -9.6. The growth rate of orders index also remained negative but rose from -15.2 to -11.1. The capacity utilization index edged up to 3.9, while the shipments index pushed up from -10.5 to -2.8.
Perceptions of broader business conditions worsened notably in April.
The general business activity index dropped eight points to -23.4, its lowest reading in nine months. The company outlook index remained negative, ticking down two points to -15.6. The outlook uncertainty index pushed up to 24.7, elevated relative to its average reading of 16.9.
Labor market measures suggest moderate employment growth but a slight decline in work hours. The employment index ticked down two points to 8.0, in line with its average reading. Twenty percent of firms noted net hiring, while 12 percent noted net layoffs. The hours worked index dipped into negative territory, coming in at -2.7.
Prices and wages continued to increase in April.
The raw materials prices index was largely unchanged at 19.5, a reading indicative of below-average increases in input costs. The finished goods prices index was also little changed, at 8.4. The wages and benefits index moved up seven points to 37.6, a stubbornly elevated reading relative to its average of 21.0.
Expectations regarding future manufacturing activity were mixed in April.
The future production index plummeted from 13.5 to 3.0, with the low reading signaling little output growth over the next six months. The future general business activity index pushed further negative, from -11.2 to -16.6. Most other measures of future manufacturing activity remained positive but showed mixed movements this month.
Comments from Survey Respondents
These comments are from respondents’ completed surveys and have been edited for publication.
Computer and electronic product manufacturing
- We are decreasing our systems sales business and transitioning to software as a service.
- The first quarter came in about as expected; all markets weakened with the exception of automotive. There are signs that inventories are building quickly in auto, so expect that market to weaken soon. There are no concerns in long-term demand outside of a significant macro deceleration. Inventory overbuild was expected/anticipated and usually takes three to six quarters to burn through to ship back to end demand.
Primary Metal Manufacturing
- Almost all of our customers have high inventories from overbuying last year. So, they are all cutting back on ordering new inventory. Business is slow as customers are waiting to see when recession starts. Most customers, when pressed, think the recession will start in summer. We are getting ready for our second layoff in the last four months.
Fabricated Metal Product Manufacturing
- We have already been notified that our credit line renewal may be difficult. Our monthly increase in costs (rate) is at highs not seen since 2007.
- A slight decrease in material costs is offset by a continued increase in labor costs.
- There is a definite slowdown. New orders virtually stopped.
- We are starting to see a real slowdown. We are hoping it is short lived.
Food and beverage stores
- Federal Reserve efforts to subdue inflation are not over; further rate increases are anticipated. Will higher rates slow down economic activity and, if so, by how much?
Transportation Equipment Manufacturing
- We are in the trucking industry. There has been some continued degradation of indicators in our market, such as dropping freight rates. We are still planning on a solid business year but with some decrease compared with the past 12 months.
- Some customers are pulling back due to high raw material costs.
- Funding has dried up to purchase our products.
Printing and Related Product Manufacturing
- Business has gotten stupid slow, and we estimate having many days of just a few hours’ work due to low volume. This is crazy—as busy as we were last year, and now for this year to have it turn off so quickly, it is hard to understand why. We hear from many others in our industry, and they are all saying the same thing: that it’s gotten slower without any signs of turning around in the near term. Perhaps it’s the Federal Reserve actions that are causing this.
Next release: Tuesday, May 30
Source: Dallas Fed Surveys Texas Manufacturing Outlook Survey