The Dallas Fed manufacturing survey manufacturing index, a key measure of state manufacturing conditions, edged down to negative 13.5 in February, indicating output slid even more from January. The new orders index slid to -13.2 vs -4.0 prior, the 9th month in a row negative. The production index, a key measure of state manufacturing conditions, went negative to -2.8 versus 0.2 in January. Prices and wages continued to increase, wages and benefits +32.7 versus 30.5 last month and prices received +15.8 versus 9.9 last month. We saw a floe on from that in employment -1.0 versus 17.6 last month.
Dallas Fed February 2023 manufacturing index
- Manufacturing index -13.5 vs -8.4 prior
- Production index in January -2.8 versus 0.2 in January
- New orders index -13.2 vs -4.0 prior, 9th month in a row negative
- Growth rate of orders -16.9 versus -12.3 last month
- Employment -1.0 versus 17.6 last month
- Hours worked +4.9 versus 3.8 last month
- Capital expenditures -1.3 versus +11.6 last month
- Wages and benefits +32.7 versus 30.5 last month
- Prices received +15.8 versus 9.9 last month
- Prices paid for raw materials +25.1 versus 20.5 last month
- Finished goods inventory -3.0 versus -8.9 last month
- Shipments -5.0 versus -6.3 last month
Texas factory activity declined in February for the first time since May 2020, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, edged down from 0.2 to -2.8, a reading suggestive of a modest contraction in output.
Other measures of manufacturing activity also indicated contraction this month. The new orders index was negative for a ninth month in a row and moved down nine points to -13.2. The growth rate of orders index fell from -12.3 to -16.9. The capacity utilization index returned to negative territory after two positive readings, falling 10 points to -4.1, while the shipments index was largely unchanged at -5.0.
Perceptions of broader business conditions worsened in February as pessimism increased. The general business activity index pushed down from -8.4 to -13.5. The company outlook index has been negative for a full year and plummeted 15 points this month to -17.5. The outlook uncertainty index moved up to 25.0, a four-month high.
Labor market measures suggest relatively flat employment and longer workweeks. The employment index dipped below zero to -1.0 after tracking above average for more than two years. Fifteen percent of firms noted net hiring, while 16 percent noted net layoffs. The hours worked index held fairly steady at 4.9.
Comments from Survey Respondents
These comments are from respondents’ completed surveys and have been edited for publication.
- There has been some improvement in orders, but it is spotty and material specific, and is not showing a broad trend that influences a six-month outlook.
- January and the start of February resulted in headwinds following a strong fourth quarter. Customers are decreasing inventories held and asking for better terms.
Primary Metal Manufacturing
- We expect recession in the second half of this year. We already had a first round of layoffs. We are looking at each employee very carefully to learn who may have to be in a second wave of layoffs, if and when business slows down again.
- Our residential building and construction business has decreased drastically over the past few months due to mortgage rate increases, inflation and other factors. One major factor affecting our industry is foreign competitors dumping product into the U.S. at lower prices than their domestic prices—and lower than U.S. producers’ prices. Mexico, India, Colombia, Ecuador, Vietnam, Malaysia, Turkey and Poland are among countries exporting aluminum extrusions to the U.S. at record levels.
Fabricated Metal Product Manufacturing
- The requirements for the Build America, Buy America Act are a hurdle because they have yet to be settled, and American manufacturing does not have the capacity to provide all the necessary materials for the construction projects. This is causing inflated prices and delayed project starts. Infrastructure projects are essential to the well-being of American citizens, not just the economy. [The water crises in] Jackson, Mississippi, and Flint, Michigan, are just two examples of the results of the high cost and unavailability of materials.
- Bid activity is high and consistent, but there seems to be a lot of projects on hold or being deferred.
- All markets served have slowed down and are ordering lower quantities as compared with last year. Automotive OEM [original equipment manufacturers] customers’ volumes are most affected by lower quantities.
Computer and Electronic Product Manufacturing
- After a slow start to the year, we saw a lot of new orders in late January and early February. Despite the talk of recession, we believe that we’ll continue to grow.
- We are seeing all markets slow with the exception of automobiles. Personal electronics is in its third quarter of correction; all other markets (except automobiles) are in their second. We would expect most markets to correct in about four to five quarters, likely when the automobiles segment begins to correct. Long-term demand continues to be strong. We continue to make investments to support growth long term.
- I am currently worried about the time I am seeing it take for my customers to pay me.
Transportation Equipment Manufacturing
- There is nothing positive with respect to the economy.
- We do believe that the second half of 2023 will see a general reduction in business levels but no contraction of pricing.
- The market seems to have stabilized. Costs have leveled out, but we are seeing an uptick in protein raw material costs.
Textile Product Mills
- February has been a slow month; it is hard to know why, but our outlook has worsened for both our business and retail activity in general.
- Customer volumes in soft goods, specifically bed subcomponents, mattresses, comforters and pillows, have seen a sales reduction of 55 percent over last year.
Plastics and Rubber Products Manufacturing
- Revenue dollars per sale are going down. People are watching their money.
- We have seen a slowing the last two quarters and expect the same moving forward.
Printing and Related Product Manufacturing
- It seems like someone turned off the spigot, as we have gotten stupid slow, as have others in our industry. We are not sure if it’s the Federal Reserve jacking with interest rates, or else some sort of cyclical slowdown, but it feels like business has ground to a halt. We have some nice work planned for later on this year, but right now we are just stupid slow.
- A continued lack of labor (semi-skilled) is crippling. We have newly established training but can’t find people to train. Absenteeism is high as employees feel free to take time off because we are unable to replace workers, even when they do not comply with normal work rules.
Next release: Monday, March 27
Source: Dallas Fed Surveys Texas Manufacturing Outlook Survey