The Dallas Fed manufacturing survey manufacturing index, a key measure of state manufacturing conditions, edged down to negative 15.7 in March, weaker than the -13.5 in February, despite a modest increase in output. The new orders index slid to -14.3 vs -13.2 prior, the 10th month in a row negative. The production index, a key measure of state manufacturing conditions, rose to +2.5 from -2.8 in February. Capacity utilization rose +2.3 vs. -4.1 prior.
Perceptions of broader business conditions continued to worsen in March. The general business activity index slipped two points to -15.7. The company outlook index remained negative but rose four points to -13.3. The outlook uncertainty index came in at 22.0, down slightly from February but still elevated.
Dallas Fed March 2023 manufacturing index
Highlights
- Manufacturing index -15.7 from -13.5 in February
- New orders index (-14.3 vs -13.2) negative for a 10th month in a row
- Orders continued to contract (-15.2 vs -16.9)
- Shipments (-10.5 vs -5).
- Production index moved up to 2.5 from -2.8,
- Capacity utilization index returned positive +6 to 2.3.
- Labor market measures suggest a resumption of employment growth (10.4 vs -1) c
- Company outlook index remained negative but rose four points to -13.3.
- Outlook uncertainty index at 22.0, down slightly from February but still elevated.
Texas factory activity expanded slightly in March after contracting in February, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, moved up from -2.8 to 2.5, a reading suggestive of a modest increase in output.
Other measures of manufacturing activity showed mixed signals this month. The new orders index was negative for a 10th month in a row and came in at -14.3, little changed from February. The growth rate of orders index was also negative and largely unchanged, at -15.2. The capacity utilization index returned to positive territory, moving up six points to 2.3, while the shipments index pushed down from -5.0 to -10.5.
Perceptions of broader business conditions continued to worsen in March. The general business activity index slipped two points to -15.7. The company outlook index remained negative but rose four points to -13.3. The outlook uncertainty index came in at 22.0, down slightly from February but still elevated.
Labor market measures suggest a resumption of employment growth and continued lengthening of workweeks. The employment index shot up 11 points to 10.4 after dipping below zero last month. Twenty-four percent of firms noted net hiring, while 14 percent noted net layoffs. The hours worked index edged down to 2.6, a reading slightly below average.
Price and wage pressures receded in March, though wage growth remained elevated relative to average. The raw materials prices index retreated five points to 20.3, falling further below its series average of 27.9. The finished goods prices index dropped from 15.8 to 7.0, falling below its series average of 9.0 for the first time since 2020. The wages and benefits index inched down two points to 30.5.
Expectations regarding future manufacturing activity were mixed in March. The future production index remained positive but fell eight points to 13.5, signaling well-below-average output growth is expected over the next six months. The future general business activity index pushed further negative, from -2.9 to -11.2. Most other measures of future manufacturing activity remained positive but moved lower this month.
Next release: Monday, April 24
Comments from Survey Respondents
These comments are from respondents’ completed surveys and have been edited for publication.
Nonmetallic mineral product manufacturing
- Nonmetallic mineral product manufacturing
Primary Metal Manufacturing
- Business is slowing down. Mexican imports are increasing. We can no longer sell all of our capacity. Requests for quotations for curtain walls for office buildings are drying up for 2024. We actually expect that part of our business will slow down in the third and fourth quarters.
- Foreign competition is at an all-time record percentage for our segment of the industry. Several countries, including Mexico, are subsidizing manufacturers in our industry. Our industry association is looking into antidumping charges on several countries that are known to subsidize their manufacturing plants exporting to the U.S. On a positive note, there was a recent customs ruling that any product containing Russian-sourced aluminum will be subject to a 200 percent tariff. A declaration of country of origin for aluminum will be required for imports of aluminum products. Several of the countries subsidizing our competitors are also using Russian-sourced aluminum. This ruling should help somewhat to fight the unfair trade practices.
Fabricated Metal Product Manufacturing
- Activity has picked up. We are cautiously optimistic regarding activity this year. Downward risk factors (inflation, workforce, and global security threats) are still more significant than the potential economic tailwinds.
Food and beverage stores
- The current market upheaval with bank failures and inflation is still above acceptable levels and the main driver of my thoughts. How this is handled in the near term will impact the future exponentially. Higher interest rates could mean more bank failures. The government cannot insure all deposits in all the banks. I do not see any price pressure on raw materials in the near term. Labor is still a problem; finding and retaining good employees is challenging.
Computer and Electronic Product Manufacturing
- We continue to struggle to find qualified manufacturing employees. We are investing heavily in automation to increase productivity and allow us to meet demand without adding head count. This also allows us to pay more to the people we have, which should help us retain skilled people.
- We are closely monitoring the banking meltdown with customers and suppliers. There has been minimal impact so far.
- We expected things to cyclically slow, and all markets are correcting except auto. We expect once inventories reduce from elevated levels, we will begin to ship closer to end demand, likely mid-to-late second half 2023.
- [The collapse of] Silicon Valley Bank could be the beginning of more challenges ahead.
- We are seeing steady growth in our services business while at the same time phasing out older hardware-based sales. We are considering outsourcing our warehouse and fulfillment services.
Transportation Equipment Manufacturing
- There are too many negatives in the economy: International conflict, inflation, poor national leadership, deficit spending, the Federal Reserve keeping rates artificially low and now raising them quickly and steeply, thus stressing the financial markets
Food Manufacturing
- Margins are better than they have been since COVID began. Business is good right now.
- Illiquidity of consumer customers is increasing. Stagflation is upon us. The politically charged funny money, the denial of economic realities by the current administration and the illusion of prosperity have come home.
Plastics and Rubber Products Manufacturing
- The supply chain is still a huge concern. Raw materials are steadily increasing in cost and getting harder to locate in some instances.
Printing and Related Product Manufacturing
- We continue to see new orders coming in, sustaining the price increase we implemented due to increased labor and material costs. We hope this holds up but are worried that the slowdown we are seeing may create competitive pressures on maintaining price margins. It is still very tough to find employees wanting or willing to work. Perhaps we need to loosen up on immigration restrictions to help with this shortage of laborers.
Source: Dallas Fed Surveys Texas Manufacturing Outlook Survey