The Dallas Fed manufacturing survey manufacturing index, a key measure of state manufacturing conditions, edged down to negative 29.1 in April from -23.4 prior to the lowest reading since July. The new orders index has now been in negative territory for a year and pushed down further from -9.6 to -16.1. The growth rate of orders index also fell, declining 10 points to -20.7, its lowest value since mid-2020. Perceptions of broader business conditions continued to worsen in May. The general business activity index dropped six points to -29.1, its lowest reading in three years
Dallas Fed May 2023 manufacturing index
Highlights
- The production index, inched down from 0.9 to -1.3
- The new orders index pushed down further from -9.6 to -16.1.
- The growth rate of orders index declining 10 points to -20.7, its lowest value since mid-2020.
- The capacity utilization index moved down from 3.9 to -4.9,
- The shipments index was unchanged at -3.0.
- The general business activity index dropped six points to -29.1, its lowest reading in three years.
- The company outlook index pushed down seven points to -22.3, also a three-year low.
- The outlook uncertainty index retreated to 13.4, a reading below average.
- The employment index ticked up two points to 9.6 . Twenty-three percent of firms noted net hiring, while 13 percent noted net layoffs.
- The hours worked index inched up to -0.9.
- The raw materials prices index fell six points to 13.8, further below its average reading of 27.8.
- The finished goods prices index fell eight points to 0.4
- The wages and benefits index declined 13 points to 25.0, a reading now only slightly above its average of 21.0.
- The future production index rebounded from 3.0 to 12.0,
- The future general business activity index remained negative, edging up to -12.7.
- Most other measures of future manufacturing activity remained positive but showed mixed movements this month.
Texas factory activity remained relatively flat in May, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, inched down from 0.9 to -1.3, with the near-zero reading suggestive of little change in output from last month.
Other measures of manufacturing activity showed declines in May. The new orders index has now been in negative territory for a year and pushed down further from -9.6 to -16.1. The growth rate of orders index also fell, declining 10 points to -20.7, its lowest value since mid-2020. The capacity utilization index moved down from 3.9 to -4.9, while the shipments index was unchanged at -3.0.
Perceptions of broader business conditions continued to worsen in May.
The general business activity index dropped six points to -29.1, its lowest reading in three years. The company outlook index pushed down seven points to -22.3, also a three-year low. The outlook uncertainty index retreated to 13.4, a reading below average.
Labor market measures suggest continued employment growth but flat work hours. The employment index ticked up two points to 9.6, slightly above its average reading. Twenty-three percent of firms noted net hiring, while 13 percent noted net layoffs. The hours worked index inched up to -0.9.
Price pressures dropped further below normal levels, and wage pressures also eased but remained elevated.
The raw materials prices index fell six points to 13.8, further below its average reading of 27.8. The finished goods prices index fell eight points to 0.4, with the near-zero reading suggestive of flat selling prices. The wages and benefits index declined 13 points to 25.0, a reading now only slightly above its average of 21.0.
Expectations regarding future manufacturing activity were mixed in May.
The future production index rebounded from 3.0 to 12.0, while the future general business activity index remained negative, edging up to -12.7. 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
- It is easier to find qualified employees over the last few weeks.
Primary Metal Manufacturing
- Business is slowing down. That is certain.
- The building and construction industry remains significantly off, primarily residential. Another very negative factor is the influx of foreign material used in our industry.
Fabricated Metal Product Manufacturing
- Our only problem is our inability to hire enough hourly employees at the plant.
- We have had orders canceled when owners have decided not to proceed with projects.
- We have a continued focus on clearing the backlog of orders as supply constraints clear.
Paper manufacturing
- We are seeing all indications of a continued slide in demand (three quarters now). Prices are coming down some, but labor costs are still going up. This offsets any reduction in material costs, so margins are down as a result.
Machinery manufacturing
- We are seeing a massive slowdown in business activity.
Chemical manufacturing
- Volumes have not rebounded at a level we would expect this time of year. Orders seem to be more erratic, which is in line with automotive and building construction markets trending downward as interest rates have deeply impacted both of these key, basic-materials consumer sectors.
Transportation Equipment Manufacturing
- There is nothing encouraging on the horizon. The war on fossil fuels and higher interest rates continue to make things worse. Doesn’t the Federal Reserve understand a higher interest rate is crushing banks?
Food Manufacturing
- Order volume has stalled recently.
- We have different dynamics and drivers in our business. We clearly are moving into a period of stagflation.
Printing and Related Product Manufacturing
- We are fortunate to have been busy with seasonal work the last few months; otherwise, we would have been hurting just living off commercial finishing work. We have a large seasonal job starting in two weeks that will keep a lot of people busy through Labor Day. General activity is definitely slower than it has been.
Textile product mills
- We feel better now than we did a month ago about sales and the general environment. We have seen an increase in sales, particularly in our direct-to-consumer segment, although retail stores are down (retail stores are not a key strategic growth area for us; we’ve seen the writing on the wall for a while with this group). I also think uncertainty has reduced. I feel that we have a better grasp on the “new normal” cost structure and don’t anticipate any new major shocks to the system.
Next release: Monday, June 26
Source: Dallas Fed Surveys Texas Manufacturing Outlook Survey