Dallas Fed: Manufacturing activity changed little in May

Factory activity changed little in May, according to the 125 business executives who responded to the Texas Manufacturing Outlook Survey. The report, compiled by the Federal Reserve Bank of Dallas, was released on May 29. After strengthening in the first quarter, overall manufacturing activity appears to have leveled off in the first two months of the second quarter. Indexes for production, volume of new orders, volume of shipments and company outlook in May were very similar to those in April.

The index for general business activity improved for the second consecutive month in May. Index values were also higher for growth rate of orders, unfilled orders and number of employees. In contrast, the index for capacity utilization drifted lower, falling from 25.2 in April to 19.2 in May, with 30 percent of firms reporting an increase and 10 percent reporting a decrease.

Survey results continue to suggest upward price pressure. The raw materials price index edged up from 39.1 to 40.8 in May, with 44 percent of the manufacturers reporting an increase and 3 percent reporting a decrease. The finished goods price index rose from 15.6 to 20 in May. Twenty-five percent of the respondents indicated higher selling prices, and only 5 percent reported price declines. Index values increased for both raw materials and finished goods prices six months from now. Forty-seven percent of responding firms expect higher raw materials prices in the future, while 34 percent said they believe finished goods prices will increase six months from now.

Sentiment on future business activity remained optimistic, although most of those indicators were slightly below last month’s levels. Still, just over half of responding firms expect an increase in production and the volume of new orders six months from now.

The Dallas Fed conducts the Texas Manufacturing Outlook Survey monthly to obtain a timely assessment of the state’s factory activity. Firms are asked whether output, employment, orders, prices and other indicators increased, decreased or remained unchanged over the previous month.

For additional perspective on the survey, see "The Texas Manufacturing Outlook Survey: A Tool for Understanding the Economy" and "Made in Texas: The Natural Selection of Manufacturing." 

• Click on links in the table for greater details, including historical data.

Questions regarding the Texas Manufacturing Outlook Survey can be addressed to Fiona Sigalla at Fiona.Sigalla@dal.frb.org or 214-922-5166. Note The Texas Manufacturing Outlook Survey has not been produced for a long enough time period to assess the appropriateness of seasonal adjustment. Thus, while respondents are asked to adjust for normal seasonal variation, the month-to-month values of these indexes may include some normal seasonal variation that is not indicative of changes in the business cycle. Other Federal Reserve Bank business outlook indexes benefit from seasonal adjustment, and the Texas indexes will be seasonally adjusted if appropriate.