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Texas Manufacturing Activity Falls Sharply in January, Says Dallas Fed Survey

For immediate release: January 25, 2016

DALLAS—Texas factory activity fell sharply in January, according to the Federal Reserve Bank of Dallas’ Texas Manufacturing Outlook Survey.

The production index—a key measure of state manufacturing conditions—dropped 23 points, from 12.7 to –10.2, suggesting output declined this month after growing throughout fourth quarter 2015.

Positive readings in the survey generally indicate expansion of factory activity, while readings below zero generally indicate contraction.

“The Texas manufacturing sector is facing some major challenges—namely, low oil prices and a strong dollar,” said Emily Kerr, Dallas Fed business economist.

Other indexes of current manufacturing activity also indicated contraction in January. The new orders and growth rate of orders indexes led the falloff in production with negative readings last month, and they both pushed further negative in January. The capacity utilization and shipments indexes posted double-digit declines into negative territory.

“Forward-looking indicators in the survey, like the new orders index, have been signaling impending weakness in manufacturing for several months now,” Kerr said. “This month we saw that weakness materialize in a big way, with some indexes reaching levels not seen since the last recession.”

However, Kerr noted that the majority of state economic indicators point to modest growth, and the Dallas Fed employment forecast for Texas currently stands at 1.1 percent job growth in 2016—slower than typically seen in the state but still positive.

Perceptions of broader business conditions weakened markedly in January. The general business activity and company outlook indexes fell to their lowest readings since April 2009. The general business activity index fell 13 points to –34.6, while the company outlook index slipped to –19.5.

Labor market indicators reflected a decline in January after exhibiting strength the previous two months. The employment index dropped from 10.9 in December to –4.2. The hours worked index plummeted 23 points to –9.2, suggesting a sharp pullback in employee hours.

Expectations regarding future business conditions weakened notably in January. The index of future general business activity fell further into negative territory, while the index of future company outlook fell to its first negative reading in nearly seven years. Indexes for future manufacturing activity generally declined but remained solidly positive.

Texas produces more than 11 percent of total manufactured goods in the United States, ranking second behind California in factory production.

The Dallas Fed conducts the Texas Manufacturing Outlook Survey monthly to obtain a timely assessment of the state’s factory activity.


Media contact:
Justin Jones
Federal Reserve Bank of Dallas
Phone: (214) 922-5449