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Texas Manufacturing Activity Weak but Outlook Turns Up Slightly
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Texas’ factory activity continued to contract in March, according to firms responding to the Texas Manufacturing Outlook Survey. Indexes for production, capacity utilization, new orders and shipments ticked upward but remained overwhelmingly negative, with more than 80 percent of respondents reporting no change or declines in these measures.
The business activity index, the survey’s broadest measure of state manufacturing trends, revealed widespread downbeat sentiment. Fifty-three percent of responding manufacturing executives reported worsening market conditions, and 43 percent indicated no improvement from the prior month.
Several indicators of future activity suggest that the region’s manufacturers expect declines in factory activity to ease over the next six months. Indexes for future production, capacity utilization, shipments, new orders and growth rate of orders improved modestly for the fourth consecutive month, and 40 percent of manufacturing executives foresee increases in production six months from now.
Consistent with shrinking domestic demand and ebbing overseas sales, manufacturers continued to draw down inventories. The index for materials inventories plunged to its lowest reading since the start of the survey in 2004, and 30 percent of manufacturers noted declines in their finished goods inventories.
Manufacturers’ demand for labor remained weak. More than half of surveyed firms reported job cuts, and the average workweek index plummeted. The sluggish demand kept wage pressures subdued, with 82 percent of respondents noting no changes in wages and benefits.
Manufacturers continued to report downward prices pressures. Fifty percent noted falling input prices, and 34 percent cited lower prices for their goods. Firms’ expectations for future price increases were subdued as well. The index for raw materials prices over the next six months remained negative, and manufacturers expecting declines in finished goods prices outnumbered those foreseeing increases by more than three-to-one.
Posted: March 30, 2009 Monday 10:30 AM