August Dallas Fed Manufacturing Outlook: "Recovery Continues in Texas Manufacturing"

1. This morning the Dallas Fed released its Texas Manufacturing Outlook Survey for August. The latest general business activity index came in at 8, up 11.0 from -3.0 in July. All figures are seasonally adjusted.

Here is an excerpt from the latest report:

Texas factory activity expanded in August for the third month in a row following a record contraction in the spring after the onset of the COVID-19 pandemic, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, came in at 13.1, down slightly from July but still indicative of moderate growth.

Other measures of manufacturing activity also point to expansion this month. The new orders index advanced three points to 9.8, and the growth rate of orders index surged more than 10 points to 11.8. The shipments index rose from 17.3 to 23.3, while the capacity utilization index inched down but remained positive at 10.9.

Expectations regarding future activity were more positive in August. The future production index pushed up to an above-average reading of 43.0, and the future general business activity index jumped 10 points to 20.4. Other measures of future manufacturing activity advanced further into positive territory.

Monthly data for this indicator only dates back to 2004, so it is difficult to see the full potential of this indicator without several business cycles of data. Nevertheless, it is an interesting and important regional manufacturing indicator. The Dallas Fed on the TMOS importance:

Texas is important to the nation’s manufacturing output. The state produced $159 billion in manufactured goods in 2008, roughly 9.5 percent of the country’s manufacturing output. Texas ranks second behind California in factory production and first as an exporter of manufactured goods.

Texas turns out a large share of the country’s production of petroleum and coal products, reflecting the significance of the region’s refining industry. Texas also produces over 10 percent of the nation’s computer and electronics products and nonmetallic mineral products, such as brick, glass and cement.

Here is a snapshot of the complete TMOS.

The next chart is an overlay of the General Business Activity Index and the Future Outlook Index — the outlook six months ahead.

For comparison, here is the latest ISM Manufacturing survey.

Let's compare all five Regional Manufacturing indicators. Here is a three-month moving average overlay of each since 2001 (for those with data).

Here is the same chart including the average of the five for the latest month with complete data.