Execs: Texas manufacturing up

Dallas Fed survey reports above-average growth in September

Texas factory activity expanded in September for the fourth month in a row following a record plunge due to the pandemic, business executives responding to a Federal Reserve Bank of Dallas survey said.

The survey forms the basis of several indexes the Dallas Fed uses to track the health of the manufacturing sector.

The production index, a key measure of manufacturing conditions in the state, rose nine points to 22.3, its highest reading in two years, the Texas Manufacturing Outlook Survey states. It hit a record low of minus 55.6 in April, data going back to 2004 shows.

Other measures of manufacturing activity also point to aboveaverage growth this month. The new orders index jumped five points to 14.7. The capacity utilization index, another measure of production, increased to 17.5 from 10.9 in August, while the shipments index was mostly unchanged at 21.5.

Although manufacturing activity has picked up substantially since the spring, when the rapidly spreading pandemic forced many plants to shut down, it has yet to fully recover, said Emily Kerr, a Dallas Fed senior business economist.

About 60 percent of manufacturers say business still is down from normal levels by an average of about 30 percent.

The improved manufacturing outlook coincides with what has been a steady, if tentative, recovery since state and local governments ordered businesses to shut down and residents to stay at home during the spring to slow the rapid spread of the coronavirus.

The state unemployment rate has fallen from a peak of 13.5 percent in April to 6.8 percent in August, although that still is about double the jobless rate of a year ago, according to the Labor Department.

First-time claims for unemployment benefits in Texas have fallen below 50,000 a week from a peak of more than 300,000 in the spring. Claims, however, remain about four times the levels of a year ago.

Perceptions of broader business conditions among manufacturers continued to improve in September. The general business activity index rose six points to 13.6, its highest reading since November 2018.

Manufacturers also appear to be hiring. The manufacturing survey’s employment index increased to 14.5 from 10.6, suggesting more hiring. Twenty-four percent of firms noted net hiring, while 10 percent noted net layoffs.

“Job growth continued to pick up and sentiment about broader business conditions remained positive, though uncertainty persists,” Kerr said.