Dallas Fed Manufacturing Outlook: Factory Activity Declined In May

manufacturing growthJill Mislinski:   This morning the Dallas Fed released its Texas Manufacturing Outlook Survey (TMOS) for May. The latest general business activity index declined in May after two months of increases. The General Activity index came in at -20.8, down from -13.9 in April.

Here is an excerpt from the latest report:

Texas factory activity declined in May after two months of increases, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, fell from 5.8 to -13.1, hitting its lowest reading in a year.

Other measures of current manufacturing activity also reflected contraction this month. The new orders index fell more than 20 points to -14.9 after pushing into positive territory last month. The growth rate of orders index has been negative since late 2014 and fell to -14.7 in May after climbing to near zero in April. The capacity utilization and shipments indexes returned to negative territory after two months of positive readings, coming in at yearlong lows of -11.0and -11.5,respectively.

Perceptions of broader business conditions were more pessimistic this month. The general business activity index declined from -13.9 to -20.8, and the company outlook index fell 10 points to -16.1.

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.

Dallas Fed Manufacturing

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.

ISM Manufacturing PMI

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

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