Workers collaborating in a Texas manufacturing facility.
The latest Texas Manufacturing Outlook Survey reveals a mixed performance in the state’s manufacturing sector for May, with some improvement evident despite ongoing contraction. The general business activity index increased significantly, although remaining negative, marking four consecutive months of downturn. Key indices showed varying trends, including new orders improving slightly, while labor market conditions displayed both increased workforce numbers and reduced working hours. Overall, while expectations for future activity have improved, uncertainty about sustained growth persists.
Dallas, Texas — The latest Texas Manufacturing Outlook Survey (TMOS) released by the Dallas Fed shows a mixed picture for the state’s manufacturing sector in May, with signs of improvement in some areas despite an ongoing contraction. The general business activity index saw a significant rise of nearly 21 points, reaching -15.3, although it remains in negative territory, marking the fourth consecutive month of deteriorating conditions for the manufacturing industry in Texas.
In May, Texas factory activity was reported as holding steady despite challenges. The production index, a critical measure of manufacturing health, dropped four points to a near-zero reading, suggesting flat output for the month after showing modest growth in March and April. Some indices that measure manufacturing activity showed improvements, yet many indicators still reflect contraction within the sector.
The new orders index, while still negative and indicating contraction, improved to -8.7 from the previous figure of -20.0, signaling a slight easing in the downturn of new orders. The capacity utilization index remained negative but inched up to -1.5, suggesting slightly better performance. Notably, the shipments index rebounded into positive territory, rising to 0.5 after having dipped into negative numbers the previous month.
While overall perceptions of broader business conditions continued to show signs of deterioration in May, many of the indexes were less negative than reported in April. The company outlook index, which indicates manufacturers’ expectations for future business, increased to -11.3 from -28.3, a significant improvement but still indicating a pessimistic outlook. Also, the outlook uncertainty index decreased by 34 points to 12.7, suggesting a slight reduction in uncertainty, although uncertainty about the future remains notable.
Labor market conditions reflected some changes as well, showing a slight increase in workforce numbers paired with shorter working hours. The employment index increased seven points to 3.5, with 12% of firms reporting net hiring while 8% reported net layoffs. The hours worked index remained negative but saw a minor increase to -3.6, highlighting ongoing challenges in labor utilization.
Price pressures appeared to be elevated in May, with companies reporting higher-than-usual costs, although wage growth appeared subdued. The raw materials prices index decreased by 8 points to 40.7, while the finished goods prices index remained stable at 15.1, both significantly above average. Meanwhile, the wages and benefits index stayed largely unchanged at 15.0, remaining below average levels.
The TMOS is a monthly survey conducted among 100 Texas manufacturers to assess the state of factory activity, encompassing various factors such as output, employment, orders, and prices. Texas remains a crucial player in the national manufacturing landscape, having produced $296 billion in manufactured goods in 2023, accounting for approximately 11% of the United States’ total manufacturing output. The state ranks second in manufacturing, following California, and is the leading exporter of manufactured goods in the nation, significantly contributing to sectors like petroleum and coal products, chemicals, and nonmetallic mineral products.
Looking ahead, expectations for general business activity improved, with future general business activity expectations jumping back into positive territory at 1.3. The future production index also saw a substantial increase of 16 points, reaching 31.1. Although many future manufacturing activity indexes rose, they still remain below average levels, indicating uncertainty about sustained growth. The TMOS data has been tracked since 2004, providing essential insights into regional manufacturing trends.
Houston Companies Blast Off with Space Grants
Texas and Mexico Strengthen Economic Collaboration
Big Changes on the Horizon for Texas Hemp Industry
Eli Lilly Plans Major Biomanufacturing Plant in Northeast Houston
Texas Businesses Express Concerns Over Tariffs
NVIDIA Announces AI Supercomputer Plants in Texas
Southern Dallas-Fort Worth Metroplex Experiences Rapid Growth
Plano Welcomes NTxBio’s New Biomanufacturing Facility
Texas Republicans Propose Bills Impacting Renewable Energy
Big Changes in Texas Construction Industry
News Summary Waco, Texas is preparing to welcome a new baseball and softball complex spanning…
News Summary Galveston is preparing for a pivotal business luncheon, 'The State of Business in…
News Summary In May, Texas' manufacturing sector reported nearly stagnant activity, with the production index…
News Summary Houston welcomes a new business park as Urban Logistics Realty breaks ground on…
News Summary T1 Energy has reached a significant operational milestone at its G1 Dallas solar…
News Summary The Dallas Stars have secured their place in the Western Conference Finals after…