Texas Factory Activity Increases For 3rd Month In A Row

Texas factory activity increased for a third month in a row in December. The production index, a key measure of state manufacturing conditions, rose from 5.2 to 13.4, indicating stronger growth in output. Some other indexes of current manufacturing activity also reflected growth in December, but the survey's demand measures showed continued weakness.

New orders, an indicator of incoming demand, declined at a faster pace. The index has been below zero for five months and fell to minus 8.9 in December. The growth rate of orders index has been negative for more than a year and dipped 7 points to minus 14.3 this month. Meanwhile, the capacity utilization and shipments indexes posted their fourth positive readings in a row and inched up to 7.8 and 7.6, respectively.

Perceptions of broader business conditions weakened markedly in December. The general business activity index has been negative throughout 2015 and plunged to minus 20.1 this month. After pushing just above zero last month, the company outlook index fell 10 points in December to minus 9.7, its lowest level since August.

The survey's price measures pushed further negative in December. The raw materials prices index declined to minus 8.6, suggesting a slightly steeper drop in input costs than last month. The finished goods prices index was negative all year and moved down to minus 15.9. Meanwhile, the wages and benefits index moved up to plus 20.4, indicating stronger wage growth.

Expectations regarding future business conditions were mixed in December. The index of future general business activity fell 9 points to minus 1.4, while the index measuring future company outlook fell but remained positive at 6.6. Indexes for future manufacturing activity declined but remained strongly positive.

Recent History Of This Indicator:
The Dallas Fed general activity index has been buried in deep contraction and has been offering, along with the Kansas City Fed report, the starkest evidence of energy-price damage. The Econoday median is calling for a 12th straight month of contraction, and a little deeper contraction at minus 6.0 vs November's minus 4.9. Production in this report has been in the plus column but the outlook for future gains is not supported by growth in new orders which has been in contraction for 13 straight months.