Dallas Fed: Texas factory output spikes to 11-year high in December

Texas factory production tends to ebb and flow from one month to the next, but overall output surged throughout 2017 and in December reached its highest point in more than 11 years, according to a new report from the Federal Reserve Bank of Dallas.

The state production index, a key measure of factory activity statewide, jumped to a reading of 32.8 in December from 15.1 the prior month, according to the monthly Texas Manufacturing Outlook Survey.

The greater, positive figure indicated that manufacturing production in the state expanded at a faster pace this month.

The production index tracks closely with the overall Texas economy, so it provides one of the most current glimpses of broader economic conditions across the state. Texas factories, which produce about 11 percent of the country’s total manufactured goods — second behind only California — have now increased their output for 18 consecutive months.

“This month’s manufacturing report was impressively strong, continuing a trend we’ve seen throughout 2017 of accelerating manufacturing activity in Texas,” Emily Kerr, a Dallas Fed senior business economist, said in a written statement.

Kerr said that roughly half the responding firms expect to increase spending on equipment, machinery and other capital expenditures six months from now, the highest share since 2006.

“Looking ahead,” Kerr said, “comments from survey respondents indicate the tax bill may be a tailwind for manufacturing, while difficulty hiring remains a headwind.”

While several factory managers noted trouble finding qualified workers, according to anonymous comments compiled by the Dallas Fed, manufacturers across the state sharply accelerated their pace of hiring during December. The survey’s measure of employment soared to its highest reading since March 2012.

Other underlying factors, including gauges of new orders, shipments, capacity utilization and wages, all posted strong gains in December.

With a few exceptions, monthly production at Texas factories has expanded steadily since the recession officially ended in 2009. However, the events of the past year reinvigorated the state’s manufacturers.

Oil and gas prices sustained their modest recovery, stabilizing much of the manufacturing sector’s lost demand from energy-related customers. The strong U.S. dollar eased somewhat, making Texas exports more affordable overseas.

And more recently, the potential and eventual completion of a business-friendly tax overhaul appears to have opened the spigot on more orders, according to the comments in the survey.

Expectations for both company-specific and general business activity remained strongly optimistic during the month, with managers’ perspectives on current conditions soaring and future conditions holding steady, the survey said.

“With the passage of the tax relief bill, my feeling is that the manufacturing segment of the economy will continue to grow at a faster pace,” said one fabricated metal products manufacturer. “The biggest problem for most manufacturing companies will be finding and hiring competent employees.”

Reader Comments ...

Next Up in Business

Austin billionaire DeJoria selling off Patron Spirits
Austin billionaire DeJoria selling off Patron Spirits

Bacardi Limited said Monday that plans to swallow the rest of Patron Spirits in a deal that values the tequila maker at $5.1 billion. Bacardi has held a minority stake in Patron since 2008. The two private companies on Monday didn’t disclose terms of the deal for the remainder of Patron. The acquisition is expected to close in the first half...
After strong 2017 finish, outlook bright for Austin office market
After strong 2017 finish, outlook bright for Austin office market

The Austin-area’s office market rolled to a strong finish in 2017, new reports show, propelled by Fortune 500 companies including Facebook Inc., Google, Indeed and HomeAway signing sizeable office leases in the market last year. Major lease transactions were the theme of 2017, according to the latest office market report from the Austin office...
Up the Ladder

Credit unions Greater Texas Credit Union has named Lisa Bateman vice president-consumer lending. Consulting Potomac Strategy Group has named Jamie Bennett vice president. E-Commerce Twyla has named Thomas Galbraith chief executive officer. Health care HNI Healthcare has named Michael Saunders president. Law firms Weisbart Springer Hayes has named Mia...
Top Local Business Stories of the Week
Top Local Business Stories of the Week

TEXAS ECONOMY With tax overhaul as ‘tailwind,’ regional economy surged, Dallas Fed says: Economic activity in Texas and parts of two neighboring states surged over the past six weeks, as the federal tax overhaul boosted confidence across a wide range of businesses in the region, according to a report last week from the Federal Reserve Bank...
Despite tight labor market, Austin job growth maintains momentum
Despite tight labor market, Austin job growth maintains momentum

Back around the middle of last year, workforce experts looked at the easing rate of Austin-area job growth and figured the inevitable had finally arrived: The region’s tight labor market was bringing expansion back to more reasonable levels. In true Austin fashion, though, local hiring re-accelerated in the months since. And after modest job...
More Stories