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TMOS June 2012

TMOS June 2012

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Published by Coy Davidson

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Published by: Coy Davidson on Jun 28, 2012
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06/29/2012

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June 25, 2012
Texas factory activity surged in June, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, rose from 5.5 to 15.5,posting its strongest reading in 15 months.Other measures of current manufacturing conditions also indicated strengthening activity in June. The new ordersindex rose to 7.9, following three readings around zero, suggesting demand finally grew after staying flat sinceFebruary. Similarly, the shipments index rebounded to 9.6 after two months of near-zero readings. The capacityutilization index rose from 5 to 13.3, reaching its highest level since early 2011.Perceptions of broader economic conditions improved in June. The general business activity index had beennegative in April and May but increased to 5.8 this month. Twenty-four percent of firms noted improvement in thelevel of business activity in June, up from 15 percent last month. The company outlook index edged up from 4.7 to5.5.Labor market indicators reflected stronger labor demand growth and steady workweeks. Employment grew at afaster pace in June, with the index rising from 8.5 to 13.7. Twenty-one percent of firms reported hiring newworkers, while 8 percent reported layoffs. The hours worked index was 1, suggesting little change in workweeklength.Input price pressures dissipated abruptly in June, while selling prices declined and wages rose at a slower pace.The raw materials price index plummeted from 20.2 to 2.7, registering its lowest reading since mid-2009. Selling prices fell for the fourth consecutive month in June; the finished goods price index was -5.8. The share of respondents who anticipate further increases in raw materials prices over the next six months fell 12 points to 28percent in June. The share of respondents expecting higher finished goods prices moved down 9 points to 14percent, while the share expecting falling finished goods prices tripled. Meanwhile, the wages and benefits indexmoved down from 20 to 13.2, largely due to a reduction in the share of firms noting increased compensationcosts.Expectations regarding future business conditions slipped in June. The index of future general business activityedged down from 4.3 to 1.3. The index of future company outlook also fell three points from its May level, coming in at 8.4. Indexes for future manufacturing activity moved up slightly in June, pushing further into positive territory.The Dallas Fed conducts the Texas Manufacturing Outlook Survey monthly to obtain a timely assessment of thestate’s factory activity. Data were collected June 12–20, and 91 Texas manufacturers responded to the survey.Firms are asked whether output, employment, orders, prices and other indicators increased, decreased orremained unchanged over the previous month.Survey responses are used to calculate an index for each indicator. Each index is calculated by subtracting thepercentage of respondents reporting a decrease from the percentage reporting an increase. When the share of firms reporting an increase exceeds the share reporting a decrease, the index will be greater than zero,suggesting the indicator has increased over the prior month. If the share of firms reporting a decrease exceedsthe share reporting an increase, the index will be below zero, suggesting the indicator has decreased over theprior month. An index will be zero when the number of firms reporting an increase is equal to the number of firmsreporting a decrease.July 30, 2012
Federal Reserve Bank of DallasTexas Manufacturing Outlook Survey1
 
Business Indicators Relating to Facilities and Products in TexasCurrent
IndicatorJunIndexMayIndexChangeIndicatorDirection*Trend**(months)%Reporting Increase%Reporting No Change%Reporting DecreaseProduction15.55.5+10.0Increasing729.057.513.5Capacity Utilization13.35.0+8.3Increasing726.360.713.0New Orders7.9-0.6+8.5Increasing127.253.519.3Growth Rate of Orders1.6-3.7+5.3Increasing121.558.619.9Unfilled Orders7.8-4.0+11.8Increasing118.670.610.8Shipments9.6-0.2+9.8Increasing125.458.815.8Delivery Time5.54.7+0.8Increasing212.181.36.6Materials Inventories1.17.2-6.1Increasing319.861.518.7Finished Goods Inventories-7.7-2.4-5.3Decreasing514.363.722.0Prices Paid for Raw Materials2.720.2-17.5Increasing3518.565.715.8Prices Received for Finished Goods-5.8-0.5-5.3Decreasing48.078.213.8Wages and Benefits13.220.0-6.8Increasing3114.783.81.5Employment13.78.5+5.2Increasing2021.271.37.5Hours Worked1.0-2.2+3.2Increasing117.166.816.1Capital Expenditures8.16.9+1.2Increasing917.173.99.0
General Business ConditionsCurrent
IndicatorJunIndexMayIndexChangeIndicatorDirection*Trend**(months)%Reporting Improved%Reporting No Change%Reporting WorsenedCompany Outlook5.54.7+0.8Improving220.764.115.2General Business Activity5.8-5.1+10.9Improving124.257.418.4
Business Indicators Relating to Facilities and Products in TexasSix Months Ahead
IndicatorJunIndexMayIndexChangeIndicatorDirection*Trend**(months)%Reporting Increase%Reporting No Change%Reporting DecreaseProduction33.031.6+1.4Increasing4042.248.69.2Capacity Utilization30.129.1+1.0Increasing4039.451.39.3New Orders27.822.8+5.0Increasing4040.447.012.6Growth Rate of Orders14.613.7+0.9Increasing4030.653.416.0Unfilled Orders-5.64.8-10.4Decreasing110.174.215.7Shipments33.627.2+6.4Increasing4042.349.18.7Delivery Time-9.1-3.6-5.5Decreasing34.581.813.6Materials Inventories6.8-5.9+12.7Increasing122.561.815.7Finished Goods Inventories-1.1-7.2+6.1Decreasing314.669.715.7Prices Paid for Raw Materials15.935.7-19.8Increasing3928.459.112.5Prices Received for Finished Goods-4.516.6-21.1Decreasing113.568.518.0Wages and Benefits27.334.4-7.1Increasing9728.470.51.1Employment14.615.4-0.8Increasing3425.862.911.2Hours Worked1.02.6-1.6Increasing3915.170.814.1Capital Expenditures13.618.1-4.5Increasing3125.063.611.4
General Business ConditionsSix Months Ahead
IndicatorJunIndexMayIndexChangeIndicatorDirection*Trend**(months)%Reporting Improved%Reporting No Change%Reporting WorsenedCompany Outlook8.411.4-3.0Improving3823.761.015.3General Business Activity1.34.3-3.0Improving919.462.518.1*Indicator direction refers to this month's index. If index is positive (negative), indicator is increasing (decreasing) or improving (worsening).If zero, indicator is unchanged.**Number of months moving in current direction.Data have been seasonally adjusted as necessary.
Federal Reserve Bank of DallasTexas Manufacturing Outlook Survey2
 
OMMENTSFROMURVEYESPONDENTS
These comments are from respondents' completed surveys and have been edited for publication.
Petroleum and Coal Products Manufacturing
The availability of low-cost natural gas is a huge advantage to a U.S.-based manufacturercompeting overseas.
Primary Metal Manufacturing
We have seen a decrease in production due to a limited supply of raw materials this month.
Fabricated Metal Manufacturing
There is rising hesitation to move forward on commitments to new projects.
Machinery Manufacturing
While our business remains fairly strong and stable, one can see softening in the generaleconomy. That softening is now beginning to impact exploration and production activities,and we are somewhat concerned that it could reach our customers in downstream energyservices later this year.Orders continue to be received with shorter than normal lead times. This appears to be dueto the lack of certainty on long-term projects.
Computer and Electronic Product Manufacturing
Our six-month assumptions are that Congress will address the sequestration mechanism.We realize that assumption may be a long shot.
Federal Reserve Bank of DallasTexas Manufacturing Outlook Survey3

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