Texas Factory Activity Contracted in January for Ninth Straight Month -- Dallas Fed

By Xavier Fontdegloria

Manufacturing activity in Texas continued to weaken in January, posting its ninth contraction in as many months, highlighting increasing demand headwinds for the region's factory sector.

The Federal Reserve Bank of Dallas said Monday that the index for general business activity of the Texas Manufacturing Outlook Survey rose to minus 8.4 in January from a revised minus 20.0 in December. Economists polled by FactSet expected the indicator to rise to minus 9.9.

The indicator suggests business activity in Texas contracted over the month as the reading was negative, but also signals activity declined at a softer pace than in December as the index was closer to zero.

Meanwhile, the production index--a key measure of state manufacturing conditions--decreased to 0.2 from 9.1 the previous month, signaling that output broadly stagnated after increasing in December.

Demand continued to show signs of weakness, data from the survey showed. The new orders index rose to minus 4.0 from minus 11.0 but remained negative, and the growth rate of orders index fell further to minus 12.3 from minus 9.3. Both the unfilled orders and the shipments indexes posted negative values.

"We are seeing a slowdown in orders and clients unwilling to hold additional inventory," said one respondent from the chemical manufacturing sector.

Despite faltering demand, firms in the area continued to expand their workforce. The employment index rose to 17.6 from 13.6, well above its historical average and with 31% of firms reporting net hiring and 13% reporting net layoffs.

Price pressures were generally steady, the Dallas Fed said. The raw materials prices index fell to 20.5 from 21.9, and the finished goods prices index decreased slightly to 9.9 from 10.9.

Firms' views over the short-term outlook were mixed, the report said. The future production index rose to 16.1 in January from 10.5, signaling that respondents expect higher output over the next six months. However, the future general business activity index remained negative.

Write to Xavier Fontdegloria at [e-mail]

(END) Dow Jones Newswires

01-30-23 1119ET