Last updateFri, 17 Aug 2018 5pm


Texas Manufacturing Expansion Continues but at Slower Pace

Texas factory activity continued to expand in March, albeit at a markedly slower pace than last month, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, fell 15 points to 12.7, signaling a deceleration in output growth.

Other indexes of manufacturing activity also remained positive but posted double-digit declines in March. The new orders and growth rate of orders indexes fell to 8.3 and 3.8, respectively. The capacity utilization index dropped to 9.6, and the shipments index plunged 23 points to 9.3. Although these indexes are down notably from their February readings, they remain well above their post-recession averages. 

Durable Goods Orders Up 3.1% in February

New orders for manufactured durable goods in February increased $7.4 billion or 3.1% to $247.7 billion, the U.S. Department of Commerce announced. This increase, up three of the last four months, followed a 3.5% January decrease. Excluding transportation, new orders increased 1.2%. Excluding defense, new orders increased 2.5%. Transportation equipment, also up three of the last four months, led the increase, $5.5 billion or 7.1% to $83.5 billion.

In the past 12 months, durable goods orders are up 6.9% and core capital goods are up 8.0% in that same span. 

U.S. Manufacturers’ Electricity Use Has Declined

Overall electricity use in U.S. manufacturing has declined in recent years, based on data from the U.S. Census Bureau. Many manufacturing establishments have the option of generating their own electricity in addition to pulling directly from the electric grid to run their processes. Most operators get their electricity from grid purchases. From 2006 through 2016, the manufacturing sector purchased 87% to 89% of their electricity from the grid and generated the remaining 11% to 13% onsite.

Highly efficient industrial onsite generation from combined heat and power (CHP) technology offers the potential for increased system resiliency and operational benefits, but it is concentrated in just a few manufacturing groups. In 2016, the entire manufacturing sector generated 110 million megawatthours (MWh) of electricity, driven in part by federal tax incentives and state initiatives. About 97% of this electricity came from five manufacturing groups: chemicals, paper, petroleum and coal, primary metals and food. 

U.S. Business Borrowing Rose 31% in February

The Equipment Leasing and Finance Association’s (ELFA) Monthly Leasing and Finance Index, which reports economic activity from 25 companies representing a cross section of the $1 trillion equipment finance sector, showed their overall new business volume for February was $7.7 billion, up 31% year-over-year from new business volume in February 2017. Volume was up 13% month-to-month from $6.9 billion in January. Year to date, cumulative new business volume was up 20% compared to 2017. 

Philly Fed Manufacturing Shows Continued Expansion

Results from the Philadelphia Fed’s March Manufacturing Business Outlook Survey suggest continued growth for the region’s manufacturing sector. Although the survey’s index for general activity moderated, the indexes for new orders and shipments improved. The survey’s future indexes, measuring expectations for the next six months, reflected continued optimism.

The diffusion index for current general activity remained positive but declined, from 25.8 in February to 22.3 this month (see Chart 1). Nearly 37% of the manufacturers reported increases in overall activity this month, while 14% reported decreases. The indexes for current new orders and shipments recorded notable improvements this month. The current new orders index increased 11 points, with 52% of the firms reporting an increase in new orders. 

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