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Market News and Trends

Manufacturing Growth in Texas


The Austin Chamber of Commerce posted an interesting report today based on the Texas Manufacturing Outlook Survey:

Central Texas Economy in Perspective

The outlook is optimistic.  I want to comment on just a couple of charts from the Chamber’s article, and one from the source report.

Suffice to say that current data regarding production and shipments is encouraging.  My focus here is on the future.

Survey Of Future Activity

Note that a little more than 50% of the companies surveyed report expectations for increasing future production, compared with less than 5% expecting declines.  That translates into an “index” of about 46%, which you will see in the Production index in the chart below.  Almost half of companies expect the volume of new orders to increase, and more than one-third expect the growth rate of new orders to increase as well.

Future Activity Index

The climb from last August in all of those indices is obvious, as is the dip from January to February.  Even there, though, notice that almost 30% more companies are optimistic about General Business Activity than those that are not.  Maybe more important is that the Employment index did not dip along with the other indices, with 40% more companies expecting to increase employment than those that expect decreases.

For a slightly longer-term perspective, this chart goes back to the pre-recession period:

Texas Manufacturers Production Index 2006-2011

A key difference between that chart and those above is that the longer-term view has been seasonally adjusted.  The notable feature to me is that production over the past few months has been back up to mid-2006 levels, and the expectation for future production is at or near pre-recession levels.

This data does not tell an unambiguously positive story:  Note that almost 70% surveyed companies expect to pay higher prices for raw materials and 45% more expect to increase payrolls, while companies that expect to charge higher prices for finished goods outnumber those that don’t by only about 35%.  These changes, if they turn out to be true, will result in reduced profit margins over the forecast period.  Presumably, a majority of companies are betting that the growth of new orders and new shipments will allow them to restore margins over time, justifying the thinner profit margins in the short run.

About Bill Morris, Realtor

Many years of business experience (high tech, client service, business organization and start-up, including 18 years in real estate) tell me that service is the key to success and I look forward to serving you. I represent both buyers and sellers throughout the Austin metropolitan area, which means first-hand market knowledge is brought to bear on serving your needs. Learn more about my background and experience, my commitment to my clients, my profession, and to the real estate industry at CentralTexasHomeSearch.com.

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