Texas Manufacturing Continues to Decelerate

Dallas, TX, October 30, 2007--Texas manufacturing continues to show signs of softness, according to the 122 business executives who responded to the Texas Manufacturing Outlook Survey in October.

Although nearly all current production indicators increased modestly from September, measures for general business conditions remain weak.

While positive, most indexes are lower for activity six months from now, a result that appears consistent with the decelerating trend that began earlier in the year.

The labor market measures showed little change. The index for number of employees remained essentially unchanged, with 22% of firms reporting increases in October and a slightly smaller percentage reporting decreases.

Upward price pressures persist, with more producers reporting price increases for raw materials than finished goods. Raw materials prices increased at nearly 40% of responding factories and wage and benefits increased at 21% of factories.

Texas manufacturers remain cautious about general business conditions. The company outlook index remained essentially unchanged.

The index for capital expenditures was slightly lower in October. This month, manufacturers were asked special questions about their capital spending plans. Over the next six to 12 months, nearly 40% of responding firms plan to increase capital spending, and 35% expect no change. Just over one-quarter of firms say they’re decreasing capital spending. The majority of manufacturers said recent changes in financial conditions hadn’t prompted them to revise their capital spending plans, but 25% said they had made a small downward revision and 10% had made a small upward revision. Most of those indicating a downward revision were producers of construction-related materials.