Texas manufacturing sector strengthens; Chicago Fed index improves in January

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Even as fears mounted from the spread of the COVID-19 virus around the world, economic data released Monday showed an economy that was still thriving and expanding.

Growth in Texas factory activity continued to accelerate in February, according to the Dallas Federal Reserve Bank’s manufacturing outlook survey.

The production index, a key measure of state manufacturing conditions, rose to 16.4 from 10.5 in January, a move that suggests stronger output growth. Other measures of manufacturing activity pointed to continued expansion in February, though demand growth decelerated, the Dallas Fed said.

The new orders index fell to 8.4 from a 15-month high of 17.6 in January while the growth rate of orders index fell to 3.6 from 6.1; both indexes remained above average. The capacity utilization and the shipments indexes held steady at 11.3 and 8.5, respectively.
Perceptions of broader business conditions were slightly more optimistic in February, the Dallas Fed said. The general business activity index rose to 1.2 in February from negative 0.2 as the company outlook index rose to 3.6 from 1.9. Both readings, however, were below the average readings of 2.9 and 7.2, respectively.

Looking ahead, the index measuring uncertainty regarding companies’ outlooks rose to 11.0 from 2.7 in January.

Measures regarding the labor market suggested flat employment levels and slightly longer workweeks this month.

The employment index declined to negative 0.9 from 1.9; 15% of the firms surveyed reported net hiring with 16% noting net layoffs. The hours worked index rose to 2.1 from negative 0.2.

Upward pressure on input prices and wages picked up, while selling prices remained flat.

Expectations regarding future business conditions were slightly more optimistic. The indexes of future general business activity and future company outlook moved up to 18.0 and 24.1, respectively. Most other indexes for future manufacturing activity declined slightly, but remained positive.

Also on Monday, the Chicago Fed National Activity Index improved to negative 0.25 in January from a revised negative 0.51 in December, originally reported as negative 0.35, the Chicago Federal Reserve reported on Monday.

A zero value for the CFNAI has been associated with the national economy expanding at its historical average rate of growth; negative values with below-average growth; and positive values with above-average growth.

The index’s three-month moving average, CFNAI-MA3, moved up to negative 0.09 in January from negative 0.23 in December.

The CFNAI Diffusion Index, which is also a three-month moving average, improved to negative 0.16 in January from negative 0.25 in December.

Periods of economic expansion have historically been associated with values of the CFNAI-MA3 above negative 0.70 and the CFNAI Diffusion Index above negative 0.35. Conversely, periods of economic contraction have been associated with values of the CFNAI-MA3 below negative 0.70 and the CFNAI Diffusion Index below negative 0.35.

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Economic indicators Federal Reserve Bank of Chicago Federal Reserve Bank of Dallas Manufacturing industry