Fiona Sigalla

Frank Berger

Mine Yücel

Tom Fomby

English

Research Papers in Economics

FEDERAL RESERVE BANK OF DALLAS • JANUARY/FEBRUARY 2007             SouthwestEconomy 15
n May 2004, the Dallas Fed asked Texas’
top manufacturers to help it better understand
the economy. Each month, firms respond to
an electronic survey about changes in a vari-
ety of indicators, including production, new
orders, prices and general business condi-
tions.
Roughly 80 manufacturers regularly par-
ticipate, with respondents coming from all
sectors of manufacturing. No one industry
dominates the survey.
Each question asks participants whether
certain items of interest have increased,
decreased or remained unchanged. Answers
cover changes over the previous month and
expectations for six months into the future.
For each question, survey responses are
used to generate an index. Each index is cal-
culated by subtracting the percentage report-
ing a decrease from the percentage reporting
an increase. If all firms report an increase in
activity, an index will register 100; if all report
a decrease, an index will register –100. An
index will be zero when the number report-
ing an increase equals the number reporting
a decrease.
There are not sufficient data to seasonal-
ly adjust the index, but survey respondents
are asked to adjust their responses for normal
seasonal variations. There seems to be no
obvious seasonal pattern. The Dallas Fed will
further examine the issue of seasonality as
soon as sufficient data are available.
At the survey’s inception, results pointed
to an economy expanding strongly, with
many indexes high or rising through 2004 and
2005. Several of the indexes began to decel-
erate along with the state’s cooling economy
in mid-2006 but rebounded in January (see
charts below). Index movements over the last
six months suggest continued expansion of
the manufacturing sector but at a slower pace.
To the extent conclusions can be drawn
with a limited sample size of just over 30
months, preliminary statistical analysis sug-
gests the manufacturing survey may have
some predictive power for understanding
both the U.S. and Texas economies. 
The Texas Manufacturing Outlook Survey:
A Tool for Understanding the Economy
Index
Volume of New Orders, Growth Rate of Orders, Unfilled Orders  Production, Volume of New Orders, Shipments
Index
Prices Paid, Prices Received 
Index 
General Business Activity
Index 
SOURCE:  Federal Reserve Bank of Dallas.
–100
–80
–60
–40
–20
0
20
40
60
80
100
Jan. June Jan.
2006
June Jan.
2005
June
2004 2005 2007 2006
–100
–80
–60
–40
–20
0
20
40
60
80
100
Jan. June Jan.
2006
June Jan.
2005
June
2004 2005 2007 2006
Future general
business activity
General
business activity
Prices paid
for raw materials
Prices received
for finished goods
–100
–80
–60
–40
–20
0
20
40
60
80
100
Jan. June Jan.
2006
June Jan.
2005
June
2004 2005 2007 2006
Volume of shipments
Volume of new orders
Production
–100
–80
–60
–40
–20
0
20
40
60
80
100
Jan. June Jan.
2006
June Jan.
2005
June
2004 2005 2007 2006
Unfilled orders
Growth rate of orders
Volume of new orders
I The employment diffusion index appears
to help explain changes in U.S. and Texas
employment. The general business activity
index seems to be useful in understanding
movements in U.S. and Texas industrial pro-
duction. The future business activity index
also appears to have some predictive power
for understanding movements in U.S. industri-
al production over the next two months.
The Dallas Fed will continue to closely
monitor the Texas Manufacturing Outlook
Survey’s monthly results and their ability to
predict changes in the economy.
—Frank Berger, Tom Fomby, Fiona Sigalla, Mine Yücel
Note
The Texas Manufacturing Outlook Survey is released on the
last Monday of the month, and results are posted on the
Dallas Fed web site. An electronic mailing list is available to
notify recipients each month when new data are released. To
subscribe, go to www.dallasfed.org and click on “E-mail
Alerts” under “Tools.”

The Texas Manufacturing Outlook Survey: a tool for understanding the economy

http://dallasfed.org/assets/documents/research/swe/2007/swe0701g.pdf

The Texas Manufacturing Outlook Survey: a tool for understanding the economy

Abstract

Similar works

Full text

Available Versions

Research Papers in Economics