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U.S. February Dallas Fed Business Outlook Report (Text)

The following is the text of the Texas manufacturing activity from the Federal Reserve Bank of Dallas.

Texas factory activity continued to increase in February, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, rose from 5.8 to 11.2, suggesting a pickup in the pace of growth.

Other measures of current manufacturing conditions also indicated expansion in February. The new orders index was positive for a second month in a row but fell from 9.5 to 5.8. Similarly, the shipments index moved down from 6.1 to 4.2. Capacity utilization increased further in February; the index edged up from 8.5 to 10.

Perceptions of broader economic conditions were more positive in February. The general business activity index rose to 17.8, its highest reading since November 2010. More than a quarter of manufacturers noted improvement in the level of business activity, while 8 percent noted a worsening. The company outlook index also reached a level not seen since 2010; it advanced from 13.5 to 15.8.

Labor market indicators reflected a sharp increase in hiring and longer workweeks. The employment index jumped to 25.2, its highest level since the beginning of 2006. Twenty-nine percent of firms reported hiring new workers, while 4 percent reported layoffs. The hours worked index continued to suggest average workweeks lengthened.

Prices and wages increased in February. The raw materials price index was 25.2, little changed from January. The finished goods price index climbed from 9 to 16.2, suggesting selling prices rose at a faster pace. About half of respondents anticipate further increases in raw materials prices over the next six months, while 30 percent expect higher finished goods prices. The February wages and benefits index was 18.4, indicating a continued rise in labor costs.

Expectations regarding future business conditions remained optimistic in February. The index of future general business activity remained positive for the fifth month in a row but moved down from 22.3 to 15.9. The index of future company outlook came in at 24.2, down from 27.9 last month. Most other indexes for future manufacturing activity also receded slightly, but all remained in solid positive territory.

The Dallas Fed conducts the Texas Manufacturing Outlook Survey monthly to obtain a timely assessment of the state’s factory activity. Data were collected Feb. 14-22, and 85 Texas manufacturers responded to the survey. Firms are asked whether output, employment, orders, prices and other indicators increased, decreased or remained unchanged over the previous month.

Survey responses are used to calculate an index for each indicator. Each index is calculated by subtracting the percentage of respondents reporting a decrease from the percentage reporting an increase. When the share of firms reporting an increase exceeds the share reporting a decrease, the index will be greater than zero, suggesting the indicator has increased over the prior month. If the share of firms reporting a decrease exceeds the share reporting an increase, the index will be below zero, suggesting the indicator has decreased over the prior month. An index will be zero when the number of firms reporting an increase is equal to the number of firms reporting a decrease.

Next release: March 26, 2012

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