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Texas factory output slowed further in June. Is this the bottom?

By Bart Taylor

The Federal Reserve Bank of Dallas’ Texas Monthly Manufacturing Outlook survey found that “output growth decelerated in June”, and reported that ‘The production index, a key measure of state manufacturing conditions, fell five points to 4.1, a reading suggestive of a below-average pace of output expansion.”

In other words, manufacturing is still growing, but at a slower rate.

More, “Perceptions of broader business conditions were fairly stable in June. The general business activity index was flat, with the zero reading indicating no change in activity from May.” 

Employment growth resumed in June, and business sentiment rebounded sharply, with the Fed reporting that “the future general business activity index jumped 12 points to 25.9. Other indexes of future manufacturing activity remained in positive territory.”

What’s it all mean?

We’ve consistently reported that while demand for domestic manufacturing is high, industrial output continues to be suppressed by geo-politics and policy mishaps. But if other trends remain consistent, there’s every reason to believe that a powerful industrial rebound could be in the offing, if only the uncertainty that bedevils manufacturers, is mitigated. 

As we’re reported: 

• Wage growth is steady – a magnet for much-needed talent and sign that manufacturing is healthy despite labor challenges

• Productivity gains reflect ongoing efforts by manufacturers to automate and otherwise uptool operations

• Market conditions favor hyper-growth in key manufacturing industries, many of which are aligned with Houston’s industrial assets

• So-called “free trade” has lost its luster. Americans are more receptive than ever to industrial policy that picks US manufacturing ‘to win.’

A prescription to ensure that American industrial output rebounds to keep pace with high expectations would start with a straightforward embrace of a balanced trade ledger. The policy framework needed to lower our trillion-dollar trade deficit favors US manufacturing at every turn.

We’ll dig into why and how with Ian Fletcher and Marc Fasteau, authors of the brilliant Industrial Policy for the United States , Winning the Competition for Good Jobs and High-Value Industries, in the weeks ahead.

Bart Taylor is president of the Greater Houston Manufacturers Association. Reach him at [email protected].