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Texas Manufacturing Activity declined in May
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Texas factory activity declined in May after two months of increases, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, fell from 5.8 to -13.1, hitting its lowest reading in a year.
Other measures of current manufacturing activity also reflected contraction this month. The new orders index fell more than 20 points to -14.9 after pushing into positive territory last month. The growth rate of orders index has been negative since late 2014 and fell to -14.7 in May after climbing to near zero in April. The capacity utilization and shipments indexes returned to negative territory after two months of positive readings, coming in at yearlong lows of -11.0 and -11.5, respectively.
Perceptions of broader business conditions were more pessimistic this month. The general business activity index declined from -13.9 to -20.8, and the company outlook index fell 10 points to -16.1.
Latest readings on employment and workweek length indicated a fifth consecutive month of contraction in May. The employment index moved down three points to -6.7. Sixteen percent of firms noted net hiring, and 22 percent noted net layoffs in May. The hours worked index posted a double-digit decline from its April reading, coming in at -11.8.
Price pressures were mixed, and wages continued to rise. Input costs rose for a second month in a row, as the raw materials prices index pushed up to 12.4, its highest level since October 2014. The pace of decline in selling prices has slowed in recent months according to the finished goods prices index, which edged up for a third month in a row and came in at -3.3 in May. Meanwhile, the wages and benefits index stayed positive and rose from 16.7 to 21.8, suggesting a slightly accelerated rise in compensation.
Expectations regarding future business conditions were mixed in May. The index of future general business activity fell 2 points to -1.8, while the index measuring future company outlook remained positive but moved down to 4.4 this month. Indexes for future manufacturing activity fell but remained solidly positive.
The Dallas Fed conducts the Texas Manufacturing Outlook Survey monthly to obtain a timely assessment of the state’s factory activity. Data were collected May 17–25, and 111 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.
Posted: May 31, 2016 Tuesday 10:30 AM