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Texas Fed Manufacturing Activity Continues but Pace Slows in May
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Texas factory activity continued to expand in May, albeit at a slower pace, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, fell six points to 6.3, indicating output growth decelerated from April.
Most other measures of manufacturing activity also suggested slower expansion in May. The survey’s demand indicators fell but remained positive: The new orders index slipped seven points to 2.4, and the growth rate of orders index moved down from 5.2 to 1.1. The capacity utilization index fell to 7.7 from a seven-month high of 15.6 in April. Meanwhile, the shipments index edged up to 7.6.
Perceptions of broader business conditions exhibited some weakness in May. The general business activity index turned negative and reached a year-to-date low of -5.3. The company outlook index dipped into negative territory for the first time this year, coming in at -1.7. The index measuring uncertainty regarding companies’ outlooks jumped nine points to 16.1, its highest reading since last September. More than a quarter of firms said uncertainty increased this month.
Labor market measures suggested stronger employment growth and longer workweeks in May. The employment index rebounded from its April dip, rising seven points to 11.6. Twenty-one percent of firms noted net hiring, while 9 percent noted net layoffs. The hours worked index remained positive but inched down to 6.4.
Slight upward pressure on input costs continued in May, while pressure on selling prices abated. The raw materials prices index held steady at 7.4, a three-year low. Meanwhile, the finished goods prices index retreated from 6.0 to 0.7, with the near-zero May reading suggesting virtually no growth in selling prices. The wages and benefits index remained elevated and largely unchanged at 27.6.
Expectations regarding future business conditions remained positive in May, although the indexes moved down from April readings. The index of future general business activity fell nine points to 9.1. Similarly, the index of future company outlook fell nine points to 11.5. Most other indexes of future manufacturing activity declined this month but stayed in positive territory.
Posted: May 28, 2019 Tuesday 10:30 AM