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Texas Manufacturing Activity Remains Sluggish
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Texas factory activity rebounded slightly in July, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key indicator of state manufacturing conditions, rose from –2 to 5, suggesting output expanded slightly in July after contracting in June.
Several indexes for factory activity continued to fall in July. The new orders and growth rate of orders indexes pushed deeper into negative territory, indicating a further contraction of demand. The index for capacity utilization dipped to –1, its first negative reading in nine months. The shipments index stabilized in July, rising from –9 to –1, with nearly equal shares of respondents noting an increase or decrease.
The general business activity index fell sharply to –21, its lowest level since July 2009. Thirty-one percent of firms reported a worsening of activity, up from 22 percent in June. The company outlook index also fell to a 12-month low, as only 13 percent of manufacturers said their outlook had improved over the previous month, compared with 24 percent who said it had worsened.
The employment index edged up and was positive for the fifth consecutive month, with 20 percent of firms reporting new hires. The wages and benefits index also rose, but overall wage pressures remained minimal, as 90 percent of respondents noted no change in compensation costs. The hours worked index dipped into negative territory, with 23 percent of manufacturers reporting a decrease in the average employee workweek.
The index for raw materials prices fell from 30 in June to 12 in July, suggesting the upward pressure on raw materials prices continued to moderate. Two-thirds of manufacturers reported no change in input costs, the highest share in six months. Downward pressure on finished goods prices intensified again in July, driving the index further into negative territory. The future raw materials prices index remained positive but slid to its lowest level in a year, while the future finished goods prices index fell to zero.
Optimism regarding firms’ six-month outlook continued to wane in July, although the indexes remained positive. The future production, capacity utilization and shipments indexes fell again this month, while the future indexes for new orders and growth rate of orders inched up but remained below the levels seen earlier this year. The future general business activity index decreased but remained in positive territory. The future company outlook index moved down from 22 to 16, with 32 percent of respondents expecting improved conditions six months from now.
Posted: July 26, 2010 Monday 10:30 AM