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For immediate release: September 24, 2007

Manufacturing Expansion Slows in September, Dallas Fed Survey Finds

DALLAS—Texas factory activity expanded at a slower pace in September, according to the Federal Reserve Bank of Dallas' Texas Manufacturing Outlook Survey.

Texas produces more than 8 percent of the total manufactured goods in the United States, ranking second behind California in factory production.
While remaining positive, key September indexes retreated to their lowest levels since December 2006, excluding July, when weather disrupted companies' operations.

The production index dipped from 21.6 to 4.5. Capacity utilization fell from 19.2 to 1.8. The index for volume of new orders declined from 14.4 to 2.7, and the index for volume of shipments dropped from 27 to 5.4.

“While the index indicates continued expansion, this month's data suggest the pace of manufacturing activity has slowed,” said Dallas Fed economist Fiona Sigalla.

The labor market improved slightly, according to survey respondents. The index for number of employees strengthened to 3.5 after spending two months at zero.

Texas manufacturers remain cautious about general business conditions, according to the survey. The company outlook index was essentially unchanged, near zero. The index for the current level of general business activity fell from –1.8 to –4.6, the lowest reading since December 2006.

Upward price pressures persist but have lessened on raw materials. The raw materials price index edged down from 21.6 to 17.9, with 30 percent of the manufacturers reporting higher costs in September.

The Dallas Fed conducts the survey monthly to obtain a timely assessment of the state's factory activity. Data for the latest survey were collected between September 11 and 19.

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Media contact:
James Hoard
Phone: (214) 922-5307
e-mail: james.hoard@dal.frb.org