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Texas Manufacturing Activity Increases in August, Says Dallas Fed Survey

For immediate release: August 29, 2016

DALLASTexas factory activity increased in August, according to the Federal Reserve Bank of Dallas’ Texas Manufacturing Outlook Survey.

The production index—a key measure of state manufacturing conditions—came in at 4.5 after a near-zero reading in July, suggesting output picked up this month.

Positive readings in the survey generally indicate expansion of factory activity, while readings below zero generally indicate contraction.

Other measures of current manufacturing activity also reflected expansion. Demand bounced back, with the new orders index rising from –8.0 to 5.3 in August and the growth rate of orders index pushing up to 2.1, its first positive reading in nearly two years. The capacity utilization index remained only barely positive at 0.9, while the shipments index rose nearly 10 points to 9.9.

“Texas manufacturing is picking up after struggling since early last year in the face of headwinds such as higher dollar value and economic slowdown from the oil bust,” said Emily Kerr, Dallas Fed business economist. “The production index pushed into positive territory and for the first time since October 2014 was coupled with a positive growth rate of orders index. Accelerating demand growth is a hopeful sign that the sector may continue to expand going forward.”

Perceptions of broader business conditions remained fairly pessimistic in August. The general business activity index was negative for a 20th month in a row, moving down from –1.3 to –6.2. The company outlook index was largely unchanged at –2.8.

Labor market measures indicated slight employment declines and shorter workweek length in August. The employment index came in at –5.0, down from –2.6 in July. The hours worked index edged down to –4.5 after coming in near zero last month.

Expectations regarding future business conditions improved again in August. The index of future general business activity posted a third positive reading in a row but retreated 11 points to 7.0 this month. The index of future company outlook also declined but remained positive, coming in at 17.1. Other indexes for future manufacturing activity fell but stayed in solid positive territory, suggesting continued optimism.

Texas produces more than 11 percent of total manufactured goods in the United States, ranking second behind California in factory production.

The Dallas Fed conducts the Texas Manufacturing Outlook Survey monthly to obtain a timely assessment of the state’s factory activity.

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Media contact:
Justin Jones
Federal Reserve Bank of Dallas
Phone: 214-922-5449
Email: Justin.Jones@dal.frb.org