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For immediate release: June 25, 2007

Growth in Texas Manufacturing Activity Cools in June

DALLAS—Growth in Texas factory activity moderated in June, according to the Federal Reserve Bank of Dallas' Texas Manufacturing Outlook Survey.

Many of the indexes, including production, volume of new orders and volume of shipments, remained positive but recorded lower levels. The general business activity index was 10.8 in June, down from 20.9 in May. Indicators for unfilled orders and materials inventories turned negative.

"The survey suggests factory activity continues to expand, but at a slower pace than in the past couple of months," said Dallas Fed economist Fiona Sigalla. "We received comments that suggest demand is being restrained by slower homebuilding. Some firms continue to have difficulty finding the qualified labor they need to expand production."

Upward price pressures continue, although growth has receded slightly. The raw materials price index slipped from 40.8 to 30.7 in June, with 34 percent of manufacturers reporting higher costs. The finished goods price index also increased, but more slowly.

"Rising prices of raw materials remain a concern for most manufacturers, with several mentioning the high cost of energy, metals and food. Still, the survey suggests competitive pressures are preventing many of these costs from being passed to finished goods prices," Sigalla said.

Manufacturers remain optimistic about future business activity six months from now.

The Dallas Fed conducts the survey monthly to obtain a timely assessment of the state's factory activity. One hundred fourteen businesses responded to the June survey.

Texas produces nearly 9 percent of the total manufactured goods in the United States. Texas ranks second behind California in factory production and first as an exporter of manufactured products.


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