For immediate release: June 1, 2010
Dallas Fed: Texas Manufacturing Activity Rises Again
DALLAS— Texas factory activity continued to expand in May, according to the Federal Reserve Bank of Dallas’ Texas Manufacturing Outlook Survey.
Texas produces more than 9.5 percent of total manufactured goods in the United States, ranking second behind California in factory production.
The production index—a key indicator of state manufacturing conditions—rose to its highest level in three years.
Other indicators of factory activity also expanded in May, although several posted slower advances than in April. The index for capacity utilization was strongly positive but edged downward, and the growth rate of orders index fell from 20 to 9. The new orders and shipments indexes were positive but largely unchanged after increasing in April.
The business activity index—the broadest indicator in our survey—stayed positive but fell sharply in May, reversing April’s strong increase. The company outlook index fell from 26 to 20, with about a third of manufacturers saying their outlook had improved over the previous month.
Strong upward pressure on raw materials prices continued in May. Forty-two percent of respondents saw increasing costs, while only 4 percent noted decreases. In contrast, only 13 percent of respondents noted increased finished goods prices. Half of respondents continued to anticipate further increases in raw materials prices over the next six months, and 29 percent expected higher finished goods prices.
Firms grew more optimistic about their six-month outlook in May, and most indexes for future manufacturing activity moved further into positive territory.
The future business activity index rose, as the share of firms reporting improved activity exceeded those reporting worsened conditions by more than 3 to 1. The future company outlook also climbed, with 85 percent of respondents expecting either increased or unchanged activity six months from now.
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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