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Dallas Fed: Texas Manufacturing Posts Slower Growth in July Amid Weaker View of General Business Activity

For immediate release: July 30, 2012

DALLAS—Texas factory activity continued to increase in July but at a slower pace, according to the Federal Reserve Bank of Dallas’ Texas Manufacturing Outlook Survey.

Texas produces more than 9 percent of total manufactured goods in the United States, ranking second behind California in factory production.

The production index—a key measure of state manufacturing conditions—fell from 15.5 to 12, suggesting slightly slower output growth.

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 indicated slower growth in July. The new orders index was positive for the second month in a row, although it moved down from 7.9 to 1.4.

The capacity utilization index came in at 8.7 after rising to 13.3 last month.

Perceptions of broader economic conditions were less optimistic in July. The general business activity index plummeted to –13.2, its lowest reading in 10 months. The company outlook index fell but remained positive for the third month in a row.

Labor market indicators reflected increased labor demand. Employment growth continued in July, although the index edged down.

Price pressures were largely unchanged in July, although compensation costs rose at a faster pace. The wages and benefits index rose nearly 10 points to 22.9, largely due to a marked rise in the share of firms noting increased labor costs.

Expectations regarding future business conditions were less optimistic in July. The index of future general business activity slipped from 1.3 to –7.3, registering its first negative reading in 10 months.

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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