Texas factory activity increased in September, according to the Texas Manufacturing Outlook Survey. The production index rose from 1.1 to 5.9, suggesting growth picked up this month after stalling in August.
Most other measures of current manufacturing conditions also indicated growth in September. The new orders index edged down from 4.8 to 3.6 in September, suggesting order volumes continued to increase, but at a slightly decelerated pace. The shipments index rose from 6.7 to 9.4, reaching its highest level since March.
However, perceptions of general business conditions worsened in September. The general business activity index remained negative for the fifth month in a row and fell from minus 11.4 in August to minus 14.4 in September. The company outlook index fell from 7.2 in August to a near-zero reading of 0.5 in September. Still, the great majority of respondents said their outlooks were unchanged or improved from last month.
Labor market indicators reflected higher labor demand growth. The employment index came in at 13.4, up notably from 5.4 in August. One quarter of manufacturers reported hiring new workers, while 12 percent reported layoffs. The hours worked index moved back into positive territory in September, suggesting average workweeks lengthened.
Input prices and wages rose at a pace similar to August, while selling prices increased slightly after holding steady last month. The raw materials price index was 23.5, virtually unchanged from its August reading. The finished goods price index moved up to 3.9 after coming in near zero last month. Forty-six percent of respondents anticipate further increases in raw materials prices over the next six months, while 29 percent expect higher finished goods prices. The wages and benefits index rose from 15.7 in August to 17.4 in September, although nearly three-fourths of respondents noted no change in labor costs.
Expectations regarding future business conditions were generally less optimistic in September. The index of future general business activity edged down to minus 1.5, the first negative reading since April 2009, from 2.9 in August.
Market Consensus before announcement
The Dallas Fed general business activity index contracted in August, dropping to minus 11.4 from minus 2.0 in July. The production index, a key measure of state manufacturing conditions, remained positive but fell from 10.8 to 1.1. Most other measures of current manufacturing conditions indicated slower growth in August. The new orders index fell from 16.0 to 4.8, suggesting order volumes continued to increase, but at a decelerated pace.