Manufacturing activity in Texas has seen a notable improvement this month, entering a shallower contraction phase as key metrics such as production and shipments have turned positive, according to the latest report from the Federal Reserve Bank of Dallas. The general business activity index experienced a rise, moving from minus 17.5 in July to minus 9.7 in August.
This upward shift exceeded analysts' expectations, who had predicted a more modest improvement to minus 16, as indicated by a recent Bloomberg poll. Production levels, deemed a crucial indicator of the state's manufacturing health, reported a positive swing to 1.6 from a previous decline of minus 1.3.
Shipments also showed remarkable recovery, leaping to 0.8 from minus 16.3 recorded the prior month. Additionally, new orders demonstrated progress, improving to minus 4.2 from a previous minus 12.8. These findings showcase a gradual, albeit hesitant, recovery in the Texas manufacturing landscape. Emily Kerr, a senior business economist at the Dallas Fed, commented that August represented "another month of little to no growth" largely driven by persistently weak demand.
Interestingly, the Dallas Fed noted that approximately 25% of Texas businesses reported being affected by Hurricane Beryl and consequent storms, which likely contributed to the ongoing challenges faced by the industry. The survey from which this data was drawn was conducted between August 13 and 21, aligning with these disruptions.
Moreover, the employment index has also seen a decline, dropping to minus 0.7 in August from 7.1 in July. The number of firms reporting understaffing continues to fall, which implies a stabilization in employment figures according to Kerr. In terms of price pressures, there is evidence of "moderate upward pressure" on both prices and wages this month, demonstrated by the prices paid index rising to 28.2 from 23.1.
The prices received index similarly increased, moving up to 8.5 from 3.4. Looking to the future, the index measuring general business activity for six months ahead has decreased, sliding to 11.6 from 21.6 in July. However, there's a glimmer of hope as the future production index edged upwards to 33.7 from 32, while the forward-looking indicators for new orders and shipments also recorded incremental rises of 0.4 and 1 point, resulting in figures of 30.7 and 30.1, respectively.
Kerr noted that despite some softening in outlooks, overall expectations for future activity remain positive. Firms have expressed expectations that both input and selling prices are likely to stabilize somewhat over the next six months, even as labor indicators show slight improvements..