Texas manufacturing activity unexpectedly improved this month, moving into shallower contraction territory as production saw a positive swing, as reported by the Federal Reserve Bank of Dallas. The general business activity index increased to minus 3 in October from minus 9 in September, based on the Dallas Fed's manufacturing outlook survey released on Monday.
Analysts previously anticipated a month-over-month decline to minus 9.2. Production, a crucial indicator of state manufacturing conditions, rebounded significantly to 14.6 from minus 3.2. New orders rose slightly to minus 3.7 from minus 5.2, as indicated by the regional Fed’s survey. Shipments also showed improvement, turning positive at 1.5 this month after recording a minus 7 reading in September.
Emily Kerr, senior business economist at the Dallas Fed, commented, "The Texas manufacturing sector saw a strong rise in production in October, but other survey measures of factory activity and employment were more mixed. Expectations for future production and business conditions moved markedly higher." The employment index, however, fell to negative territory at minus 5.1 from a positive 2.9 in September.
Around 14% of businesses reported net hiring in October, while 19% indicated net layoffs. The prices paid for raw materials index decreased to 16.3 in October from 18.2 in September, while the index for prices received for finished goods edged down one point to 7.4. The Dallas Fed noted, "Moderate upward pressure on prices and wages continued in October." Looking six months ahead, the gauge for general business activity surged over 18 points to 29.6 in October.
The future production index reached 42.4, representing its highest reading in nearly three years, up from 35.2. Forward-looking indicators for new orders rose by 3.3 points to 36.6 and increased by about 10 points to 39.1 for shipments, with firms anticipating slight increases in both raw material and selling prices over the next six months..