Dallas Fed: Factory Activity Sluggish, With Hints of Improvement in May: Update

NEW YORK - “Texas manufacturing activity remained sluggish amid some hints of reviving optimism in May,” according to the monthly business activity survey conducted by the Federal Reserve Bank of Dallas, released today.

The general business conditions index improved to negative 10.3 in May from negative 23.4 in April.

The production index decreased to 5.5 in May from 12.5 in April, while capacity use dipped to 7.4 from 8.0, the Fed reported. Volume of new orders rose to 8.3 from 8.1, while growth rate of orders index declined to negative 1.8 from zero.

Unfilled orders dropped to negative 8.4 from negative 5.4 in the prior survey, while the volume of shipments slid to 7.4 from 11.6, and delivery times slipped to negative 3.7 from negative 2.7. The materials inventory index fell to 0.9 from 11.6, the finished goods inventory declined to 2.8 from 3.6. Prices paid for raw materials slid to 67.3 from 69.6, while prices received for finished goods grew to 34.2 from 25.9. Wages and benefits climbed to 24.0 from 19.1, while the number of employees index dipped to 0.9 from 4.5, and the average workweek index reversed to negative 2.8 from positive 1.8, and the capital expenditures index increased to 6.6 from 4.5.

As for future outlook (six months from now), the general business conditions index dropped a tick to negative 5.6 from negative 5.5 last month, the production index decreased to 17.8 from 24.5, while capacity use slid to 14.0 from 21.8, the Fed reported. Volume of new orders fell to 19.6 from 20.0, while growth rate of orders index declined to 11.2 from 13.6.

Unfilled orders improved to negative 2.9 from negative 4.5 in the prior survey, while the volume of shipments dropped to 18.6 from 23.6 and delivery times fell to negative 9.5 from negative 4.6. Materials inventories increased to positive 4.7 from negative 3.6, the finished goods inventory fell to negative 14.1 from negative 8.5.

Prices paid for raw materials rose to 58.0 from 57.2, while prices received for finished goods slumped to 38.7 from 44.5. Wages and benefits soared to 38.7 from 34.9, the number of employees index dropped to 3.7 from 9.1, while the average workweek index slumped to negative 1.9 from positive 0.9, and the capital expenditures index surged to 10.5 from 2.7.

The Texas Manufacturing Outlook Survey is a monthly anecdotal survey of manufacturers in Texas. Roughly 80 manufacturers regularly participate in the Dallas Fed survey, which began collecting data in May 2004.

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