NEW YORK - Texas factory activity, as measured by the production index, continued to strengthen in February, according to the monthly business activity survey conducted by the Federal Reserve Bank of Dallas, released Monday.

The general business conditions index increased to 17.8 in February from 15.3 in January.

The production index gained to 11.2 from 5.8, while capacity use increased to 10.0 from 8.5, the Fed reported. Volume of new orders slipped to 5.8 from 9.5, while growth rate of orders index remained positive 6.6.

Unfilled orders widened to negative 12.7 from negative 1.0 in the prior survey, while the volume of shipments slid to 4.2 from 6.1, and delivery times slipped to 3.6 from 8.7. The materials inventory index fell to 2.0 from 5.8, the finished goods inventory declined to negative 5.8 from zero. Prices paid for raw materials gained to 25.2 from 24.4, while prices received for finished goods increased to 16.2 from 9.0. Wages and benefits grew to 18.4 from 17.5, while the employment index surged to 25.2 from 12.2, and the hours worked index grew to 7.1 from 6.6, and the capital expenditures index increased to 12.1 from 9.6.

As for future outlook (six months from now), the general business conditions index slid to 15.9 from 22.3 last month, the production index decreased to 40.8 from 43.6, while capacity use fell to 39.1 from 41.1, the Fed reported. Volume of new orders dropped to 37.0 from 45.6, while growth rate of orders index increased to 32.1 from 30.0.

Unfilled orders fell to 10.9 from 13.3, while the volume of shipments slipped to 42.8 from 44.1, and delivery times reversed to negative 1.2 from positive 6.6. Materials inventories sank to 3.7 from 12.1, and the finished goods inventory slumped to 1.3 from 6.7.

Prices paid for raw materials increased to 45.8 from 42.9, while prices received for finished goods declined to 22.9 from 27.0. Wages and benefits grew to 39.9 from 36.6, the employment index increased to 32.9 from 25.5, while the hours worked index slid to 10.0 from 11.2, and the capital expenditures index increased to 30.5 from 25.3.

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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