NEW YORK - “Factory activity continued to contract at a slower pace in August,” according to the monthly business activity survey conducted by the Federal Reserve Bank of Dallas, released today, “The August survey echoes the broad signal from the previous five months that Texas factory output and employment is still receding but at a slower pace. The signal for a recovery will be positive readings in key current indexes.”

The general business conditions index narrowed to negative 9.1 in August from negative 23.4 in July.

The production index fell to negative 9.7 from negative 7.3, while capacity use increased to negative 13.3 from negative 14.9, the Fed reported. Volume of new orders narrowed to negative 1.7 from negative 3.4, while growth rate of orders index narrowed to negative 6.0 from negative 8.4.

Unfilled orders jumped to negative 10.0 from negative 25.3 in the prior survey, while the volume of shipments remained negative 11.2, and delivery times improved to negative 7.2 from negative 19.8. The materials inventory index widened to negative 29.6 from negative 22.0, the finished goods inventory increased to negative 23.2 from negative 29.7. Prices paid for raw materials moved to positive 9.9 from negative 14.0, while prices received for finished goods climbed to negative 21.4 from negative 29.0. Wages and benefits slipped to zero from 2.2, while the number of employees index rose to negative 15.7 from negative 23.0, and the average workweek index increased to negative 11.2 from negative 16.5, and the capital expenditures index rose to negative 15.3 from negative 24.5.

As for future outlook (six months from now), the general business conditions index surged to positive 16.8 from negative 2.3 last month, the production index increased to 31.2 from 28.7, while capacity use rose to 34.4 from 26.2, the Fed reported. Volume of new orders grew to 33.4 from 21.1, while growth rate of orders index grew to 23.5 from 22.4.

Unfilled orders slid to 5.1 from 8.9, while the volume of shipments increased to 32.2 from 20.7, and delivery times gained to negative 6.3 from negative 7.7. Materials inventories improved to negative 6.1 from negative 7.7, and the finished goods inventory slipped to negative 9.2 from negative 8.9.

Prices paid for raw materials increased to 29.9 from 12.2, while prices received for finished goods gained to 3.1 from 2.3. Wages and benefits soared to 19.7 from 8.9, the number of employees index fell to zero from 2.2, while the average workweek index grew to 12.2 from 7.8, and the capital expenditures index rebounded to negative 1.0 from negative 4.5.

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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