Texas factory activity, as measured by the production index, "expanded in September," according to the monthly business activity survey conducted by the Federal Reserve Bank of Dallas, released Monday.

The general business activity index climbed to 12.8 in September from 5.0 in August.

The production index grew to 11.5 from 7.3.

Capacity use surged to 10.7 from 4.6, the Fed reported. Volume of new orders decreased to 5.0 from 5.4, while growth rate of orders index slipped to 0.9 from 2.2.

Unfilled orders gained to 1.1 from 0.5 in the prior survey, while the volume of shipments decreased to 10.3 from 11.4, and delivery times narrowed to negative 1.1 from negative 9.8. The materials inventory index improved to negative 7.9 from negative 11.6, the finished goods inventory increased to negative 10.0 from negative 11.0. Prices paid for raw materials rose to 17.6 from 10.0, while prices received for finished goods jumped to 10.6 from 4.0. Wages and benefits dipped to 9.7 from 14.5, while the employment index fell to 10.0 from 11.2, and the hours worked index narrowed to negative 0.6 from negative 9.9, and the capital expenditures index dropped to 5.9 from 10.4.

As for future outlook (six months from now), the general business conditions index slid to 13.3 from 14.2 last month, the production index decreased to 33.3 from 36.0, while capacity use fell to 31.5 from 32.4, the Fed reported. Volume of new orders slid to 32.7 from 35.8, while growth rate of orders index declined to 25.4 from 31.0.

Unfilled orders increased to 4.6 from 1.3, while the volume of shipments dropped to 31.0 from 41.2, and delivery times reversed to positive 3.7 from negative 3.7. Materials inventories gained to 4.6 from 2.6, and the finished goods inventory narrowed to negative 1.2 from negative 1.3.

Prices paid for raw materials soared to 31.0 from 24.1, while prices received for finished goods decreased to 13.9 from 16.4. Wages and benefits slumped to 28.6 from 40.7, the employment index increased to 21.9 from 11.5, while the hours worked index gained to 9.5 from 5.9, and the capital expenditures index fell to 16.1 from 20.5.

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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