"Factory activity continued to contract at a slower pace in August," according to yesterday's monthly business activity survey conducted by the Federal Reserve Bank of Dallas.

"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 said. Volume of new orders rose to negative 1.7 from negative 3.4, and growth rate of orders index moved to negative 6.0 from negative 8.4.

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, and 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.

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