Texas factory activity, as measured by the production index, “rose markedly in May,” reaching a 12-year high, according to the monthly Texas Manufacturing Outlook Survey conducted by the Federal Reserve Bank of Dallas, released Tuesday.

“Price and wage pressures remained elevated in May,” according to the report.

The general business activity index grew to 26.8 in May from 21.8 in April.

The production index soared to 35.2 from 25.3.

Capacity utilization gained to 32.2 from 18.7, the Fed reported. New orders dipped to 27.7 from 27.9, while growth rate of orders index increased to 26.5 from 18.9.

Unfilled orders slid to 4.1 from 7.2, while shipments surged to 39.5 from 19.3, and delivery times fell to 10.2 from 14.5. The finished goods inventory dropped to negative 6.6 from positive 1.7. Prices paid for raw materials fell to 44.0 from 46.3, while prices received for finished goods rose to 20.5 from 17.0. Wages and benefits slipped to 24.3 from 29.3, while the employment index increased to 23.4 from 17.8, and the hours worked index rose to 23.2 from 14.3, and the capital expenditures index fell to 21.7 from 23.9.

As for future outlook (six months from now), the general business conditions index declined to 30.0 from 31.9 last month, the production index rose to 58.0 from 52.3, while capacity use increased to 51.0 from 49.0, the Fed reported. New orders grew to 48.5 from 47.6, while growth rate of orders index decreased to 37.7 from 37.8.

Unfilled orders slid to 13.8 from 15.5, while shipments remained at, and delivery times jumped to 13.4 from 11.4. The finished goods inventory grew to 11.9 from 11.1.

Prices paid for raw materials rose to 51.9 from 49.1, while prices received for finished goods slid to 27.0 from 33.3. Wages and benefits climbed to 50.6 from 50.1, the employment index rose to 37.6 from 35.4, while the hours worked index declined to 13.9 from 14.4, and the capital expenditures index gained to 32.2 from 31.0.

The Texas Manufacturing Outlook Survey is a monthly anecdotal survey of manufacturers in Texas. Over 100 manufacturers regularly participate in the Dallas Fed survey, which began collecting data in May 2004.

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