Factory Activity in Texas Flat in August

Aug. 29, 2011
The index of future general business activity edged down as well.

Although the production index in Texas, a key measure of state manufacturing conditions remained positive, it did fall from 10.8 to 1.1, suggesting growth stalled in August.

Most other measures of current manufacturing conditions indicated slower growth in August. The new orders index fell from 16 to 4.8 this month, suggesting order volumes continued to increase, but at a decelerated pace. The shipments index was positive and little changed, edging down from 7.8 to 6.7. The capacity utilization index dipped into negative territory in August, with one-quarter of manufacturers noting a decrease.

Perceptions of general business conditions were mixed in August. The general business activity index remained negative for the fourth month in a row and fell from 2 to 11.4. The change in the index was largely due to a notable increase in the share of firms noting worsened activity. The company outlook index stayed positive but edged down from 11 in July to 7.2 in August. Still, the great majority of respondents said their outlooks were unchanged or improved from last month.

Labor market indicators reflected slower labor demand growth. The employment index came in at 5.4, down from 12.1 in July. Twenty-three percent of manufacturers reported hiring new workers, while 17% reported layoffs. The hours worked index fell from 7.9 to 2.2, suggesting average workweeks shrank.

Input prices and wages rose at a slower pace in August, while selling prices were unchanged. The raw materials price index retreated from 34.3 to 23.2, its lowest reading since September 2010. The finished goods price index came in at 0.5, down from 4.6 in July. The near-zero reading suggests selling prices were flat in August. Thirty-eight percent of respondents anticipate further increases in raw materials prices over the next six months, while 26% expect higher finished goods prices. The wages and benefits index moved down from 18.4 in July to 15.7 in August, although the great majority of respondents noted no change in labor costs.

Expectations regarding future business conditions were generally less optimistic in August. The index of future general business activity edged down, as did most indexes of future manufacturing activity, although all remained in solid positive territory. The index of future company outlook inched up for the second month in a row, coming in at 16.1.

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