Texas factory gauge ends 2-month slide
State production index was at roughly zero in July, Dallas Fed reports.
Production at Texas factories leveled off in July, easing a twomonth decline in the state’s manufacturing sector, according to a report Monday from the Federal Reserve Bank of Dallas.
The sector did continue to show some job cuts, but manufacturers expressed an improved view of current economic conditions, according to the report.
The state production index, a key measure of factory activity, was at a reading of roughly zero for the month, according to the Texas Manufacturing Outlook Survey. The index had been in negative territory the previous two months, at -7 in June and -13.1 in May, so the flat reading for July indicates factory output in the state at least stopped its decline in July, according to the Dallas Fed.
The state production index tracks closely with the overall Texas GDP, so it provides one of the most current readings of broader economic conditions across the state.
Measures of underlying production factors, such as new orders and unfilled orders, also improved during the month, according to the Dallas Fed report. The new orders index rose 6 points to -8, while the growth rate of orders index rose 9 points to -9.7, according to the report.
The sector did show some employment declines in July. The employment index came in at -2.6, which indicates a net loss of jobs for the month. However, that was an improvement from a rating of -11.5 the previous month.
Manufacturers provide roughly 7 percent of the state’s nonfarm jobs, according to data from the Texas Workforce Commission.
Texas manufacturing has struggled since the end of 2014. The drop in oil and gas prices has reduced factory demand from the energy sector, while a strong U.S. dollar has made exports more
expensive overseas.
According to a supplemental of questions added in the July survey, manufacturers see some potential improvements ahead for the sector. The index of future general business activity and the index of future company outlook both rose during the month.
“The future is murky, but things appear to have bottomed out. Customers have asked to validate old quotes, so there are signs of life,” one machinery manufacturer said.