Dallas Fed Manufacturing Unexpectedly Slows In July

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The Dallas Fed's monthly survey of regional manufacturing activity is out.

The headline index fell to 4.4 in July from 6.5 in June. Economists were looking for an advance to 7.5.

The drop in the index suggests that the pace of growth in regional manufacturing slowed in July.

Below is the full text of the release.

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July 29, 2013 Texas Manufacturing Activity Increases but at a Slower Pace

Texas factory activity continued to expand in July, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, fell from 17.1 to 11.4, suggesting output growth continued but at a slower pace than in June.

Some other measures of current manufacturing activity also indicated slower growth in July. The new orders index was positive for the third month in a row, although it edged down from 13 to 10.8. The capacity utilization index also slipped slightly, falling three points to 12.2. However, the shipments index inched up to 17.7, reaching its highest reading in six months.

Perceptions of broader business conditions improved again in July. The general business activity index posted a second consecutive positive reading, although it edged down from 6.5 to 4.4. The company outlook index also remained positive but fell, coming in at 4.5.

Labor market indicators reflected a pickup in labor demand. The employment index rose to 9.3, its highest reading in nearly a year. Eighteen percent of firms reported hiring new workers compared with 9 percent reporting layoffs. The hours worked index remained in positive territory.

Input prices and wages rose in July while selling prices were little changed. The raw materials price index came in at 15.9, slightly above its June reading of 14.3. The wages and benefits index was positive but edged down from 20 to 16.4, although the great majority of manufacturers continued to note no change in compensation costs. The finished goods price index was  -1,  suggesting fairly steady selling prices. Looking ahead, 37 percent of respondents anticipate further increases in raw materials prices over the next six months, while 24 percent expect higher finished goods prices.

Expectations regarding future business conditions remained optimistic in July. The indexes of future general business activity and future company outlook fell five points but remained in strongly positive territory. Indexes for future manufacturing activity also remained solidly positive.

The Dallas Fed conducts the Texas Manufacturing Outlook Survey monthly to obtain a timely assessment of the state’s factory activity. Data were collected July 16–24, and 85 Texas manufacturers responded to the survey. Firms are asked whether output, employment, orders, prices and other indicators increased, decreased or remained unchanged over the previous month.

Survey responses are used to calculate an index for each indicator. Each index is calculated by subtracting the percentage of respondents reporting a decrease from the percentage reporting an increase. When the share of firms reporting an increase exceeds the share reporting a decrease, the index will be greater than zero, suggesting the indicator has increased over the prior month. If the share of firms reporting a decrease exceeds the share reporting an increase, the index will be below zero, suggesting the indicator has decreased over the prior month. An index will be zero when the number of firms reporting an increase is equal to the number of firms reporting a decrease. Data have been seasonally adjusted as necessary.

Next release:  August 26, 2013

 



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