Dallas Fed activity index falls less than feared

Texas factory activity declined further in April, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, pushed further negative from -35.3 to -55.3, suggesting the contraction in output has steepened since last month.

Other measures of manufacturing activity also point to a sharper decline in April. The new orders index dropped 26 points to -67.0, its lowest reading since the survey began in 2004. Similarly, the growth rate of orders index fell to -62.2. The capacity utilization and shipments indexes fell to -54.5 and -56.6, respectively. The capital expenditures index declined 20 points to -54.3. Each of these April readings represents a historical low.

Perceptions of broader business conditions remained very pessimistic in April. The general business activity index inched down from -70.0 to -73.7, pushing to a new historical low. The company outlook index remained near an all-time low but inched up from -65.6 to -62.6. The index measuring uncertainty regarding companies’ outlooks retreated slightly to 54.4, a reading still indicative of sharply increased uncertainty.

Labor market measures indicate further employment declines and shorter workweeks this month. The employment index held steady at -21.2. Three percent of firms noted net hiring, while 24 percent noted net layoffs. The hours worked index dropped 18 points to -40.2, signaling a notably reduced workweek length.

Prices and wages declined in April. The raw materials prices index posted a second negative reading in a row, falling from -5.9 to -19.6. The finished goods prices index dropped to -24.6 from -9.2. Both price indexes reached lows last seen in mid-2009. The wages and benefits index dipped into negative territory for the first time since the Great Recession, coming in at -2.7.

Expectations regarding future business conditions remained negative in April. The indexes of future general business activity and future company outlook came in at -42.1 and -41.5, respectively, holding within a few points of their March readings. Other indexes for future manufacturing activity inched up but remained in negative territory.