Dallas Fed Manufacturing Survey at +13.6

exas factory activity expanded in August for the third month in a row following a record contraction in the spring after the onset of the COVID-19 pandemic, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, came in at 13.1, down slightly from July but still indicative of moderate growth.

Other measures of manufacturing activity also point to expansion this month. The new orders index advanced three points to 9.8, and the growth rate of orders index surged more than 10 points to 11.8. The shipments index rose from 17.3 to 23.3, while the capacity utilization index inched down but remained positive at 10.9.

Perceptions of broader business conditions improved in August. The general business activity index turned positive after five months in negative territory, coming in at 8.0. The company outlook index registered a third consecutive positive reading, shooting up 11 points to 16.6, its highest reading in nearly two years. The index measuring uncertainty regarding companies’ outlooks remained positive but retreated to 8.2.

Labor market measures indicated solid growth in employment and workweek length. The employment index pushed up from 3.1 to 10.6, suggesting more robust hiring. Twenty-three percent of firms noted net hiring, while 13 percent noted net layoffs. The hours worked index pushed up five points to 10.5.

Input and labor costs continued to increase, while selling prices remained fairly flat in August. The raw materials prices index rose 10 points to 19.4, and the wages and benefits index rose six points to 15.2. The finished goods prices index remained near zero, suggesting no change in selling prices from July.

Expectations regarding future activity were more positive in August. The future production index pushed up to an above-average reading of 43.0, and the future general business activity index jumped 10 points to 20.4. Other measures of future manufacturing activity advanced further into positive territory.