Texas Manufacturing Outlook Survey Indicates “Robust” Growth for July

The Dallas Federal Reserve’s Texas Manufacturing Outlook Survey continued to show “robust expansion” in July, beating an elevated consensus forecast. The production index, a key measure of state manufacturing conditions, increased 6 points to 29.4.

That’s a clear indication of an acceleration in output growth.

The new orders and growth rate of orders indexes — which are demand gauges in the Texas Manufacturing Outlook Survey — declined but remained well above average at 23.3 and 17.0, respectively. The shipments index increased by 5 points to 30.8, and the capacity utilization index ticked up to 25.0.

While business conditions were modestly less positive juxtaposed to June and uncertainty undoubtedly increased, the declines to current levels are still either above or far above their averages.

For instance, the company outlook index declined 13 points to 20.4, which is the second-lowest reading this year. However, it is still elevated when compared to the average. The same is true of the general business activity index, which declined by 4 points to 32.3.

The median forecast called for an even 32.0.

In July, a quarter of firms reported an increase in uncertainty, while just 8% said it decreased—bringing the outlook uncertainty index to 17.0. That’s well above its June reading and the highest level to date.

Nevertheless, optimism over future business conditions remained solidly optimistic in July.

The indexes of future general business activity and future company outlook were essentially unchanged at 36.2 and 37.2, respectively. Other indexes for future activity were mixed, but remained solidly in positive territory.

There was also positive news about labor market conditions. These gauges indicate a pickup in net hiring and longer work hours in July. The employment index increased by 5 points to 28.9, a 13-year high.

Thirty-six percent (36%) of firms noted net hiring, compared with 7% noting net layoffs. The hours worked index ticked up to 22.2.