Dallas Fed – Manufacturing Contracted Less in July Than in June

Overall business activity, the general business activity index, was -4.6 in July. While still negative it was less negative than the -7.0 reading in June.

Data were collected from the dates of July 14 to 22, and 112 Texas manufacturers responded to the survey. Firms which participate are asked whether output, employment, orders, prices and other indicators increased, decreased or remained unchanged over the previous month.

The manufacturing production index was -1.9 in July versus -6.5 in June. The Dallas Fed noted that this is suggesting further moderation in the decline in manufacturing output.

Additionally, the capacity utilization index edged up to -4.2, and the shipments index increased to -4.3. It was noted that these negative index levels indicate contraction, but also that the upward movement again this month suggests the pace of decline continued to slow.

The new orders index rebounded strongly in July with a reading of 0.7 after having spent six months with readings in negative territory. The growth rate of orders index jumped better than 11 points, to -5.2 from -16.5.

Additional Dallas Fed manufacturing results were as follows:

• Perceptions of broader business conditions were mixed. Manufacturers expect improved conditions ahead, with the company outlook index surging nearly nine points to 1.2 and posted its first positive reading in seven months.
• Labor market indicators reflected slight employment declines and shorter workweeks. The July employment index was negative for a third month in a row and edged down to -3.3. Eleven percent of firms reported net hiring, compared with 15 percent reporting net layoffs. The hours worked index rose from -10.7 to -6.3.
• Price and wage pressures were mixed in July. The raw materials prices index has been rather volatile lately—moving from negative readings earlier this year to a positive 7.4 in June then falling to zero in July. The finished goods prices index remained negative for a seventh month in a row, coming in at -2.9. Meanwhile, the wages and benefits index remained positive and little changed at 14.4.
• Expectations regarding future business conditions improved notably in July. The indexes of future general business activity and future company outlook both posted double-digit increases. Indexes for future manufacturing activity pushed further into solid positive territory.