The Federal Reserve Bank of Dallas is showing some continued strain in the region’s manufacturing sector. While the regional report said that Texas manufacturing activity expanded again in April, it was not positive on all fronts by any means. Texas produces more than 11% of total manufactured goods in the United States, ranking second in factory production of the 12 Fed bank districts, behind California.

For the second month in a row, overall Texas factory activity increased in the Texas Manufacturing Outlook Survey. The production index, which is the measure of the state’s manufacturing conditions, rose to 5.8 in April from 3.3 in March. This left the overall report suggesting a slight pickup in output growth.

Economists view positive readings in the survey generally as an indicator of expansion in factory activity. Readings below zero generally indicate contraction in the region. Again, this was a mixed report, despite the overall positive number.

The new orders index rebounded into positive territory after four months of negative readings, up at 6.2 for April. The Dallas Fed showed that the growth rate of orders index jumped 11 points to –0.7 in April, still slightly under the breakeven line. The capacity utilization rose to 8.2 and the shipments index rose to 7.1 — both marked their second positive readings in a row.

Despite a recovery in oil prices, perceptions of broader business conditions remained pessimistic in April. The general business activity index held steady at –13.9, which was its 16th straight negative reading. The company outlook index rose from –11.0 in March to –5.9 in April, but this has remained a negative reading for the fifth consecutive month, despite showing signs of additional stabilization in April.

Labor market indicators reflected persistent weakness in April, as the employment and hours worked indexes remained negative for the fourth straight month but rose to –3.7 and –1.0, respectively. For labor and prices, the Dallas Fed report said:

Labor market indicators reflected persistent weakness in April. The employment and hours worked indexes remained negative for the fourth straight month but rose to -3.7 and -1.0, respectively. Fourteen percent of firms noted net hiring, and 18 percent noted net layoffs in April.

Price pressures were mixed, and wages continued to rise. Abatement in downward pressure on input costs was seen in April, as the raw materials prices index bounced back into positive territory after nine months of decline, coming in at 5.5. The finished goods prices index has been negative since January 2015 and edged up to -6.6 this month. Meanwhile, the wages and benefits index stayed positive and rose from 14.7 to 16.7, suggesting a slightly accelerated rise in compensation.

Future business conditions were shown to be mixed for expectations in April. The index of future general business activity fell by six points to 0.4. The index for future company outlook posted its third positive reading at 8.9. Indexes for future manufacturing activity were shown to be up and 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 from April 12 to April 20, with some 103 Texas manufacturers having responded to the survey. Firms are asked each month whether output, employment, orders, prices and other indicators increased, decreased or remained unchanged over the previous month.

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.