Expansion in Texas Manufacturing Picks Up, Costs Soar

Texas factory activity expanded at a faster pace in June, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, rose 14 points to 29.4, a reading indicative of strong output growth. Other measures of manufacturing activity also pointed to accelerated growth this month.

The new orders index came in at 26.7, up from 20.8 in May and quadruple the series average of 6.4. Similarly, the growth rate of orders index reached 23.4, up from 19.5. The capacity utilization index rose seven points to 30.6, and the shipments index shot up 14 points to 31.8.

Perceptions of broader business conditions improved markedly in June. The general business activity index came in at 31.1, down slightly from its May reading but notably higher than its series average of 2.8 and indicative of greater activity. The company outlook index moved up six points to 27.5, a reading also well above the series average. The outlook uncertainty index inched up to 17.6, indicating a further rise in uncertainty.

Labor market measures indicate robust growth in employment and work hours. The employment index held steady at a highly elevated 22.9. Thirty-two percent of firms noted net hiring, while 9 percent noted net layoffs. The hours worked index also held fairly steady at 23.8.

Price and wage pressures accelerated further in June. The raw materials prices index inched up to 80.8, an all-time high. The finished goods prices index also pushed to new heights, coming in at 42.8. Similarly, the wages and benefits index set another record high of 48.1, up nine points from its May reading.

Expectations regarding future manufacturing activity pushed higher in June. The future production index rose nine points to 56.6, and the future general business activity index rose six points to 37.3. Other measures of future manufacturing activity also pushed further into positive territory.