DALLAS FED MANUFACTURING MISSES EXPECTATIONS

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The Dallas Fed's latest survey on regional manufacturing conditions is out.

The headline index rose to -10.6 from last month's -15.6 reading, missing expectations for a rise to -10.0.

Below is the full text from the release:

Texas factory activity increased sharply in May, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, rose from -0.5 to 11.2, indicating a notable pickup in output.

Stronger manufacturing activity was reflected in other survey measures as well. The new orders index rebounded to 6.2 after falling to -4.9 in April. Similarly, the shipments index bounced back to 3.1 after dipping to -0.4. The capacity utilization index came in at 6.4, up from 2.7 last month.

Perceptions of broader business conditions continued to worsen in May. The general business activity index remained negative but moved up five points to -10.5. The company outlook index declined from -2.2 to -6.8, reaching its lowest level since July 2010.

Labor market indicators reflected weaker labor demand. The employment index fell to -6.3 in May, registering its first negative reading this year and reaching its lowest level since November 2009. Eight percent of firms reported hiring new workers compared with 15 percent reporting layoffs. The hours worked index came in at -2.3, suggesting the workweek shrunk further.

Price movements were mixed in May; input prices and wages rose while selling prices declined. The raw materials price index was 6.4, above the April reading but still below the levels seen over the last eight months. The wages and benefits index edged down to 14, although the great majority of manufacturers continued to note no change in compensation costs. The finished goods price index pushed further negative to -8.3, its lowest reading since July 2010. Looking ahead, 30 percent of respondents anticipate further increases in raw materials prices over the next six months, while 19 percent expect higher finished goods prices.

Expectations regarding future business conditions were mixed. The index of future general business activity remained negative but moved up from -6.7 to -2.6. The index of future company outlook was positive although it edged down to 5.3. Indexes for future manufacturing activity remained in strong positive territory.

The Dallas Fed conducts the Texas Manufacturing Outlook Survey monthly to obtain a timely assessment of the state’s factory activity. Data were collected May 14–22, and 93 Texas manufacturers responded to the survey. Firms are asked whether output, employment, orders, prices and other indicators increased, decreased or remained unchanged over the previous month.

Survey responses are used to calculate an index for each indicator. Each index is calculated by subtracting the percentage of respondents reporting a decrease from the percentage reporting an increase. When the share of firms reporting an increase exceeds the share reporting a decrease, the index will be greater than zero, suggesting the indicator has increased over the prior month. If the share of firms reporting a decrease exceeds the share reporting an increase, the index will be below zero, suggesting the indicator has decreased over the prior month. An index will be zero when the number of firms reporting an increase is equal to the number of firms reporting a decrease. Data have been seasonally adjusted as necessary.

Next release: June 24, 2013

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