Dallas Fed Manufacturing Survey Surges

The Dallas Federal Reserve says its index surged to +6.5.

Economists estimated an improvement of just -1.5 compared with -10.5 in May.

The survey queries Texas manufacturers about the state's business climate.

The production index hit its highest reading in more than two years, while company outlook rose to a 16-month high.

Here's the full report:

Texas factory activity increased sharply in June, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, rose six points to 17.1, posting its highest reading in more than two years.

Notably stronger manufacturing activity was reflected in other survey measures as well. The new orders index climbed to 13 in June, a level not seen since July 2011. The capacity utilization index rose to a two-year high, jumping from 6.4 to 15.3. The shipments index advanced 12 points to 15.4.

Perceptions of broader business conditions rebounded strongly in June. The general business activity index rose to 6.5 after posting negative readings in April and May. The company outlook index soared 20 points to 13.3, reaching its highest level in 16 months.

Labor market indicators reflected steady labor demand and longer workweeks. The employment index was zero in June, suggesting no change in employment levels. The hours worked index moved up to 4.8 after four months in negative territory.

Price movements were mixed in June; input prices and wages rose while selling prices declined. The raw materials price index increased again this month, rising from 6.4 to 14.3. The wages and benefits index also strengthened, from 14 to 20, although the great majority of manufacturers continued to note no change in compensation costs. The finished goods price index remained negative for the third month in a row but moved up from -8.3 to -2.1. Looking ahead, 33 percent of respondents anticipate further increases in raw materials prices over the next six months, while 25 percent expect higher finished goods prices.

Expectations regarding future business conditions improved significantly in June. The index of future general business activitysurged to 14.7 after negative readings in April and May. The index of future company outlook rose sharply as well, coming in at 21.8. Indexes for future manufacturing activity also moved up.

The Dallas Fed conducts the Texas Manufacturing Outlook Survey monthly to obtain a timely assessment of the state’s factory activity. Data were collected June 11–19, and 95 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.

This will be the first in what will be a closely watched blitz of economic data and Fed announcements set to come out this week.

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