By Xavier Fontdegloria

Manufacturing activity in Texas expanded in January for the eighth consecutive month but the expansion pace slowed significantly compared with December, data from the Federal Reserve Bank of Dallas showed Monday.

The production index of the Texas Manufacturing Outlook Survey, a key measure of state manufacturing conditions, stood at 4.6 in January, down sharply from 26.8 in December and indicative of a deceleration in output growth.

In the survey, researchers at the Federal Reserve in Dallas ask Texas executives about a range of conditions in the industrial sector. They are asked whether certain parameters such as output, employment or orders increased, decreased or remained unchanged over the previous month.

In line with the production index, the index for general business activity for January fell to 7.0 from 10.5 the previous month, signaling that overall activity in the manufacturing sector softened. The reading misses forecasts from economists polled by FactSet, who expected it to climb to 12.5.

Other measures of manufacturing activity also point to more muted growth in January, the Dallas Fed said.

The new orders index dropped 13 points to 6.3, and the growth rate of orders index fell to 5.9 from 15.9 the prior month.

The capacity utilization index declined 10 points to 9.2, while the shipments index fell to 13.5 from 23.4.

Labor market measures indicated slower growth in employment and a continued increase in work hours in January. The employment index came in at 16.6, down from 20.9, with 27% of firms noted net hiring while 11% noted net layoffs. The hours worked index rose to 12.6 from 9.5 in December.

The raw materials prices paid index rose to 55.0, its highest reading in nearly 10 years from 50.8, the Dallas Fed said.

Expectations regarding future activity remained positive in January, though some key indexes weakened from their December readings.

The future company outlook index increased to 27.7 in January from 24.7 in December, while the future general business activity index rose to 29.6 from 17.8 the prior month. The future production index, however, decreased to 43.7 from 47.3 in December.

Write to Xavier Fontdegloria at xavier.fontdegloria@wsj.com

(END) Dow Jones Newswires

January 25, 2021 11:03 ET (16:03 GMT)

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