By Xavier Fontdegloria

Texas manufacturing production kept strong momentum in July compared with the previous month, 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, increased to 31.0 in July from 29.4 in June. The reading is well above average and suggests strong output growth, the Dallas Fed said.

The survey is carried out monthly among Texas executives, asking whether certain parameters such as output, employment or orders increased, decreased or remained unchanged over the previous month.

The index for general business activity, which assesses broader business conditions, fell to 27.3 in July from 31.1 in June. The reading is below economists' forecasts, who polled by The Wall Street Journal expected it to come in at 31.6.

Manufacturing activity in Texas has expanded since August 2020. The industrial sector is growing robustly across the U.S., but supply-chain bottlenecks and labor shortages are constraining potential output and factories have been struggling to keep up with orders.

Other measures of manufacturing activity were broadly steady compared with the previous month, pointing to continued growth, the Dallas Fed said.

Demand for goods remained strong. The new orders index stood at 26.8, broadly unchanged compared with June, while the growth rate of orders index edged up to 25.8.

The capacity utilization and shipments indexes held steady at high levels of 29.9 and 31.6, respectively.

Labor market indicators continued to suggest strong growth in employment. The employment index came in at 23.7, with 31% noting net hiring and 8% reporting net layoffs.

The delivery time index edged down to 19.7 from 26.9 the previous month, signaling somewhat shorter delivery times.

Input prices and wage pressures continued to pick up pace in July, but showed signs of easing compared with the previous month.

The raw materials prices index stood at 73.5, down from 80.8 in June, and the finished goods prices index came in at 40.9 from 42.8 the previous month. The wages and benefits index ticked down to 46.0 from its historical high of 48.1 in June.

Expectations regarding future manufacturing activity remained optimistic in July, albeit less than in June. The future production index slipped eight points to 48.4, and the future general business activity index was unchanged at 37.1. Most other measures of future manufacturing activity declined but remained in robust growth territory, the Dallas Fed said.

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

(END) Dow Jones Newswires

July 26, 2021 11:08 ET (15:08 GMT)

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