By Xavier Fontdegloria

Factory activity in Texas contracted in September for the fifth consecutive month but manufacturing output expanded, data from the Federal Reserve Bank of Dallas showed Monday.

The index for general business activity of the Texas Manufacturing Outlook Survey, which assesses business conditions of the state's factory sector, decreased to minus 17.2 in September from minus 12.9 in August.

The index suggests regional activity continued to contract in September, and did so at a sharper pace than the previous month as the reading is further from zero.

However, the production index--a key measure of state manufacturing conditions--rose to 9.3 from 1.2, suggesting that factory output increased over the month.

Other measures of manufacturing activity showed mixed signals in September, the Dallas Fed said.

Demand continued to weaken, the data showed. The new orders index fell to minus 6.4, posting its fourth consecutive month in negative territory and signaling a contraction in demand. The growth rate of orders index increased to minus 1.7, while the shipments index increased to 7.1.

The employment index fell slightly to 15.0 from 15.6, but still suggested that firms continued to expand their workforce.

Supply-chain strains eased, according to the survey. The delivery times index edged up to 0.9 from minus 3.5 the previous month, and the unfilled orders index edged up to minus 0.1, suggesting backlogs were stable.

Inflation pressures persisted in September. The raw materials prices index increased to 37.1 from 34.4, ending a three-month trend of easing price pressures. However, the finished goods prices index, fell to 18.1 from 26.8, the Dallas Fed said.

Manufacturing firms in Texas remained pessimistic about their short-term outlook. The future general business activity index fell to minus 22.4 from minus 8.8. However, the future production index rose to 28.3 from 23.9, signaling that firms expect strong output gains in the months ahead.

"Sales have started to slow this summer, as has our general outlook on business over the short and long term," said one respondent from the textile product sector. "Inflation and general uncertainty seem high with customers," it said.

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

(END) Dow Jones Newswires

September 26, 2022 11:19 ET (15:19 GMT)