By Xavier Fontdegloria

 

Manufacturing activity in Texas contracted in June for the second straight month and factory output grew only marginally, according to a survey from the Federal Reserve Bank of Dallas released Monday.

The production index of the Texas Manufacturing Outlook Survey--a key measure of state manufacturing conditions--decreased to 2.3 in June from 18.8 in May, suggesting that manufacturing output barely expanded over the month.

The index for general business activity--which assesses broader business conditions--fell to minus 17.7 from minus 7.3 the previous month, the lowest level since May 2020 and signaling that activity declined as the reading came in well below the zero threshold which separates expansion from contraction.

All the main indicators of the index signaled a slowdown or a decline in activity, according to the survey.

Demand weakened in June compared with the previous month. The new orders index decreased to minus 7.3 from 3.2 in May, its first negative reading in two years, and the growth rate of orders index fell to minus 16.2 from minus 5.3.

The shipments index dropped to 1.2 from 13.1, signaling that shipments were little changed over the month

The employment index decreased to 15.2 from 20.9, suggesting that firms in the area continued to add workers but at a lesser pace than in May.

The indexes related to supply chains painted a mixed picture. The delivery times index increased to 19.9 from 4.3, suggesting longer delivery times, while the unfilled orders index fell to minus 8.8 from 4.1, reflecting a decline in backlogged orders.

Inflation pressures remained elevated by historical standards, but eased compared with the previous month. The raw materials prices index fell to 57.5 from 61.8, and the finished goods prices index decreased to 33.8 from 41.8.

The short-term outlook for Texas' manufacturing firms worsened markedly in June. The future general business activity index decreased to minus 26.0 from minus 6.5 the previous month. Other measures of future manufacturing activity also declined, though most remained positive, the Dallas Fed said.

 

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

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(END) Dow Jones Newswires

June 27, 2022 11:13 ET (15:13 GMT)

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