The Dallas Fed reports a temporary cooldown for Texas factories this month, but local manufacturing executives say a rebound is already in sight.
DALLAS — Texas manufacturing growth cooled in May as factory output shifted to a more moderate pace, according to the latest Texas Manufacturing Outlook Survey from the Federal Reserve Bank of Dallas.
The survey’s production index, which is a key measure of state manufacturing conditions, dropped 10 points to 9.4 this month. Data from the Dallas Fed suggests this reading reflects an “average pace of output expansion”.
Several key measures showed signs of slower growth in May. The capacity utilization index plunged 15 points to 5.2, the shipments index fell eight points to 7.4, and the new orders index dipped four points to 6.4.
The general business activity index edged up three points to 0.4, and the company outlook index came in at 0.3. Both near-zero readings indicate “no change in activity” or outlook compared to April.
Local manufacturers also experienced shifting financial pressures. Raw materials prices jumped six points to 42.7—marking an eight-month high—while finished goods prices eased. Meanwhile, the local labor market remained static. The employment index was unchanged at 0.2, signaling “no change in payrolls” from last month, while hours worked moved down to 1.8.
Despite the current deceleration, Texas executives expressed optimism for the second half of the year. The future production index was little changed at 36.8, showing that “expectations are for increased manufacturing activity six months from now”.
The Dallas Fed collected data for the report between May 12 and May 20, with responses from 75 of the 114 Texas manufacturers surveyed.