By Xavier Fontdegloria
Manufacturing activity in Texas continued to expand at a solid level in April after reaching record-high growth 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, stood at 34 in April, down from 48 in March, which was the highest reading in the survey's 17-year history.
Despite the fall, the indicator signals that factory activity in the state's industrial sector expanded at a solid clip as it is still well above average and indicates robust output growth, the Dallas Fed said.
Researchers at the Federal Reserve in Dallas ask Texas executives whether certain parameters such as output, employment or orders increased, decreased or remained unchanged over the previous month. April data signal the sector has expanded for 11 consecutive months.
Contrary to the production index, the index for general business activity rose to 37.3 in April from 28.9 the previous month. This is above economists forecasts, who polled by The Wall Street Journal expected the reading to be at 31.7.
Other measures of manufacturing activity also pointed to strong growth in April, with demand, labor, price and wage indexes reaching all-time highs, the Dallas Fed said.
The new orders index rose eight points to 38.5, and the growth rate of orders index increased 10 points to 32.3. Both readings were the highest in the survey's 17-year history, suggesting strong demand.
The capacity utilization index remained high, but slipped to 34.6 from 46.1 in March. The shipments index held roughly steady at 32.6.
Labor market measures indicated robust growth in employment and work hours, the report said. The employment index came in at 31.3, up notably from 18.8 and its highest reading since the survey began in 2004.
Price and wage pressures accelerated further, the report said. The raw materials prices index rose to 71.4 from 66.0, near an all-time high. The finished goods prices index did reach an all-time high, climbing seven points to 39.1. The wages and benefits index also posted its highest reading on record, increasing nine points to 37.1, the Dallas Fed said.
"Market demand is outstripping our ability to fulfill orders in the time requested," said one of the respondents from the fabricated metal manufacturing sector, citing production capacity and steel and labor supply as the limiting factors.
The company outlook index edged up three points to 29.1, a reading four times higher than the series average.
Expectations regarding future manufacturing activity were more positive in April compared with the previous month. The future production index increased to 47.2 and the future general business activity index inched up to 36.6. Most other measures of future manufacturing activity also rose, and all remained solidly in positive territory, the report said.
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(END) Dow Jones Newswires
April 26, 2021 11:12 ET (15:12 GMT)Copyright (c) 2021 Dow Jones & Company, Inc.