• August reading stands at highest level since February 2019.

• Components strengthen broadly.

• Expectations improve.

The Dallas Federal Reserve reported in its Texas Manufacturing Outlook Survey that the General Business Activity Index increased to 8.0% in August. That followed five consecutive months of negative readings and was improved from -74.0 in April. (Data extend back to June 2004).

Improvement in each of the business indicators was broad-based this month with the growth rate in the new orders index rising to 11.8%, its highest level in two years. Shipments also increased sharply. The unfilled orders index remained elevated at 7.8%, its best reading in two years. The delivery times measure continued to indicate slower rates of order fulfillment. Working lower, however, was the production series as it reversed July's improvement.

The employment index improved to 10.6% this month, its second positive reading since January. An increased 23% of respondents reported gains in hiring while a lessened 13% reported a decline. That compared to 26% who reported a decline in March. The wages & benefits measure surged to 15.2%, though it remained weaker than the highs of 30% or more in the summer of 2018.

The index of prices received turned positive. At 0.9%, it was the first reading above zero since December. A greatly increased 14% of respondents reported higher prices while a slightly increased 13% reported a decline. The raw materials price measure strengthened to 19.4%, its highest reading since October of last year. It remained well below the highs registered two years ago.

The index of expected business conditions in six months rebounded to 20.4% in August after falling moderately in July. It remained above April's low of -43.0%. Strength amongst expected business indicators was broad-based with the future new orders and production readings strong. The expected employment index strengthened as an increased 35% of respondents expected higher employment and a lessened seven percent expected a decline. Future capital expenditures fell sharply.

Each index is calculated by subtracting the percentage reporting a decrease from the percentage reporting an increase. When all firms report rising activity, an index will register 100. An index will register -100 when all firms report a decrease. An index will be zero when the number of firms reporting an increase or decrease is equal. Items may not add up to 100% because of rounding. Data for the Texas Manufacturing Outlook can be found in Haver's SURVEYS database.

The Federal Reserve's New Monetary Policy Framework: A Robust Evolution is the title of today's speech by Fed Vice Chairman Richard H. Clarida. It can be found here.