Texas Factory Sector Outlook Indicates Improvement in June

• Component increases are broad-based.

• Expectations also improve broadly.

The Dallas Federal Reserve reported in its Texas Manufacturing Outlook Survey that the General Business Activity Index increased to -6.1% from the near-record low of -49.2% in May (data extend back to June 2004).

All of the business indicators improved this month as the production index rose to 13.6% following three straight negative figures. The growth rate of new orders index improved to -5.8% from -30.8% while the unfilled orders index improved to -2.3% from -17.4% in May. The shipments index also rebounded, following a severe May drop, and the delivery times measure also improved.

The employment index rose to -1.5% this month, its highest level since January. The wages & benefits measure improved to 6.8% following two months of negative readings.

The index of prices received improved to a still-negative -4.7%. but indicated the slowest rate of price deflation since February. The raw materials price measure of 12.3% was its second consecutive positive reading and the highest since December of last year.

The index of expected business conditions in six months rose to 19.7% in June from -19.0% in May. Each of the future business indicators improved but the future new orders and future shipments readings were notably improved. The expected employment index surged to 18.6%, its first positive measure in four months. The future capital expenditures also rose.

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.