Texas General Business Activity Turns Slightly Negative in August, But Expectations Remain Positive

General business activity in Texas eased in August after expanding in July for the first time since January, according to the Texas Manufacturing Outlook Survey conducted by the Federal Reserve Bank of Dallas. The overall measure, the general business activity index, was at -1.8 in August, down from +0.9 in July and up from -12.7 in June. The August reading was below a high of +14.1 in January but up from its recent low of -35.8 in April and -8.8 in August 2024. The index had been in negative territory from February through June 2025. A lessened 21.7% of respondents reported improved business activity in August, down from 22.1% in July. An increased 23.5% of respondents reported worsened business conditions, up from July's 21.2%. The company outlook index was at 3.3 in August following 4.7 in July and five successive negative readings. Twenty-four percent of respondents expected improved company outlook this month while 21.0% expected deterioration. Data were collected from August 12-20 from 82 Texas manufacturers.

The production index, a key measure of state manufacturing conditions, decreased to 15.3 in August after a 20.0-point jump to 21.3 in July (the highest level since December 2021), indicating production expanded for the sixth straight month and remained well above the historical average. Thirty-three percent of respondents reported higher production this month while 17.8% reported a decline. The capacity utilization index fell to 13.7 in August following an 18.3-point surge to 17.3 in July and five consecutive negative readings; it was up from -15.0 in January 2024 but well below a record-high 46.3 in March 2021.

The growth rate of orders index climbed to 2.6 in August after increasing to -9.1 in July, registering the first positive reading since January and the highest level since a high of 4.8 in April 2024. The index was above a low of -24.3 in November 2023 but significantly below a peak of 29.6 in April 2021. The new orders index rose to 5.8 this month after improving to -3.6 in July, indicating a rise in demand for the first time in seven months and at the highest level since January. The index was above a low of -21.8 in November 2022 but well below a high of 22.6 in February 2022 and a record-high 38.6 in April 2021. The unfilled orders index increased to -5.1 in August, the 12th straight negative reading, from -12.0 in July. The index, while below a high of 1.4 in August 2024, was above a low of -26.3 in July 2024. The shipments index advanced to 14.2 this month, the third positive reading in four months and the highest since February 2022, after rising to 2.7 in July. Meanwhile, the delivery time index rose to 2.3 this month, the highest reading since March, from -7.8 in July.

Labor market indexes showed employment growth and longer workweeks in August. The employment index rose to 8.8 this month after rising to 8.4 in July, indicating employment expanded for the fourth successive month and at the highest level since September 2023. The latest reading was up from a low of -9.7 in January 2024 but well below a high of 17.9 in January 2023 and a record-high 31.8 in April 2021. An increased 20.0% of respondents reported net hiring in August while 11.2% reported net layoffs. The hours worked index jumped to 15.0 this month, the highest reading since March 2022, after a 16.1-point surge to 7.7 in July. The wages & benefits index rebounded to 15.4 in August, the highest level since March, from 13.2 in July; nevertheless, having been trending downward since a peak of 55.0 in March 2022 and remaining below the historical average.

Inflationary pressures increased this month. The index for prices received for finished goods rose to 15.1 in August following a 15.0-point drop to 11.1 in July; it was up from a low of -7.0 in November 2023 but meaningfully below a high of 47.4 in March 2022 and a peak of 51.4 in October 2021. An increased 24.3% of respondents reported raising prices in August while 9.2% reported lowering prices. The index of prices paid for raw materials rose to 43.7 this month after a 1.3-point decline to 41.7 in July, marking the highest reading since April and well above its average reading of 27.4. The index was well above a low of 1.0 in June 2023 but significantly below 73.2 in March 2022 and a record-high 83.8 in November 2021.

Expectations on future manufacturing activity remained positive this month. The future general business activity index rose to 24.8 in August from 19.0 in July, registering the fourth consecutive positive reading and the highest since January. The future production index jumped to a solid 40.4, the highest figure since January, from July’s 30.3. Other indexes of future manufacturing activity also rose in August (vs. July), with most currently residing above their average levels: company outlook (26.8 vs. 21.6), capacity utilization (40.4 vs. 27.8), new orders (36.0 vs. 23.7), growth rate of new orders (28.4 vs. 18.8), shipments (37.2 vs. 21.0), employment (27.6 vs. 27.3), and wages & benefits (42.1 vs. 37.2).

Each index is calculated by subtracting the percentage reporting a decrease in activity 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 equals the number reporting a decrease. Data for the Texas Manufacturing Outlook, conducted by the Federal Reserve Bank of Dallas, can be found in Haver's SURVEYS database.