Texas manufacturers eased off the accelerator in July after their surge during June, but production activity continued its solid expansion throughout the state, according to a monthly survey released Monday by the Federal Reserve Bank of Dallas.
The state production index, a key measure of manufacturing activity in Texas, slipped to 11.4 this month from 17.1 in June, according to the Dallas Fed’s Texas Manufacturing Outlook Survey.
The lower, positive reading indicated that production continued to expand in July, albeit at a slower pace than in June, when the index posted its highest reading in more than two years.
The survey’s measure of production activity tends to track with overall economic activity in Texas, so it offers an early indication of broader conditions statewide.
Most of the survey’s other measures followed the slower growth rate of overall manufacturing activity. New orders and the growth rate of orders, for example, continued to expand in July, but they also slowed.
But other measures reflected the lingering strength of June’s surge in production. Shipments continued to accelerate in July, and the employment index surged, indicating that hiring activity increased after an essentially flat month of hiring in June.
Hours worked and wages and benefits also expanded in July, but at a slower rate than in June.
The month did little to dampen manufacturers’ expectations as they enter the second half of 2013. The survey’s measures of outlooks on company-specific and general business activity all showed slight dips in optimism—both for current conditions and for six months out—but all held in positive territory.
July’s more-cautious outlooks were reflected in anonymous executives’ comments compiled by the Dallas Fed. Many continued to express concerns about federal regulations, including the Affordable Care Act. One producer noted a tight supply of skilled labor.
“Business for July and August has increased,” said one chemical manufacturer, “but it is still too early to know if this a step increase in business or just a blip.”