A key measure of Texas manufacturing activity surged to its highest point in more than two years as producers put a recent slowdown further behind them and adopted a much more optimistic view of the months to come, according to a report released Monday by the Federal Reserve Bank of Dallas.
The state’s production index jumped to a reading of 17.1 in June from 11.2 the prior month, according to the Dallas Fed’s monthly Texas Manufacturing Outlook Survey. That marked the highest measure for the headline index since it hit 24.2 in March 2011.
The sharp uptick in manufacturing activity could be a good sign for the broader state economy. The production index tends to track closely with overall economic activity in Texas, so it offers an early glimpse into broader conditions statewide.
Just two months ago, the production index had dipped just into negative territory, suggesting that manufacturing activity had contracted slightly during April. It had rebounded in May before surging this month.
That rebound sparked a sharp turnaround in manufacturer executives’ outlooks for both current and future business activity. Producers had taken a mostly pessimistic view of the business environment in April and May, but those indexes jumped back into solidly positive territory in June, indicating much more optimistic expectations for company-specific and general business conditions alike.
The company-specific gauge of current conditions hit its highest reading in 16 months, according to the report.
The increases in production and outlooks were underpinned by a surge in new orders and shipments, the report showed. Measures of both soared in June, as the growth rate of orders also accelerated after slowing in May.
The overall resurgence helped lift hiring activity after a month when employment had appeared contract, the report showed. Employment measures suggested that workforce levels remained essentially level in June, although the number of hours worked increased after a slight pullback in May.
A collection of anonymous comments compiled by the Dallas Fed also reflected a cautiously optimistic tone. While several manufacturers noted concerns about rising costs due to federal policies, most focused on positive signs for sales and demand growth.
“We have seen general broad-based improvements, as we had hoped for,” said one computer and electronic products producer. “There are still some mixed signals coming through, but most are biased positively. We continue to remain hopeful for follow-through in the second half of the year, which has been elusive the past few years.”