Texas manufacturing production surged in May after a sharp downturn the prior month, but the volatile production swings left many producers uncertain about their business prospects, according to a monthly survey released Tuesday by the Federal Reserve Bank of Dallas.
The state production index, a key measure of manufacturing activity, jumped to 11.2 in May from -0.5 in April, according to the Dallas Fed’s Texas Manufacturing Outlook Survey.
The swing into positive territory indicated that production expanded in May after flat to slightly lower production the month before.
May’s acceleration included a strong rebound in both the new orders and shipments indexes, which returned to positive territory after contracting in April, according to the survey.
However, the declines of April continued to weigh on Texas manufacturers throughout May. The employment index, which provides a general measure of hiring, plummeted to a reading of -6.3 this month, the report said.
That was the first time the employment index hit negative figures this year, reaching its lowest point since November 2009, according to the Dallas Fed. Another measure of labor showed that the number of hours worked contracted again in May, although not quite as steeply as in May.
The pull back on hiring reflected Texas manufacturers’ broader concerns about their business prospects. Executives expressed decidedly pessimistic views of current conditions for both their own companies and for general business activity.
Outlooks were a little better for conditions six months from now, with mild pessimism for general business conditions and cautious optimism for company-specific prospects.
A collection of anonymous comments compiled by the Dallas Fed belied some of the pessimism, with several manufacturers reporting good if not spectacular conditions in May.
However, many of the firms also noted concerns about the impact of federal regulations and policies, including those related to health care and budgeting.
One transportation equipment manufacturer who does roughly half its budget with the U.S. military and Homeland Security said it was starting to see the budget cuts known as the sequester “curtailing this activity.”