The Dallas Federal Reserve Bank reported that manufacturing activity strengthened further in October. The composite index of general business activity rose from 21.3 in September to 27.6 in October, its best reading since March 2006.
The underlying data continue to reflect a Texas economy that has improved significantly as the energy sector has recovered, and while the sample comments reflect challenges related to Hurricane Harvey, the report mostly indicates resilience in the wake of such damage. Indeed, most of the key indices were higher for the month, including new orders (up from 18.6 to 24.8), production (up from 19.5 to 25.6), capacity utilization (up from 15.8 to 22.5) and employment (up from 16.3 to 16.7), with each indicating healthy expansions in October. At the same time, shipments (down from 27.4 to 20.9), hours worked (down from 18.4 to 13.7) and capital expenditures (down from 13.6 to 13.3) also grew rather soundly despite some easing in this release.
Moving forward, manufacturing leaders remained very positive about the next six months, with the forward-looking measure increasing from 34.5 to 38.5, its highest point since January. More than half of those completing the survey felt that new orders, production and shipments would rise in the coming months, and 40.1 percent and 34.9 percent anticipate more hiring and capital spending, respectively. Meanwhile, pricing pressures for raw materials (up from 35.9 to 36.5) were also anticipated to accelerate robustly, with that index at its quickest clip since March.