Texas Business reports: Texas factory activity increased in April, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, fell from 11.1 to 5.6, suggesting growth continued but at a slower pace than last month.

Other measures of current manufacturing conditions stagnated in April. The capacity utilization index came in at 1.4, down markedly from 12.3 in March, with one-quarter of respondents noting decreases. Shipment volumes were flat in April after increasing for the previous three months; the shipments index fell from 8.6 to -0.8. The new orders index posted a near-zero reading for the second consecutive month.

Perceptions of broader economic conditions worsened in April. The general business activity index turned negative after three months of positive readings, falling from 10.8 to -3.4. Thirteen percent of firms noted improvement in the level of business activity, while 16 percent noted a worsening. The company outlook index also fell into negative territory, slipping to -4.5 after a reading of 9.5 last month.

Labor market indicators reflected sharply slower labor demand growth and shorter workweeks. Employment growth continued in April, but at a much slower pace than in previous months, with the index receding from 21.7 to 11.8. Nineteen percent of firms reported hiring new workers, while 7 percent reported layoffs. The hours worked index declined eight points to -4.6, its first negative reading in eight months.

Input prices and wages increased at a slower pace in April, and selling prices declined. The raw materials price index was 21.2, down from 27.7 in March. This was the index’s lowest reading in five months and is well below last year’s April reading of 57.1. The wages and benefits index moved down from 21 to 15.2. The finished goods price index was negative for a second month in a row and edged down to -5.4. Looking ahead, 45 percent of respondents anticipate further increases in raw materials prices over the next six months, while 24 percent expect higher finished goods prices.

Expectations regarding future business conditions were less optimistic in April. The index of future general business activity edged down from 19.1 to 15.7. The index of future company outlook came in at 14.4, down significantly from 26.2 in March. Other indexes for future manufacturing activity also decreased, although all remained in strong positive territory.

The Dallas Fed conducts the Texas Manufacturing Outlook Survey monthly to obtain a timely assessment of the state’s factory activity. Data were collected Apr. 17–25, and 89 Texas manufacturers responded to the survey. Firms are asked whether output, employment, orders, prices and other indicators increased, decreased or remained unchanged over the previous month.

Survey responses are used to calculate an index for each indicator. Each index is calculated by subtracting the percentage of respondents reporting a decrease from the percentage reporting an increase. When the share of firms reporting an increase exceeds the share reporting a decrease, the index will be greater than zero, suggesting the indicator has increased over the prior month. If the share of firms reporting a decrease exceeds the share reporting an increase, the index will be below zero, suggesting the indicator has decreased over the prior month. An index will be zero when the number of firms reporting an increase is equal to the number of firms reporting a decrease.