Texas Business reports:  Texas factory activity increased but at a slower pace in August, according to business executives responding to the Texas Manufacturing Outlook Survey.

The production index, a key measure of state manufacturing conditions, fell from 12 to 6.4, suggesting softer output growth.

Other indexes of current manufacturing activity also declined in August. The new orders index edged down to a reading of zero, suggesting flat demand. The capacity utilization index fell from 8.7 to 1.7, reaching its lowest reading since April. Shipments declined slightly in August; the index dipped into negative territory, with more than a quarter of manufacturers noting a decrease in shipment volumes.

Indexes reflecting broader business conditions were mixed, but both increased from last month. The general business activity index remained negative but climbed nearly 12 points from -13.2 to -1.6. The company outlook index was positive for the fourth month in a row and edged up to 4.1 from a reading of 1.6 in July.

Labor market indicators reflected stronger labor demand but unchanged workweeks. Employment growth picked up in August, with the index rising to 14.2, its highest reading in five months. Twenty-four percent of firms reported hiring new workers, while 10 percent reported layoffs. The hours worked index was near zero, suggesting little change in workweek length.

Price pressures were mixed in August. After two months of minimal increases in input costs, the raw materials price index rebounded, rising 8 points to 10.9. Selling prices fell for the sixth consecutive month in August; the finished goods price index was -1.6, up from -5.5 last month. The wages and benefits index fell from 22.9 to 13.5, largely due to a marked decline in the share of firms noting increased compensation costs. Looking ahead, 44 percent of respondents anticipate further increases in raw materials prices over the next six months, while 32 percent expect higher finished goods prices.

Although the manufacturing activity indexes, such as production and new orders, fell from July levels, their corresponding future indexes rose this month. However, expectations regarding future business conditions remained mixed in August. The index of future general business activity remained negative but edged up from -7.3 to -5.1. The index of future company outlook inched up to 6.2.

The Dallas Fed conducts the Texas Manufacturing Outlook Survey monthly to obtain a timely assessment of the state’s factory activity. Data were collected Aug. 14-22, and 91 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. Data have been seasonally adjusted as necessary.