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In its monthly report on Texas manufacturing, the Federal Reserve Bank of Dallas reported that its production index, a key indicator of the state’s manufacturing conditions, declined by 12 points month over month in June. The drop signals a “deceleration” in output growth.

At the same time, raw materials prices index rose 10 points to 53.6, its highest level since 2011, and the wages and benefits index rose seven points to 31.4.

The trends remain positive, even though some month-over-month changes are slowing down

The Dallas Fed surveys a number of the state’s manufacturers every month seeking information on output, employment, orders, prices and other monthly indicators. The June data were collected from 104 manufacturing businesses between June 12 and June 20.

The bank also noted that perceptions of broader business conditions rose month over month in June. In particular, the new orders index that indicates demand strength rose to 29.6, its highest level of the year to date.

Expectations for future business conditions also remained upbeat in June. Index scores for future general business activity and future manufacturing activity rose to 35.9 and 38.7, respectively, both “significantly above average.”

Here are a few comments the Dallas Fed received from June survey respondents:

The price of steel raw materials is causing costs to increase—A nonmetallic mineral product manufacturer

Steel tariffs to NAFTA partners is a mistake. Higher steel prices could slow down strong projects and the manufacturing recovery which started in the fourth quarter of 2017—A fabricated metal product manufacturer

Even steel sourced from the U.S. is rapidly increasing in price due to capacity constraints—A machinery manufacturer

We are operating at the lowest levels of our 70-year history. Chinese imports continue to depress pricing of our products—A (different?) machinery manufacturer

It’s like a switch was turned on in May and orders were abnormally high. June bookings look very positive so far—A computer and electronics product manufacturer

Visit the Dallas Fed website to read the whole report.

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