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Texas Manufacturing Production Surges as Business Sentiment Improves

In October, Texas factory activity rose notably, with the production index increasing dramatically from -3.2 to 14.6, while other indicators of manufacturing were mixed. The new orders index remained negative at -3.7, indicating demand was still slightly in decline. On the other hand, both the capacity utilization index and shipments index exhibited substantial gains and moved into positive territory, registering at 4.3 and 1.5, respectively.

Overall business conditions remained negative, although pessimism abated some. The general business activity index moved up six points but remained negative at -3.0, and the company outlook index improved slightly to -3.3. The outlook uncertainty index, which has been volatile lately, ticked down less than one point to 16.4 after surging nearly 10 points in the previous month.

Labor market indicators pointed to some employment declines and shorter workweeks in October. The employment index fell eight points to -5.1, while the hours worked index inched down three points to -5.5. About 14% of firms reported net hiring, while more than 19% noted layoffs. Moderate upward pressure on prices and wages persisted. The wages and benefits index rose five points to 23.5, roughly aligned with historical averages. The raw materials prices index ticked down to 16.3, while the finished goods prices index remained relatively unchanged at 7.4.

The outlook for future manufacturing activity remained optimistic. The future production index rose to 42.4, the highest reading in nearly three years, while the future general business activity index shot up 18 points to 29.6, also a three-year high.

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