Dallas Fed Manufacturing Index Surprises to the Upside

The Texas Manufacturing Outlook Survey is a monthly survey of Texas-area manufacturers. Firms report on how business conditions have changed for a number of indicators, including production, new orders, employment, prices and company outlook. The Survey is primarily a regional survey, but its key indexes are highly correlated with state-level measures of business activity and employment.According to the Dallas Fed Manufacturing Index, general business activity in June increased to 5.8 from -5.1 in May. This is also better than the expected estimate of -2.0. This is essentially bullish for the manufacturing sector and positive for general economic growth in the United States.According to the report, the production index, a key measure of state manufacturing conditions, rose from 5.5 to 15.5, posting its strongest reading in 15 months.Other measures of current manufacturing conditions also indicated strengthening activity in June. The new orders index rose to 7.9, following three readings around zero, suggesting demand finally grew after staying flat since February. Similarly, the shipments index rebounded to 9.6 after two months of near-zero readings. The capacity utilization index rose from 5 to 13.3, reaching its highest level since early 2011.Perceptions of broader economic conditions improved in June. The general business activity index had been negative in April and May but increased to 5.8 this month. Twenty-four percent of firms noted improvement in the level of business activity in June, up from 15 percent last month. The company outlook index edged up from 4.7 to 5.5.