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Dallas Fed: Texas manufacturing activity unexpectedly contracts in May

Overall business activity in the Texas manufacturing sector declined month over month in May as growth in both production and demand decelerated sharply, according to latest survey data from the Federal Reserve Bank of Dallas.

The Dallas Fed's general business activity index fell to negative 5.3 from 2.0 in April, significantly below the Econoday consensus forecast of 6.0. An index reading above zero indicates a monthly increase.

Output growth slowed this month, with the production index falling to 6.3 from 12.4. The capacity utilization index sank to 7.7 from a seven-month high of 15.6.

Demand indicators also weakened, with the new orders index dropping to a reading of 2.4 from 9.8 and the growth rate of orders index slumping to 1.1 from 5.2.

For the first time in 2019, the company outlook index dived into negative territory, falling to negative 1.7 from 6.3. The company outlook uncertainty index registered its highest reading since September 2018, jumping to 16.1 from 6.8.

Looking at the next six months, the indexes of future general business activity and company outlook both dropped by more than 9 points, as other indicators of future manufacturing activity also registered sharp declines including production and new orders.