DALLAS FED MANUFACTURING CRUSHES EXPECTATIONS

This report showed that factory activity in Texas climbed for the twelfth straight month.

"The production index, a key measure of state manufacturing conditions, rose from 17.1 to 24.7, reaching its highest level in four years and indicating stronger output growth," according to the press release.

Investors watch this number to get a sense of the health of the economy.

Here is the full release:

Texas factory activity increased for the 12th month in a row in April, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, rose from 17.1 to 24.7, reaching its highest level in four years and indicating stronger output growth.

Some other measures of current manufacturing activity also reflected more robust growth. The new orders index posted a four-year high, rising to 21.3. The capacity utilization index rose to a multiyear high as well, climbing from 13.1 to 18.7, with a third of manufacturers noting an increase. The shipments index fell 7 points to 12.4, indicating the volume of shipments grew but at a slower pace than in March.

Perceptions of broader business conditions were markedly more optimistic in April. The general business activity index rose for a second consecutive month, increasing from 4.9 to 11.7. The company outlook index jumped nearly 15 points to a four-year high of 23.4, reflecting a sharp rise in optimism among manufacturers.

Labor market indicators reflected stronger employment growth and longer workweeks. The April employment index rose to 19.7, its highest reading in more than two years. Twenty-eight percent of firms reported net hiring compared with 8 percent reporting net layoffs. The hours worked index spiked from 5.3 to 13.9, indicating a sizeable increase in workweek length.

Upward pressure on input prices eased somewhat in April, while pressure ticked up for selling prices and wages. The raw materials price index declined sharply from 23.1 to 10.2, reaching an 8-month low. Meanwhile, the finished goods price index edged up to a reading of 8. Looking ahead, 36 percent of respondents anticipate further increases in raw materials prices over the next six months, while 25 percent expect higher finished goods prices. The wages and benefits index increased slightly to 21.3. This index has been consistently elevated since December, suggesting strong upward pressure on compensation costs for five months.

Expectations regarding future business conditions remained optimistic in April. The index of future general business activity rose 7 points to 24.5, while the index of future company outlook was largely unchanged at 26.9. Indexes for future manufacturing activity pushed further into positive territory.

The Dallas Fed conducts the Texas Manufacturing Outlook Survey monthly to obtain a timely assessment of the state's factory activity. Data were collected Apr. 15-23, and 109 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.