Texas business activity continues to improve in August, according to a Dallas Federal Reserve Texas Manufacturing Outlook Survey (link opens a PDF) released today.

After clocking in at 4.4 for July, this month's report puts business activity at 5.0. Analysts had expected more of the same, with a slight increase to 4.5.

The monthly survey asks about 100 Texas manufacturers to rate their views on current and future business activity. Market watchers keep a close eye on this index, as Texas' manufacturing can serve as an important indicator of national economic health. A positive number indicates month-over-month growth, while a negative number means contraction.

While manufacturers may think conditions are improving, another drop in the production index says otherwise. After hitting a two-year high in June, production dropped from an 11.4 reading in July to 7.3 this month.

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Source: Dallasfed.org.

Taking a closer look at the index's components, all-important new orders were cut in half to a 5.4 reading, while capacity utilization fell 7.6 points to 4.6 and hours worked went into the red at -9.9. However, capital expenditures posted the largest gains for August, increasing 6.9 points to 10.4, a possible signal that businesses are confident about investing in their future.

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