Texas manufacturing just crawled back above water. The Dallas Federal Reserve’s general business activity index rose to 0.4 in May, up from -2.3 in April, marking the first positive reading after consecutive months of contraction.

The numbers behind the headline

The Texas Manufacturing Outlook Survey, released on May 26, painted a picture of an industry pulling in two directions at once. New orders improved, while production and shipments both declined.

The employment index held steady at 0.2, essentially flat. Hours worked, however, fell to 1.8 from 4 in the prior month.

The future general business activity index came in at 14.3, a solidly positive reading.

Raw material prices are the story within the story

The raw materials price index surged to 42.7, its highest level in eight months.

The finished goods price index actually fell to 18.9. That means manufacturers are, at least for now, absorbing higher costs rather than raising prices on their end products.

What this means for markets and investors

The positive turn in the headline index, combined with the forward-looking optimism captured in the 14.3 future activity reading, suggests that Texas manufacturers have not thrown in the towel.

The Dallas district covers Texas, northern Louisiana, and southern New Mexico. The next release is scheduled for June 29.