03:22 PM EDT, 05/28/2024 (MT Newswires) -- Texas' manufacturing contraction unexpectedly worsened this month as production and shipments fell into negative territory and outlooks softened, according to the Federal Reserve Bank of Dallas.

The general business activity index dipped to minus 19.4 in May from minus 14.5 in April, data from the Fed branch showed Tuesday. Analysts surveyed in a Bloomberg poll were expecting a month-over-month improvement to minus 12.5.

Production, which the Dallas Fed calls a key measure of state manufacturing conditions, swung back into contraction at minus 2.8 this month. Shipments fell to minus 3 from positive 5 month over month. Orders improved slightly to minus 2.2 in May from minus 5.3 in April, the regional Fed's survey showed.

"Activity in Texas' manufacturing sector edged down in May, continuing the pattern seen over the past several months of oscillating between mild expansion and mild contraction," said Emily Kerr, senior business economist at the Dallas Fed. "This bumpiness is reflected in the employment measure as well."

The employment index dropped to minus 5.3 from minus 0.1, with the latest reading indicating that manufacturing headcounts fell in May, according to Kerr. The gauge for hours worked declined 1.4 points to minus 3.7.

The index charting prices paid for raw materials climbed 9.2 points to 20.4, while prices received edged down 1.4 points to 4.1. Firms in the May 14-22 survey expect price increases for raw materials over the next six months to outpace prices received for finished products, according to the survey data.

Six months out, the gauge for general business activity dropped 11.2 points and returned to contraction territory at minus 3.3 in May. Future production tumbled 17.5 points to 17.3 this month while the forward-looking indicators for new orders and shipments decreased by 12.2 points to 13.2 and by 14.2 points to 15.2, respectively.

The future employment index slid to 13.4 from 20.2 month to month. "Firms' perceptions of general business conditions continue to worsen, as do their outlooks," Kerr said.