By Xavier Fontdegloria

Texas manufacturing production gained momentum in September compared with the previous month, although overall activity in the sector expanded at the slowest level in more than a year, data from the Federal Reserve Bank of Dallas showed Monday.

The production index of the Texas Manufacturing Outlook Survey, a key measure of state manufacturing conditions, increased to 24.2 in September from 20.8 in August.

However, the index for general business activity--which assesses broader business conditions in the manufacturing sector--fell to 4.6 in September from 9.0 in August

The reading, which signals the sector expanded slightly, is the lowest since July 2020 and misses economists' forecasts, who polled by The Wall Street Journal expected it to come in at 10.0. Any level above zero signals growth.

The industrial sector continues to grow across the U.S. but supply-chain bottlenecks and labor shortages are constraining output and factories are struggling to keep up with demand.

Other measures of manufacturing activity posted mix movements, the Dallas Fed said.

Demand for goods slipped. The new orders index fell to 9.5 from 15.6 the previous month, while the growth rate of orders index declined to 2.5.

The capacity utilization and shipments indexes edged up to 24.5 and 18.7, respectively.

Labor market measures indicated faster employment growth and longer workweeks. The employment index rose to 26.3, and the hours worked index fell slightly to a still-high 20.4 level.

Supply-related problems persisted. The delivery time index climbed to 21.4 from 19.5 the previous month, while the inventories index fell to 1.1.

Prices continued to increase strongly in September. The raw materials prices index rose to 80.4, and the finished goods prices index climbed to 44.0, an all-time high.

Expectations regarding future manufacturing activity among the companies polled were less upbeat than in August. The future general business activity index slipped to 11.5 from 15.1. The future production index also eased, as did most other measures of future manufacturing activity.

Write to Xavier Fontdegloria at xavier.fontdegloria@wsj.com

(END) Dow Jones Newswires

September 27, 2021 11:12 ET (15:12 GMT)