WASHINGTON, Dec 26: Texas manufacturing activity shrank in December, the Federal Reserve Bank of Dallas said on Tuesday, with a key gauge of production hitting the weakest level since the survey began in 2004.

The reading fell to -5.2 in December from 8.5 in November, chiming with a downturn recorded by the Federal Reserve Bank of Richmond’s poll this month of manufacturers in the mid-Atlantic states, which was also released on Tuesday.

Readings above zero point to expansion, while negative levels indicate contraction.

“Manufacturing activity contracted in December, according to the Texas Manufacturing Outlook Survey. Most indexes were negative, including production, capacity utilisation, volume of new orders and shipments,” the Dallas Fed said in a statement.

The weakness of US carmakers, together with a much cooler housing market, slowed US economic growth to a 2 per cent annual pace in the third quarter from 2.6 per cent in the second.

Some worry this decline could gather momentum. But the US central bank has voiced confidence that solid job creation and resilient consumer spending will help the economy pick up gradually over the months ahead.

The Dallas Fed detected similar hope among the roughly 80 businesses that take part in its survey.

“Manufacturers continued to be optimistic about future business. Nearly two-thirds of responding firms expect increases in production and volume of new orders six months from now,” the Dallas Fed said.—Reuters