Texas manufacturing grew in May while the state's production index was steady, indicating sustained growth from the month before, although the outlook is poor, the Federal Reserve Bank of Dallas said Tuesday.

Order volumes were close to zero, suggesting they have stagnated. Shipment volumes were flat; however, the capacity use index rose from 1.4 in April to 5 in May. Overall, perceptions of economic conditions were mixed in May, with the general activity index negative for the second consecutive month, although it did improve slightly; however, 21 percent of manufacturers reported improved outlook, up from just 11 percent in April.

The labor market showed flagging labor demand and shorter workweeks, but employment levels did improve in May, albeit at a slower rate than the month before. The hours worked index continued in negative numbers in May, but nevertheless improved slightly. Expectations moving forward were less optimistic in May, and the future general business index fell dramatically from 15.7 to 4.3, and future company outlook declined from 14.4 to 11.4.