Texas’s manufacturing sector continues to suffer the effects of the oil price crash, with the latest Dallas Fed manufacturing survey showing activity in the sector was “essentially flat”in September. According to Dallas Fed senior VP Mine K. Yücel, “the state is feeling the pinch of low oil prices. The manufacturing sector has been especially weak this year, losing more than 28,000 jobs through August, which is the latest data we have. The losses were concentrated in fabricated metals and machinery, which are closely linked to the energy industry.” Respondents to the survey mentioned low oil prices as a major obstacle and said the uncertainty around what future oil prices will be has put business outlook “in limbo.” However, it isn’t all bad news. Yücel says the fact that the production index remained near zero suggests “output held steady for the second month in a row after several months of declines.” Yücel added that manufacturing company outlooks “continued to be pessimistic but less so than in August.”
Looking to the future, however, the survey results suggest that the sector could contract even further. The new orders index, which gives a clue of whether there will be increased manufacturing activity in the near future, posted a second negative reading in September implying that the volume of new orders is decreasing. Low oil prices, the strong price of the dollar and global economic weaknesses continue to slow down the Texan sector. The Dallas fed says the decrease in new orders and the negative perception from companies is all “portending slow growth for the rest of the year.” Texas Public Radio spoke to John Diamond, a professor at the Baker Institute for Public Policy at Rice University about the results, who said the sector is not sustainable and described current conditions as a “perfect storm.” Texans will be hoping for better results in next month’s survey, but right now it seems unlikely.
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