Posted on 05/27/2015 3:57:44 AM PDT by thackney
The Dallas Fed says factories churning out equipment and products in Texas slowed their output this month to levels unseen since 2009 when the nation was still mired in a recession.
Texas manufacturing activity in May edged lower for the third month in a row as the effects of the oil slump continued to ripple through the state. About 28 percent of the state’s manufacturers reported a slowdown, according to the Federal Reserve Bank of Dallas’ monthly survey on Tuesday.
“We are seeing all industries hold cash,” a fabricated metal manufacturing executive said in the survey. Others said refineries are spending less money on machinery and demand from the state’s oil producers only got worse this month.
The Fed’s productivity index fell to -13.5 this month. At the height of economic disaster in 2009, that measure had fallen to nearly -40, but manufacturing activity jumped into positive territory by the end of that year.
Tuesday’s report marked the first time in six years the Fed’s indicator slipped anywhere near the deep recession numbers, a sign the oil bust is taking a toll.
“We don’t feel confidence anywhere, but we are feeling cost pressures,” one executive said. The cost of raw materials increased nearly 10 percent from April to May and prices for the manufacturers’ products slipped about 2 percent.
For the fifth month in a row, executives took a dim view of current business activity and new orders declined. Manufacturers slashed payrolls, with one in five companies saying they cut jobs in May. About the same number tightened work weeks for their employees, continuing a trend that began in January.
Still, several executives said the recent rally in oil prices has given rise to “a general feeling” that the impact of the oil bust is leveling out.
“We’ve maintained the position that we need to give the oil market time to settle, so our goal has been to survive until the third quarter,” one machinery manufacturing executive said.
“At that point,” the executive said, “production and inventories will have stabilized and maybe our customers will be more comfortable entering the market. We have numerous customers who have delayed purchasing product, and we are optimistic that they will begin ordering again in the third quarter.”
The manufacturing bosses’ outlook for business activity six months out improved, with the Dallas Fed’s index climbing 11 percent this month. Roughly half of the manufacturers said they expect their production to increase over the next six months, with the same number figuring they’ll get an influx of new orders in that period.
“We are cautiously optimistic about future demand and the economy as a whole,” a nonmetallic mineral product manufacturing executive said.
—The cost of raw materials increased nearly 10 percent from April to May and prices for the manufacturers’ products slipped about 2 percent.—
That’s astounding, to say the least. What business can weather that storm?
T. Boone Pickens says $60 oil by December. I hope he’s right.
Stagflation?
The nation is still mired in a recession.
T.Boone must have meant mid May.
I meant $70/bbl by Dec. Sorry.
“We are seeing all industries hold cash,”
I expect the same $70. Could run back up to $150 is the damn stupid camel jock Persians sink a tanker.
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