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The rebound in Texas manufacturing activity continued into its sixth month in March, albeit at a slower-than-expected pace, as companies in the region continue to reap in the benefit of the recent stablisation in crude prices.
The headline general business activity index came in at 16.9 this month, according to the latest survey of businesses from the Federal Reserve of Dallas. That is down from the 24.5 reading in February and weaker than economists’ expectations of 22. However, it still represents the sixth straight month of positive reading after spending the whole of 2015 and the first half of 2016 in negative territory.
A reading below zero signals contraction.
Within this, factory production – a key measure of state manufacturing conditions – rose 2 points to 18.6 from the prior month while growth rate of orders edged up 3.2 from 2.
Growth in capacity utilisation and new orders both slowed however, with the former index dropping 1.5 points month-on-month to 13.2 and the latter falling from 11.6 to 9.5 in February.
Texas is the country’s biggest oil producing state and one of the epicentres for the shale oil boom. The local economy was hit hard by the 2014-2016 collapse in global crude prices, which forced producers to cut back on output and exploration activities. A deal in December by Opec and non-Opec members to curb production have helped prices stabilise at around the $50 a barrel mark. But the price gain has encouraged US shale oil producers, which are not part of the pact, to boost output and this has put renewed pressure on prices in recent weeks.
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