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Texas manufacturing activity rose for a seventh consecutive month in April, albeit at a slower-than-expected pace.
The headline general business activity index came in at 16.8 in April, according to the latest survey of businesses from the Federal Reserve Bank of Dallas. That is down slightly from March’s reading of 16.9 and weaker than economists’ expectations of 17.
A reading below zero signals contraction.
The slowdown in growth underscores in some ways the delicate balancing act that many of the state’s shale oil producers are facing.
As the country’s largest oil producing state, Texas was hard-hit by the 2014-2016 collapse in global crude prices, which forced producers to cut back on output and exploration activities and pushed the headline gauge into negative territory for the whole of 2015 and the first half of 2016.
A deal in December by Opec and non-Opec members to curb production has helped prices stabilise at around the $50-a-barrel mark and encouraged shale producers to boost output.
While this in turn helped push the general business activity index back into positive territory for the past seven months, the renewed activity has also put fresh pressure on oil prices in recent weeks.
The effects of the new bout of oil sell-off can be seen in some ways in the April survey. Growth in factory production – a key measure of state manufacturing conditions – slowed last month, dropping 3.2 points to 15.4 from the prior month. Growth in capacity utilisation also tempered to 11.5, from the 13.2 recorded in March.
However, new orders edged higher by 2 points to 11.5.
“I keep reading and hearing that things are swinging in a favorable direction,” said one fabricated metal product maker in the survey. “I don’t see it yet. Steel consumption is still soft.”
Another primary metal manufacturer noted: “It is a fairly stable market right now.”