Texas factory production up for first time in 2015
Managers express pessimistic view of current conditions.
Production at Texas factories increased in October, marking its first expansion of the year and ending a ninemonth stretch of flat or declining output despite another month of fewer new orders, according to a report Monday from the Federal Reserve Bank of Dallas.
The state production index, a key measure of factory activity, rose to a reading of 4.8 in October from an essentially flat 0.9 the prior month, according to the Texas Manufacturing Outlook Survey.
The greater, positive figure indicated a faster rate of output growth. It was the highest reading of the top-line manufacturing index since December, according to Dallas Fed data.
Factory activity had plummeted in late spring as the sharp drawback across the state’s energy sector rippled into much of the manufacturing sector. Lower oil and gas prices, combined with a strong U.S. dollar and a weaker Chinese economy, sent Texas factory production into a five consecutive months of declines.
After essentially flat production rates in August and September, this month finally produced some expansion. A measure of shipments jumped, moving into clear growth for the first time since January.
Those gains helped stanch the loss of factory jobs, the report said. Payrolls held steady during the month, the first time the manufacturing sector didn’t cut jobs since April. The ongoing reduction in hours worked also slowed
during October.
However, the gains in production did little to change the pessimistic view factory managers expressed about current business conditions. Opinions of both company-specific and general business activity remained negative for now, although managers expressed tepid optimism for outlooks six months ahead.
Their concerns were likely rooted in part by a sharper contraction in new orders during the month. The report’s measure of new orders has been near-zero or in negative territory, indicating contraction, since the start of the year.
Anonymous comments compiled by the Dallas Fed noted some ups and downs, largely depending on the manufacturers’ exposure to the depressed energy sector and overseas markets.
“For the first time in a long time, we have a huge amount of uncertainty about the direction things are headed,” said one machinery manufacturer. “Our quotes remain strong, and our order quantity is solid ... but we have no feel for what 2016 will hold. The uncertainty about the future price of oil is unnerving.”