Texas manufacturing slows, future more uncertain
At the end of 2018, Texas factory production fell to its lowest level since mid-2016, and so did manufacturers’ outlook on the industry.
The pace of new orders slowed in December as factory managers worried about a slowdown in the oil and natural gas industry, the rising cost of materials and higher interest rates, according to the monthly Texas manufacturing report by the Federal Reserve Bank of Dallas.
The Fed surveyed 112 Texas manufacturers between Dec. 18 and 26.
Both company outlook and general business activity indexes fell by double digits in December, compared with November, hitting their lowest points in the past two and a half years.
“We live and die by the price of oil,” one machinery manufacturer said in an anonymous comments to the Dallas Fed. “With the oil field down, we see less orders.”
U.S. oil prices have fallen to around $45 a barrel. Many drillers say they need prices of $50 a barrel or more to profitably produce oil from U.S. shale plays, which require a mix of horizontal drilling and hydraulic fracturing, or fracking, to extract crude.
Rising interest rates also weighed on manufacturers across the board. The Federal Reserve recently raised interest rates for the fourth time in 2018 by a quarter of a percent, to 2.5 percent. The move has been met with criticism from President Donald Trump, who has blasted the move, saying in a Tweet on Dec. 24 that “the only problem our economy has is the Fed.”
Trump’s statements have raised concerns that he might try to replace Federal Reserve Chairman Jerome Powell, who has been in office since February and is serving a four-year term. Trump nominated Powell, who’d previously served on the Fed’s board of governors, to the chairmanship in November 2017.
Rye Druzin is a San Antonio-based staff writer covering Texas energy. Read him on our free site, mySA.com, and on our subscriber site, ExpressNews.com. | email@example.com | Twitter: @druz_journo