Does Texas Manufacturing Index Signal a Coming Slowdown?

posted by Jim Forsyth - 

While the Texas economy remains strong, with near record low unemployment, the belwether manufacturing sector might be sounding an alarm, News Radio 1200 WOAI reports.

The latest monthly report on manufacturing activity in the state from the Federal Reserve Bank of Dallas shows optimism among manufacturers, there are some concerns raised.The Fed cites a drop in 'outlooks and optimism' among manufacturing exectives.

It says the number of new orders coming in to manufacturing plants is down, and the size of the new orders they are receiving are smaller.

The concerns are being felt by manufacturing workers as well.  The index of 'hours worked' in manufacturing fell in the September report, the employment index dropped by almost half, and the number of manufacturing firms reporting net hiring fell to just one quarter, with seven percent of Texas firms reporting layoffs.

The Dallas Fed says that amounts to 'slower expansion' of manufacturing in Texas and is not prepared to say that the declining numbers represent a looming manufacturing recession.

Two main factors are believed to be leading to the increased uncertaintly in Texas manufacturing.  

One is a rise in raw materials costs, which is leading to sharp increases in inflation.

The other is a drop in exports which is directly related to the tariffs being imposed by the U.S., China, and other nations.

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