Oil Bust Mauls Texas Manufacturers, Atlanta Fed Sees Hit to Broader US Economy
By now, every executive in the American oil patch goes through the day with one eye riveted on the price of oil. And on Monday, West Texas Intermediate plunged once again below $50 a barrel. It has become the nightmare price for Texas manufactures.
The Texas economy grew admirably during the fracking boom. The high price of oil threw money in all directions. Drillers and oil field services companies, along with suppliers of the drilling boom raked in orders and the big bucks. But now the fracking boom has turned into a fracking bust, and the consequences are spreading through the economy.
The Dallas Fed’s February manufacturing index for General Business Activity dropped to -11.2 from the already crummy -4.4 in January, the lowest level since April 2013. In the survey, 22% of the business executives reported that conditions were “worsening” while only 10.8% said conditions were “improving.”
The new orders index swooned to -12.2, the “lowest reading since June 2009.” Growth of new orders hit -16.3, unfilled orders -17.3. The shipments index dropped to -3.3, “a low not seen since 2009.”
This is how companies are reacting: as costs are getting slashed to preserve cash flow, the capital expenditures index dropped to -4.8.
Texas, the job creating machine? The employment index is beginning to stagnate: 15% of the companies reported net hiring, 14% reported net layoffs, and the hours worked index descended into the negative.
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