October Has Been Busy: Manufacturing Activity Rose in Texas

Dallas general activity index fell in October

Texas produces around 7% of the nation’s output. It accounts for about 17.8% of US exports. According to Federal Reserve Bank of Dallas, the Dallas Fed’s general business activity index fell to -12.7 in October. It was much lower than the consensus estimate of -6.0 points. The SPDR Dow Jones Industrial Average ETF (DIA) fell -0.20% as of October 26. DIA rose by 10.1% over the past month. Industrial stocks like Cummins (CMI) and PACCAR (PCAR) rose 4.9% and 6.0%, respectively, for the same period.

October Has Been Busy: Manufacturing Activity Rose in Texas

New orders fell in October

The production index output growth rose to 4.8 for the first time this year. However, the new orders index fell by 3 points to -7.6. It posted the third negative reading in a row. The growth rate of the orders index also fell from -4.3 to -7.7. The aircraft industry is noticing a rise in sales and backlog orders. Companies like Boeing (BA), Textron (TXT), Northrop Grumman (NOC), and General Dynamics (GD) rose 14.5%, 3.6%, 10.9%, and 9.7%, respectively, over the past month as of October 26.

October Has Been Busy: Manufacturing Activity Rose in Texas

Employment outlook remains negative for the next six months

The downward pressure was felt in a price-related reading in October due to falling energy prices. The raw materials price index fell to -1.2. The finished goods price index rose by 1.4 points to -9.5. Meanwhile, the wages and benefits index remained positive and rose slightly to 17.9. October has been a busy month. The employment index turned positive from -6.1 to 0.3. However, the next six months appear to be a lean period and may initiate job cuts.

About 50% of the revenue from Texas is generated through energy products. A fall in oil prices and a strong dollar are adversely impacting the overall business environment. Texas needs to attempt to reduce its share of the oil and gas business from the current 50% to boost the business conditions.

Like manufacturing, housing is also watched closely by financial investors. It provides clues about household spending. The new home sales data are out. We’ll discuss the data in the next part of this series.