Texas manufacturing sluggish as energy sector slows down

HOUSTON — Falling oil prices have started affecting Texas manufacturers, who are reporting flat activity for the second consecutive month, the Federal Reserve Bank of Dallas revealed in its latest survey on the sector.

In February, the production index — a key indicator of manufacturing activity in Texas — measured 0.7, indicating the manufacturing output was largely flat and unchanged. It was the second month in a row when manufacturing in the state remained flat.

The results are based on the responses of more than 100 Texas manufacturers who report on whether output, employment, orders and other indicators are increasing or decreasing.

Some respondents said their output has slowed dramatically as the energy industry pares back on orders, the result of less drilling and other activities in the oil field.

“We are very much affected by the crash in oil prices,” a fabricated metal manufacturer said in the survey, which keeps respondents’ names anonymous in order to get candid answers. “At the beginning of the month there was a wave of projects that were either cancelled or placed on hold by the customer.”

The findings come less than a week after the head of the National Association of Manufacturers touted the industry’s success in Texas during a speech at Rice University.

“Manufacturing improves people’s lives not just through the products we make, but through the economy we strengthen,” said Jay Timmons, the organization’s president and CEO, in his prepared remarks.

But some manufacturers said in the latest survey they’re struggling. “Oil at $50 per barrel is painful,” said on respondent, noting his employer laid off a quarter of its workforce due to slowing demand.

One metal manufacture said he had experienced a “rapid decline” in orders over the last 30 days, primarily due to energy-related work, and said business was down 30 percent for the month. Forecasts “indicate further decline in overall business,” he said.

Another index released by the Fed, which measures new orders, reached its lowest level since June 2009 during the height of the recession. Other metrics also shifted negative too, suggesting pessimism about upcoming economic conditions for the industry.