The growth of factory activity in Texas accelerated to the fastest pace in two years, data from the Federal Reserve Bank of Dallas showed Monday.
Texas manufacturing expanded in October for the fifth month in a row following a record contraction due to the COVID-19 pandemic, according to business executives responding to the Dallas Fed’s Texas Manufacturing Outlook Survey.
The Dallas Fed’s production index rose to 25.5 in September, up from 22.3 in September and 13.1 in August, indicating a slight pick-up in the pace of growth. Prior to last month, this index had not risen above 20 since September 2018.
The long-term average for this series is just 9.9.
Manufacturing executives said that uncertainty about the election was weighing on them.
“Our future outlook on profits and general business all hinges on the election. If President Trump wins, our future looks bright, and if Mr. Biden wins, it will be gloom and doom for long period of time,” an executive from a metals manufacturer told the Dallas Fed.
“With the press writing more and more of a change [coming] in Washington, we’ve noticed a substantial pullback in orders and people worried about a change in administrations. They are holding cash and withholding orders until after the elections. The blue wave spoken about will be very hard on the oil industry and associated companies,” a machinery manufacturing executive commented.
The index for general business activity surged to 19.8 from 13.6. The company outlook component rose to 17.8 from 14.9, indicating a rise in confidence about business conditions over the coming months.
“Perceptions of broader business conditions continued to improve in October,” the Dallas Fed said.
The new orders index advanced by more than five points to 19.9 from 14.7. The growth rate of orders index increased to 14.3 from 13.2, indicating acceleration.
The capacity utilization index rose from 17.5 to 23.0, better than double the 10.9 reading for August.
Labor market measures indicated continued growth in employment and work hours. But the pace of growth slowed. The employment index remained positive but fell from 14.5 to 8.7. Twenty percent of firms noted net hiring, while 11 percent noted net layoffs. The hours worked index remained positive but moved down from 6.9 to 3.7.
Wages moved up as did prices paid for materials and prices received for finished materials. Eighteen and half percent of companies reported raising wages, with just two percent reporting decreasing wages.
“It appears that all common sense in politics is out the window, and the politics driving energy are now either renewables or nothing,” the machinery manufacturer said. “And as an owner of an oil-related company, we are already cutting back drastically in every area of our business to protect what we’ve gained over the past few years.”
One executive from a company engaged in “miscellaneous manufacturing” was even more dire:
“The rise and general acceptance of socialistic and communalistic principles in America is truly frightening, and the risks for our way of life and economic future are a real concern. Higher taxes, uncontrolled spending and overregulation will be a major deciding factor if we [will] continue to expand, invest, hire, innovate and focus on business or not. If our freedoms are further eroded in the name of safety, or if our property is seized in the name of equality, then many of us will be looking for a new place to utilize our time, talents and efforts.”
The index measuring plans to make capital expenditures fell to 19 from 23.9, perhaps reflecting this election worry.