Factory output in Texas appears to be perking up, amid a recent easing of the international trade tensions that have been roiling manufacturers statewide and nationally.
Growth in the state production index --a barometer of conditions in the Texas manufacturing sector devised by the Federal Reserve Bank of Dallas -- accelerated in January, continuing a rebound that began last month in the wake of its first contraction in more than three years in November.
The index came in at 10.5 this month, up from 3.6 in December and from negative 2.4 in November — but still down from a reading of 13.5 in January a year ago. Positive readings indicate expansion, while negative readings indicate contraction.
Other measures of the state’s manufacturing sector, such as new order growth and capacity utilization, also improved this month, according to the Dallas Fed, which compiles the monthly snapshot through surveys of industry executives.
“Growth accelerated in the Texas manufacturing sector in January, with the production index pushing further into positive territory and the new orders index surging to a 15-month high,” Dallas Fed senior business economist Emily Kerr said in a written statement.
Manufacturers in Texas and elsewhere in the United States spent much of 2019 rattled by international trade battles. Many were forced to rethink supply chains against the backdrop of rising costs and decreasing sales.
But recent truces in the trade disputes now may be fueling guarded optimism. Earlier this month, the United States and China reached what they have called the initial phase of a trade deal, while a new U.S. pact with Mexico and Canada — called the U.S.-Mexico-Canada Agreement, or USMCA — is expected to be signed into law this week by President Donald Trump.
“The macro backdrop continues to remain uncertain due to trade tensions, but recent events could begin to reduce the uncertainty,” said one factory manager who responded to the Dallas Fed’s latest survey and was quoted anonymously in its January report.
The manager added a word of caution, however, noting that conditions have “changed quickly with one tweet” over the last two years.
Another factory manager told the Dallas Fed that “business has fallen off, but not as bad as I thought.”
Still, “the political division and the elections this year and how divisive they are” is worrisome, the manager said. “The effects on our customers’ outlook for their business are becoming more evident as they are taking a wait-and-watch attitude.”
Other survey respondents were more bullish. The Dallas Fed’s latest barometer of new factory orders came in at its highest level since October 2018, with a reading of 17.6 this month. The index of new orders measured 1.6 in December and 11.1 in January a year ago, according to the Dallas Fed.
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Texas factory output continues its rebound - Standard-Times
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