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Texas manufacturing sector still improving, Dallas Fed survey shows

July 27, 2020

Texas manufacturing activity in July continued to recover from steep COVID-19-related spring declines, a survey of executives by the Federal Reserve Bank of Dallas found.

After a deep contraction in the state’s manufacturing in April, when an indicator of activity hit a historic low, the sector began to slow losses in May. In June, manufacturing survey responses indicated that business began to accelerate, a trend that continued in July.

The production index, a measure of state manufacturing conditions based on the responses, inched up to 16.1 from 13.6. Negative readings indicate a contraction, while positive readings indicate an expansion in the sector.

Mandated shutdowns to slow the spread of the coronavirus closed nonessential factories and destroyed demand for those that remained open. As economies around the world struggled to respond to the outbreak, supply chain disruptions have become common, increasing costs.

Some of those issues appear to have begun to resolve themselves, the survey showed, as demand creeps back after shutdown orders were lifted. Some survey respondents wrote in the comments that demand has increased in July, and one chemical manufacturer wrote that exports have improved because of some re-opening and recovery efforts abroad.

On Texas employment kept recovering in June, experts warn it won’t last with COVID-19 spikes

As COVID-19 continues to spread throughout Texas and the U.S., however, the sector’s continued improvement isn’t guaranteed. One transportation equipment manufacturer wrote that the lack of federal and state consistency on safety measures for COVID-19 has increased costs and created significant uncertainty. Another wrote that “the COVID-19 threat continues to be a black cloud.”

The manufacturing uncertainty index, which measures respondents’ assessment of their companies’ outlooks, shot up to 20.9 in July from 9.1 in June, indicating a far higher level of uncertainty.

By Erin Douglas, Houston Chronicle