Comparison of U.S Versus Texas Manufacturing Conditions
Chart of the Week for May 8, 2015 - May 14, 2015
Manufacturing conditions across the U.S. and in individual states can be influenced by many factors. The chart above compares the ISM Manufacturing Index ("ISM"), to the state specific Texas Manufacturing Outlook Survey ("Texas") over the last 12 months. ISM surveys purchasing managers nationwide regarding manufacturing in 20 industries. The Texas survey is conducted by the Federal Reserve Bank of Dallas, and asks the respondents to report current manufacturing and business conditions as well as assess conditions six months forward.
As the chart above shows, both indexes have been declining since November 2014. ISM's decline can be related to weak global demand and the stronger U.S. dollar, which are factors influencing the overall U.S. economy. The ISM value remains above 50, which is still considered expansionary. Texas' decline can be traced almost solely to the fall in oil prices. From a peak of near $108 a barrel on July 23, 2014, the price of a barrel of West Texas Crude Intermediate oil fell to approximately $44 on March 17, 2015. The price decrease has constrained the energy exploration business and the subsequent need for equipment and supplies for those manufacturers, which significantly impacts Texas. The Texas survey is below zero, which is considered contractionary.
The chart shows how a single commodity can have a significant impact on the manufacturing production of an individual U.S. state. It is a prime example of the importance of diversification and the dangers of focusing on just asset one class or even one geographic region.
Posted by: sarah_oz@yahoo.com
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