Recent data suggest a deceleration in the Texas economy, with uneven performance across sectors. Employment saw minimal gains in November, according to the Texas Business Outlook Surveys, while output trends diverged between manufacturing and services. The manufacturing employment index dipped to 1.2 from 2.0, whereas the service sector registered a modest improvement, rising to 3.1. In terms of production, manufacturing output surged, pushing its headline index up by 15 points to 20.5, signaling strong expansion. Conversely, service sector revenue continued to contract, though at a reduced pace, with its index moving to -2.5 from -6.4. Labor market indicators remained relatively steady, with initial unemployment claims in Texas increasing slightly by 1.6 percent to 18,300 during the week ending November 15, while national claims declined by 3.5 percent to 220,000. A prior spike in state-level claims was attributed to fraudulent filings, as noted by the Texas Workforce Commission. Construction activity showed a rebound in contract values, which climbed to a five-month average of $16.6 billion, driven largely by a 46.8 percent rise in nonbuilding projects. Meanwhile, nonresidential building construction fell 7.0 percent to $6.7 billion, and residential construction dipped 3.7 percent to $3.5 billion. Banking conditions weakened, with the Dallas Fed’s survey showing a broad contraction in loan volumes. The total loan volume index dropped 19 points to -10. Commercial and industrial lending turned negative, and consumer and residential real estate lending remained in contractionary territory. Only commercial real estate loans posted positive growth, edging up to 6.1. Respondents anticipate stronger demand for loans and increased business activity ahead, but expect further declines in loan quality over the next six months.
— news from Federal Reserve Bank of Dallas
— News Original —
Growth in the Texas economy appears to be slowing. The November Texas Business Outlook Surveys indicated slight increase in employment and mixed output growth. Initial unemployment claims were largely stable mid-November. The November Banking Conditions Survey reflected contracting loan volumes. n nTexas Business Outlook Surveys n nSurvey data suggest sluggish employment growth n nThe November Texas Business Outlook Surveys indicated a slight increase in service sector employment but flat headcounts in manufacturing (Chart 1). The Texas Manufacturing Outlook Survey employment index ticked down to 1.2 from 2.0, whereas the Texas Service Sector Outlook Survey index rose to 3.1. n nOutput growth mixed n nThe Texas Business Outlook Surveys indicated a sharp rise in manufacturing production but a contraction in service sector revenue (Chart 2). The Texas Manufacturing Outlook Survey headline index soared 15 points to 20.5, while the Texas Service Sector Outlook Survey index ticked up to -2.5 from -6.4, suggesting a slower pace of contraction. n nInitial unemployment insurance claims n nTexas weekly initial unemployment claims rose in mid-November, whereas the claims nationally ticked down (Chart 3). Texas’ new unemployment insurance filings edged up 1.6 percent to 18,300 in the week ending Nov. 15. U.S. initial claims fell 3.5 percent to 220,000 claims over the same period. The September spike in Texas initial claims was due to a rise in fraudulent claims, according to the Texas Workforce Commission. n nConstruction n nConstruction contract values rose in October, and the five-month moving average climbed 9.4 percent to $16.6 billion (Chart 4). The rise was concentrated in nonbuilding contract values, which increased 46.8 percent to $6.5 billion on a smoothed basis in October. The five-month moving average of nonresidential building construction decreased 7.0 percent to $6.7 billion, and residential building construction ticked down 3.7 percent to $3.5 billion. n nBanking Conditions Survey n nThe Dallas Fed’s Banking Conditions Survey suggested a broad-based contraction in loan volumes in November. The total loan volume index fell 19 points to -10 (Chart 5). The commercial and industrial loan volume index turned negative, and the consumer loan and residential real estate loan volume indexes remained negative. Only the commercial real estate loan volume index was positive, and it ticked up to 6.1 in November. Survey respondents expect growth in loan demand and business activity but further deterioration in loan performance over the next six months.