Business executives in Texas are worried about the drop in oil prices.
On Monday, the Dallas Fed’s latest manufacturing survey showed that activity in Texas is slowing down.
The latest composite index came in at 4.1, widely missing expectations and down big from November’s reading.
Expectations were for the index to come in at 9, down from 10.5 last month.
But the big takeaway is that businesses in Texas, which has been a major beneficiary of the shale boom, have noted the drop in oil prices and not for the better.
According to the Dallas Fed’s report, among comments from business executives in metal product manufacturing was that, “The drop in crude oil prices is going to make things ugly … quickly.”
Another comment from an executive in the same sector said, “The price of oil tanking was a surprise.”
And these concerns over the price of oil were widespread across industries in Texas.
An executive in the wood product manufacturing industry said, “The price of oil makes me very concerned about the service sector,” while an executive in the electrical equipment and appliance manufacturing sector said, “Falling oil prices will negatively affect our business.”
In the machinery manufacturing sector, executives expressed concern about the drop in oil prices but said they have received comments on both sides of the issue, i.e. comments that see the drop in oil as net positive and a net negative.
As one executive in this sector said, “Our business remains quite strong, and our outlook is good. However, we remain cautious over concerns about how lower oil prices will impact our midstream and downstream energy customers. We don’t believe it will be a negative impact, but there could be unanticipated consequences (e.g., market fear).”