The precipitous drop in the price of oil has not darkened the outlook of manufacturers in energy-heavy Texas, a survey released Monday shows.
The Federal Reserve Bank of Dallas reported Monday in an update to its survey of manufacturers that factory activity picked up and manufacturers remained sanguine about the state’s economic prospects.
The nearly 50 percent decline in the price of oil since the summer has raised fears among some analysts that the U.S. energy boom in shale oil and fracking, one of the bright spots during the lingering economic downturn following the financial crisis, could be at risk. In particular, analysts have warned that oil-patch states such as Texas and North Dakota could suffer regional declines even as the broader U.S. economy improved.
But Monday’s release from the Dallas Fed shows corporate optimism.
Perceptions of broader economic conditions and companies’ outlook remained positive, according to the survey. Respondents also were optimistic about future activity.
“The drop in oil prices has not affected bookings. We have received comments on both sides of the issue ranging from ‘equipment purchases will be delayed’ to ‘we are using this period to ramp up for next year,'” a machinery manufacturer said in response to the survey.
U.S. economic officials have expressed some concern about the regional impact of falling oil prices and about the fallout for lenders who have financed speculative drilling.
And some Texas manufacturers are concerned about the impact of declining energy prices.
“The drop in crude oil prices is going to make things ugly … quickly,” one identified metal manufacturer told the Dallas Fed.
Nevertheless, Federal Reserve Chairwoman Janet Yellen maintains that the problems for energy producers will be outweighed by the benefit of lower energy prices for consumers, who will see savings at the pump and in heating their homes.
Those savings are “like a tax cut that boosts their spending power,” Yellen said at the conclusion of the December meeting of the central bank’s monetary policy committee.
“Of course there may be some offset in the form of reduced drilling … but, on balance, I would see these developments as a positive for the standpoint of the U.S. economy,” Yellen said.
