Each month, the regional branches of the Federal Reserve publish an index representing manufacturing and business activity within their regions. Taken together, they are a good proxy for the state of the overall economy, as they provide an earlier look at more comprehensive data than can be released by the feds for the nation as a whole. Recent reports from some Fed Banks have confirmed what we already knew; i.e. that the economy as a whole is suffering from slower growth. But, today, in what is a real surprise, the Dallas Fed released its report showing the economy in Texas experienced a sharp pull-back in July.
Texas has long been a rare bright-spot on the economic landscape. Its combination of low taxes and moderate regulation and a strong energy sector have fueled strong job growth and economic expansion over the past few years. To be sure, today’s report showed many sectors are still in positive territory, but the numbers are way down from June. From the report:
Perceptions of broader economic conditions were mixed in July. The general business activity plummeted to -13.2 after climbing into positive territory in June. Nearly 30 percent of manufacturers noted a worsening in the level of business activity in July, pushing the index to its lowest reading in 10 months. The company outlook index remained positive for the third month in a row but fell from 5.5 to 1.6.
Expectations regarding future business conditions were less optimistic in July. The index of future general business activityslipped from 1.3 to -7.3, registering its first negative reading in 10 months. The index of future company outlook remained positive but fell from its June level, coming in at 5.3. Indexes for future manufacturing activity also decreased, although all remained in strong positive territory.
With all of its built-in strengths, an economic pull-back in Texas is bad news for the overall economy. Obama needs some positive economic signs to win reelection. Time is running out for that to happen.
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