DALLAS, Jan. 14 (UPI) -- A survey from the Dallas Federal Reserve finds pressure from energy sector weakness may be spilling over into other parts of the economy.
"Demand for oilfield services remained depressed as drilling declined in the Permian Basin and Eagle Ford shale," the Dallas Federal Reserve said in its Beige Book. "Cost cutting continued through reductions in employment and capital spending."
The Railroad Commission of Texas, the state's energy regulator, issued 727 original drilling permits in December, about 51 percent less than the total issued for the same month in 2014. Oilfield services company Baker Hughes reports 308 active rigs in Texas for the week ending Jan. 8, down 4 percent from the previous week and 62 percent lower year-on-year.
Crude oil prices are lower than peak levels in June 2014 by about 70 percent and off more than 10 percent from the start of 2016. The Dallas bank said crude oil price trajectory during the last six weeks affirmed pessimistic forecasts for the year.
Tax revenues for the state from the energy sector are down by about 50 percent from 2014, a review from the U.S. Energy Information Administration found. Though it's the No. 1 oil producer in the nation, EIA said tax data show the Texas economy is more diversified than other oil producers.
The Dallas Federal Reserve said low oil prices resulted in a deterioration of the financial position of many companies tied to the energy sector, especially smaller ones. The downturn, meanwhile, is spilling over into the manufacturing sector.
"The downturn in energy prices continued to negatively impact some fabricated metals manufacturers," the Beige Book said. "A machine tool producer said demand from the energy sector was terrible."
Overall economic growth over the last six weeks was modest and employment in most industries held steady or increased. Wages, however, remain more or less flat compared with six weeks ago.
State data from November, the last full month for which data are available, show the seasonally adjusted rate of employment increased 0.2 percent from October to 4.6 percent. The national rate is around 5 percent.