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Texas manufacturing springs to life, though the economic mood remains sour

The manufacturing sector in Texas is among the largest in the world.

Manufacturing activity in Texas improved from November levels, though there's some skepticism over whether trends will continue into 2023. File photo by Jeff Kowalsky/UPI.
1 of 3 | Manufacturing activity in Texas improved from November levels, though there's some skepticism over whether trends will continue into 2023. File photo by Jeff Kowalsky/UPI. | License Photo

Dec. 27 (UPI) -- The Federal Reserve Bank of Dallas reported that growth returned to the manufacturing sector in December, though its contacts were somewhat pessimistic about the prospects for the future.

While Texas is typically considered an oil state, its manufacturing sector is among the largest in the world. It directly employs about 1 million people and the economic output from manufacturing is greater than the entire economy of Portugal.

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The Dallas Fed on Tuesday reported the outlook on general business conditions improved from November levels, with the index representing the overall corporate outlook climbing by 2 points.

The production index, which increased by nine points, set a good baseline for overall manufacturing conditions, though new orders declined for the seventh month in a row against a backdrop of lackluster demand.

A respondent from the printing segment of the state manufacturing sector said business activity is slowing down and new orders were off, while another from the fabricated metal product division said demand was on a clear decline.

Much like the rest of the country, the Dallas Fed said labor was positive with those working in the manufacturing sector putting in long hours and working weekends, but the mood in general was somewhat sour.

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"Perceptions of broader business conditions continued to worsen in December," the Fed stated.

Manufacturing related to oil is on the rise, with one respondent expecting a "very good year" for 2023 as energy companies return to spending, though most in the business of making machinery said they "had no idea what to expect" for next year.

The mixed assessment reflects the overall mood in the U.S. economy. Inflationary pressures are declining from highs near 10%, though the price for rents, mortgages and groceries remain stubbornly high.

The U.S. Federal Reserve, meanwhile, has continued with aggressive rate hikes this year to control consumer-level inflation, though the resultant increase in the cost of borrowing is taking a toll.

"Never doubt the ability of the Federal Reserve to crush the economy when they intervene to stop inflation," one respondent said.

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