Texas is Suffering From Oil Price Declines

January 25th, 2016

This week we highlight the weakness in the Texas economy due to oil price declines.

Texas is Suffering From Oil Price Declines

This week the Federal Reserve Bank of Dallas released the results of its most recent Manufacturing Outlook Survey.  The monthly survey polls executives of manufacturing firms regarding a number of different economic health variables.

The results released this week were negative.  The headline Production Index declined from 12.7 to -10.2.  Like many survey indices, month-to-month values of the Production Index can be noisy.

The General Business Activity Index, which is part of the same survey, has tended to be more stable.  This index turned negative in January ’15, and has not been positive this year.  The current value is the lowest since April ’09.


This ongoing weakness in the Texas economy is consistent with what we have observed from other economic data. Continuing claims for unemployment in Texas and the other oil patch states  have been higher than in the rest of the country.


The growing economic weakness is also apparent in sales tax receipts in Texas.  These are a major portion of Texas’s general revenues.


Last year at this time, speaking at the Bond Buyer’s Texas Conference, State Comptroller Glen Hagar was confident that Texas’s diversified economy would cushion the impact of lower oil prices: “We are not the Texas of the 1980’s.”  Back then, Texas’s revenue estimates were based on $65 dollar oil prices.

While lower oil prices are likely to have a stimulative effect on the national economy, we are wary of impacts on the finances of local credits in the Oil Patch.

Chart of the Week:  Munis are At Near Record Rich Valuations to Treasuries



Have a great week,


Michael Craft, CFA