The rise in oil prices from below $30 to near $50 was supposed to light a fire on manufacturing in the oil producing states. It didn’t.

Dallas Fed 2016-05-31

Bloomberg Econoday reports ….


The Dallas manufacturing production index fell into negative territory with a reading of minus 13.1 from a positive 5.8 reading in April. At the same time, the May general activity index sank to minus 20.8 from minus 13.9 last time. This was the 17th consecutive negative reading.

New orders also fell back into negative territory. After popping up 6.2 in April after four consecutive declines, new orders dropped to a reading of minus 14.9. Employment remains weak, at minus 6.7 for a fifth straight contraction. Price data showed some life with wages up and raw materials, which had been week, also up. Selling prices, however, remain a negative, at minus 3.3, an improvement from minus 6.6 in April.

The ongoing recovery for oil is having a positive effect on energy prices and is likely to have a wider positive effect for the Texas manufacturing area eventually. However, this report is a setback.

Three Questions

  1. Is “setback” the right word for this disaster?
  2. What happens if oil stays at $50?
  3. What happens if oil heads back to $40?

Mike “Mish” Shedlock