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Dallas Fed: Oil patch growth slows in 2Q

Dallas Fed: Oil patch growth slows in 2Q

Job growth accelerated in most major metros during the second quarter, with Austin rising an annualized 4.7 percent; Fort Worth, 2.4 percent; and Houston, 3.6 percent. Payroll expansion in Dallas –the fastest-growing metro year to date ¬– remained robust at 4.3 percent, according to a report from the Dallas Fed.

By comparison, San Antonio employment was flat in the second quarter, partly due to payroll declines in the leisure and hospitality sector, which has likely been affected by diminished tourism across the Texas-Mexico border due to lengthier border crossing times.

Employment in the oil patch declined in the first quarter, and growth was weak in the second quarter, rising at just a 0.8 percent annual rate.

Weakness in the Permian Basin has to be interpreted with caution, however, as it could partly be due to a lack of available labor, according to the report.

Activity in the oil and gas sector was flat in second quarter 2019 after three years of growth, according to oil and gas executives responding to the Dallas Fed Energy Survey. The business activity index – the survey’s broadest measure of conditions facing Eleventh District energy firms – fell to -0.6 in the second quarter, from 10.8 in the first quarter. The near-zero reading indicates activity levels were largely unchanged from the prior quarter. The second-quarter decline was driven by exploration and production (E&P) and oilfield services firms.

Positive survey readings generally indicate expansion; those below zero suggest contraction.

Oil and gas production increased for the 11th consecutive quarter, according to E&P executives. However, the oil production index indicated a slightly slower rate of growth, edging down from 21.1 in the first quarter to 17.4 in the second quarter.

The natural gas production index also dipped, from 16.7 to 13.4. The index for capital expenditures fell from 5.0 in the first quarter to -6.1 in the second quarter, indicating a slight reduction in capital spending among E&P firms.

Among oilfield services firms, the equipment utilization index fell 13 points to 3.4 in the second quarter. Input costs continued rising, with the index inching higher, from 25 to 27.1. At the same time, the prices received for services index dipped further into negative territory, from -1.7 to -12.1, suggesting a steepening decline in oilfield services prices.

The operating margins index fell sharply, from -6.6 to -32.8, indicating notably lower margins for oilfield services firms during the second quarter.

– FWBP Staff

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