01242017Tue
Last updateTue, 24 Jan 2017 9pm

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Texas Economy Picked Up in 2016 Amid Strength in Energy Sector

The Texas economy saw continued expansion in December. Although job growth ticked down during the month, the Texas Business Outlook Surveys indicated improved conditions, and the energy sector, exports and housing market expanded as well. The Texas Leading Index also edged up and unemployment held steady. In 2016, Texas employment grew 1.6%, faster than 2015’s 1.3% increase but below the state’s long-term average of 2.1%.

The Texas Leading Index, a composite of eight indicators that tend to change direction before the overall economy does, sheds light on the future of the state’s economy. In December, its one-month net change was 1.09%, and its three-month net change was 0.68%.

The Dallas Fed’s Texas Business Outlook Surveys indicated improvement in current activity and company outlooks across the manufacturing, services and retail sectors in December. 


70% of Manufacturing Executives State Near-Sourcing Will Increase

LMA Consulting Group recently conducted a proprietary research study to better understand outsourcing, near-sourcing and insourcing trends for U. S.–based manufacturers. Pending further analysis, a preliminary finding that shows that 70% of responding executives expect near-sourcing to increase within the next five years. Survey data was collected from August–October 2016 and the U. S. presidential election may have an impact on this trend toward near-sourcing.

"I've seen that manufacturers were already considering insourcing to the U.S. and near-sourcing options to Mexico and other closely located countries because of the Amazon effect – the need for rapid response to customer needs. Thus, the industry was already moving in that direction prior to the U.S. presidential election. However, since tariffs are likely to increase and bad publicity could easily occur, the impact will probably steer some of those companies towards the U.S. instead of Mexico,” says LMA Consulting Group president Lisa Anderson. 

Philly Fed: Mid-Atlantic Business Activity Hits Two-Year High

Economic conditions continued to improve in January, according to the Philadelphia Federal Reserve’s Manufacturing Business Outlook Survey. The index for current manufacturing activity in the region increased from a revised reading of 19.7 in December to 23.6 this month. Approximately 40% of the firms reported increases in activity this month; 17 reported decreases. The general activity index has remained positive for six consecutive months, and the activity index reading was the highest since November 2014. 

Industrial Production Sees Largest Rise in More Than Two Years

Industrial production rose 0.8% in December, the largest increase since November 2014, after falling 0.7% the previous month. For the fourth quarter as a whole, the index slipped 0.6% at an annual rate.

Manufacturing output moved up 0.2% in December, as an increase in durable manufacturing outweighed declines in nondurable manufacturing and other manufacturing (publishing and logging). The index for manufacturing rose at an annual rate of 0.7% in the fourth quarter but was unchanged from its level in the fourth quarter of 2015. In December, the production of durables gained 0.5%. Primary metals recorded a sizable increase for a second consecutive month. 

IMF Raises U.S. Economic Growth Forecast

After a lackluster outturn in 2016, economic activity is projected to pick up pace in 2017 and 2018, especially in emerging market and developing economies. However, the International Monetary Fund (IMF) noted in its new World Economic Outlook, there is a wide dispersion of possible outcomes around the projections, given uncertainty surrounding the policy stance of the incoming U.S. administration and its global ramifications.

The projection for the U.S. is the one with the highest likelihood among a wide range of possible scenarios. It assumes a fiscal stimulus that leads growth to rise to 2.3% in 2017 and 2.5% in 2018, a cumulative increase in GDP of 0.5% relative to the October forecast. 

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