Texas service sector, manufacturing executives expect growth: Dallas Fed

Houston — Texas service sector activity grew at the fastest rate this April since late 2014, and the state's manufacturing activity continued to grow, judging from a Federal Reserve Bank of Dallas survey released April 26-27, which would tend to strengthen power demand and prices.

The Dallas Fed's Texas Service Sector Survey, released April 27, shows that the revenue index rose from March's 21.6 to 26.1 this April, which can be contrasted with the pandemic-induced contraction to negative 64.8 in April 2020.

The survey's various indexes reflect the result when subtracting the percentage of respondents reporting a decrease from the percentage reporting an increase. For example, the most recent survey had 39.1% of service sector survey respondents reporting an increase in revenue and 13% reporting a decrease, yielding an index of 26.1.

Data was collected April 13-21 from 283 Texas service sector business executives.

The Dallas Fed's Texas Manufacturing Outlook Survey, released April 26, shows that the production index eased from March's 48 to 34 this April, which can be contrasted with the pandemic-induced contraction to negative 54.9. In this case, 49.1% of respondents reported increases and 15.1% reported decreases, yielding an index of 34.

Data was collected April 13-21 from 107 Texas manufacturers.

Peakload up on month

Judging by the average daily peakload, power demand at 43.9 GW was stronger this April than March's 40.9 GW but basically flat with April 2020's 44 GW. The demand strength derived from the economy this April was offset by April 2020's weather-related demand, as the population-weighted average total heating- and cooling-degree days this April were about 14% less than in April 2020.

Power prices did reflect the improving economy, with the Electric Reliability Council of Texas North Hub day-ahead on-peak locational marginal prices averaging almost $36/MWh so far this April, up form this March's $24.25/MWh, which was about the same as April 2020's day-ahead on-peak LMPs.

Looking forward, the Texas Manufacturing Outlook Survey's new orders index climbed eight points to 38.5, and the growth rate of orders index rose 10 points to 32.3, both the highest in the survey's history.

"Perceptions of broader business conditions improved markedly in April, and uncertainty subsided" in the manufacturing survey, the Dallas Fed said in its news release.

The general business activity index rose eight points to 37.3 form its March reading, and the company outlook index rose three points to 29.1. The outlook uncertainty index moved down to zero, indicating that uncertainty is not rising.