Texas surveys show manufacturing growth, but contraction in services, retail

While the Federal Reserve Bank of Dallas' July Texas Manufacturing Outlook Survey indicates economic expansion, its service sector and retail sector surveys indicate contractions, which could show flat to decreasing power demand partly from a spike in novel coronavirus cases.

The TMOS' production index, which equals the percentage of respondents reporting increased production minus the percentage reporting decreased production, rose to 16.1 in the July survey from 13.6 in the June survey.

In contrast, the service sector revenue index, also the percentage reporting increases minus the percentage reporting decreases, fell to negative 8.5 in July from positive 5.7 in June.

The retail sector's revenue index plunged to 26.7 in July, the lowest level since April, from 33 in June's survey.

"Given the accelerated number of coronavirus cases seen in June and early July, the economic performance indicators for [the Electric Reliability Council of Texas], particularly the retail sales index, come with little surprise," said Kieran Kemmerer, an S&P Global Platts Analytics power market analyst in a July 29 email.

The Dallas Fed released the TMOS July 27 and the Texas Service Sector Outlook Survey and Texas Retail Outlook Survey reports July 28.

Coastal versus West Texas activity

"A weak global LNG market and general upside to summer power prices will continue to slow electricity demand growth in the coastal region (e.g. a lack of activity at Freeport), while the return of growth in the Far West will be contingent upon the resumption of drilling activity," Kemmerer said.

Metered loads in late June were about 5% below pre-coronavirus expectations, Kemmerer said, "and have since narrowed to around 1.5% as of the end of July."

Terry Bartifay, president of competitive retail electricity provider Veritas Retail Energy, pointed out how the manufacturing sector might grow, even as service and retail sectors could contract, with factories' ability "to safely continue operating lines and employees' ability and desire to continue on lines within manufacturing."

ERCOT's systemwide average peakloads were nearly flat at 52.7 GW in June from 52.8 GW in June 2019, while April and May numbers were down 1.4% and 3.9%, respectively.

The relatively flat power demand this June, compared with a year ago, likely reflects "residential growth and influx of people into Texas and associated residential power demand," Bartifay said in a July 27 email.