Manufacturing activity declined across Texas in March as the coronavirus caused some plants to shut down and others to furlough thousands of workers.
According to a monthly survey of the Federal Reserve Bank of Dallas (FRBD), general business activity for manufacturing in Texas declined to -70 in March.
The drop in manufacturing could be the beginning of a significant decline in freight volumes, experts said.
“It is a significant difference from the 1.2 index reading in February and is the lowest reading since the [FRBD] index began in 2004,” said Anthony Smith, FreightWaves lead economist. “This is signaling a critical contraction in manufacturing output, which will diminish freight volumes within the region in the coming weeks.”
Smith added that the production component of the monthly index dropped to -35.3 in March after registering a 16.4 in February.
The FRBD data is reflected in recent plant layoffs across Texas. Companies that service the oil and natural gas industry have been affected by declining demand for new pipeline projects.
Global steel pipe manufacturer Tenaris SA laid off 223 people in the Houston area on March 20. Sheet metal producer M&M Manufacturing, which services the air distribution and ventilation market, laid off 43 employees in Fort Worth on Monday. Veritas Shop Fabrication also recently eliminated 67 jobs at its plant in Whitehouse, Texas.
Across the border, the Mexican government has declared a national public health emergency due to the coronavirus pandemic, ordering the suspension of nonessential activity until April 30.
As part of the decree, parts of Mexico’s “maquiladoras” industry have begun a monthlong work stoppage across the country. Only factories that produce medical supplies or food production were exempt from the order.
Maquiladoras are foreign-owned plants operating in Mexico. Around 28 maquiladoras have closed temporarily in Ciudad Juarez to limit the spread of the coronavirus, according to Jerry Pacheco, CEO of the Border Industrial Association in Santa Teresa, New Mexico.
Bombardier Recreational Products (BRP), which has two plants in Ciudad Juarez, also announced it was suspending operations at its factories around the world this past Monday. The company makes all-terrain vehicles in Juarez.
“Due to the rapid evolution of the COVID-19 situation, we are temporarily suspending or slowing down all our powersports and marine manufacturing operations,” the company said in a release.
Around 250 maquiladoras have also begun temporarily suspending production in the Mexican state of Sonora, which borders Arizona.
There are more than 100 export maquiladoras in Sonora, just south of Nogales, Arizona, across the U.S.-Mexico border, according to the Greater Nogales Santa Cruz County Port Authority.