SECURITIES AND EXCHANGE COMMISSION
                          Washington,  D. C.  20549

                                Form 10-Q


        (Mark One)
           x      QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
          ____    SECURITIES EXCHANGE ACT OF 1934

        For the Quarterly Period Ended December 31, 1998

                  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
          ____    THE SECURITIES EXCHANGE ACT OF 1934

        For the transition period from __________ to __________


                        Commission File Number 0-5214
                                PEERLESS MFG. CO.
             (Exact name of registrant as specified in its charter)


          Texas                                       75-0724417
  (State or other jurisdiction of                  (I.R.S. Employer
  incorporation or organization)                  identification No.)


  2819 Walnut Hill Lane         Dallas, Texas            75229
  P. O. Box 540667              Dallas, Texas            75354
   (Address of principal executive offices)            (Zip code)

  Registrant's telephone number, including area code  (214) 357-6181

   	None
  Former name, former address and former fiscal year, if changed since
  last report.

  Indicate by a check mark whether the registrant (1) has filed all reports
  required to be filed by Section 13 or 15(d) of the Securities Exchange Act
  of 1934 during the preceding 12 months (or for shorter periods that the
  registrant was required to file such reports), and (2) has been subject
  to such filing requirements for the past 90 days.

                        Yes    x         No
                             ____            ____


  Indicate the number of shares outstanding of each of the issuer's classes
  of common stock, as of the latest practicable date.

             Class                    Outstanding at February 12, 1999
  Common stock, $1.00 par value              1,452,492 Shares


<PAGE>

                          PEERLESS MFG. CO.

                               INDEX

                                                                        Page
                                                                       Number

Part I:   Financial Information

          Item 1: Consolidated Financial Statements

             Condensed Consolidated Balance Sheets for the
             periods ended December 31, 1998 and June 30, 1998.          3

             Condensed Consolidated Statements of Earnings for the
             three and six months ended December 31, 1998 and 1997.      4

             Condensed Consolidated Statements of Cash Flows for
             the six months ended December 31, 1998 and 1997.            5

             Notes to the Condensed Consolidated Financial Statements. 6 - 7

          Item 2: Management's Discussion and Analysis of Financial
              Condition and Results of Operations.                     8 - 11


Part II:  Other Information

            Legal Proceedings                                           12

            Exhibits and Reports                                      12 - 13

            Signatures                                                  14



                                  2 of 14

<PAGE>
<TABLE>
                                  PART  I
                            FINANCIAL INFORMATION
Item 1. Financial Statements

                              PEERLESS MFG. CO.
                   CONDENSED CONSOLIDATED BALANCE SHEETS
                        
                                               December 31,    June 30,
                                                   1998          1998
                                                (UNAUDITED     (AUDITED)
                                               ----------     ----------
<S>                                           <C>            <C>
Assets:
Current assets:
   Cash and cash equivalents                   $1,662,762       $428,482
   Short term investments                         268,065        268,065
   Accounts receivable-principally trade-net
    of allowance for doubtful accounts of
    $769,861 at December 31, 1998 and $806,200
    at June 30, 1998                           10,035,518     14,241,036
   Inventories:
      Raw materials                                991,38        973,906
      Work in process                           1,088,167      1,114,524
      Finished goods                              261,956        331,415
   Costs and earnings in excess of billings
    on uncompleted contracts                    1,913,862      1,838,641
   Deferred income taxes                          425,460        433,596
   Other                                          193,801        165,631
                                               ----------     ----------
      Total current assets                     16,840,975     19,795,296

Property, plant and equipment-at Cost, less
 accumulated depreciation                       1,488,702      1,506,465
Property held for investment-at Cost, less
 accumulated depreciation                         802,274        830,840
Other assets                                      669,202        623,620
                                               ----------     ----------
                                              $19,801,153    $22,756,221
                                               ==========     ==========
<PAGE>

Liabilities and Stockholders' Equity:
Current liabilities:
   Notes payable                                       $0       $200,000
   Accounts payable-trade                       3,097,456      5,566,068
   Billings in excess of costs and
    earnings on uncompleted contracts             338,397         49,977
   Commissions payable                            995,774      1,205,391
   Accrued liabilities:
      Compensation                                453,554      1,499,443
      Warranty                                    547,683        434,588
      Other                                       555,690        366,408
                                               ----------     ----------
      Total current liabilities                 5,988,554      9,321,875

Deferred income taxes                              38,862         38,543

Stockholders' equity:
   Common stock-authorized 10,000,000 shares
    of $1 par value; issued and outstanding,
    1,457,492 shares                            1,457,492      1,457,492
   Additional paid-in capital                   2,583,701      2,583,701
   Unamortized value of restricted stock grants   (39,427)       (51,385)
   Cumulative foreign currency translation
    adjustment                                    (61,063)       (79,849)
   Retained earnings                            9,833,034      9,485,844
                                               ----------     ----------
                                               13,773,737     13,395,803
                                               ----------     ----------
                                              $19,801,153    $22,756,221
                                               ==========     ==========

  The accompanying notes are an integral part of these statements.

                                  3 of 14
</TABLE>
<PAGE>
<TABLE>
                             PEERLESS MFG. CO.
                     CONDENSED STATEMENTS OF EARNINGS
                               (UNAUDITED)

                              Three Months Ended         Six Months Ended
                                 December 31,              December 31,
                              1998         1997          1998         1997
                           ----------   ----------    ----------   ----------
<S>                       <C>          <C>           <C>          <C>
Revenues                  $10,931,835  $11,041,772   $20,301,525  $18,247,561
Cost of goods sold          7,295,692    7,278,267    13,722,263   11,893,871
                           ----------   ----------    ----------   ----------
      Gross profit          3,636,143    3,763,505     6,579,262    6,353,690

Operating expenses          2,729,934    2,808,416     5,321,089    5,319,887
                           ----------   ----------    ----------   ----------
      Operating income        906,209      955,089     1,258,173    1,033,803

Other income(expense)
   Interest income             16,679        6,871        23,673       15,404
   Interest expense              (954)     (11,790)      (18,898)     (14,586)
   Foreign exchange gains
    (losses)                  (65,851)     (21,902)      (93,355)     (50,984)
   Other, net                 (10,620)     (59,927)      (12,805)     (48,953)
                           ----------   ----------    ----------   ----------
                              (60,746)     (86,748)     (101,385)     (99,119)
                           ----------   ----------    ----------   ----------
Earnings from operations
   before Federal income tax  845,463      868,341     1,156,788      934,684

Federal income tax
   Current                    331,608      283,387       436,312      349,481
   Deferred                     2,037      (51,126)        8,905      (51,126)
                           ----------   ----------    ----------   ----------
                              333,645      232,261       445,217      298,355
                           ----------   ----------    ----------   ----------
Net earnings                  511,818      636,080       711,571      636,329
                           ==========   ==========    ==========   ==========
Basic and diluted earnings
 per share                      $0.35        $0.44         $0.49        $0.44
                           ==========   ==========    ==========   ==========

Basic weighted average
 shares                     1,457,492    1,451,992     1,457,492    1,451,992
Dilutive options                1,695        1,328         2,379        1,986
                           ----------   ----------    ----------   ----------
Adjusted weighted average
 shares                     1,459,187    1,453,320     1,459,871    1,453,978
                           ==========   ==========    ==========   ==========
Cash dividend per common
 share                         $0.125       $0.125        $0.250       $0.250
                           ==========   ==========    ==========   ==========

The accompanying notes are an integral part of these statements.

                                  4 of 14
</TABLE>
<PAGE>
<TABLE>
                             PEERLESS MFG. CO.
               CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (UNAUDITED)
                                                      For the six months ended
                                                            December 31,
                                                         1998         1997
                                                     ---------    ----------
<S>                                                 <C>          <C>
Cash flows from operating activities:
  Net earnings                                      $  711,564   $   636,329
  Adjustments to reconcile earnings to net cash
     provided by (used in) operating activities:
         Depreciation and amortization                 172,953       177,166
         Other                                             698         7,686
         Changes in operating assets and liabilities
           Accounts receivable                       4,205,518       958,698
           Inventories                                  78,338      (868,915)
	   Cost and earnings in excess of billings
                 on uncompleted contracts              (75,221)    1,469,558
           Other current assets                        (20,034)       59,257
           Other assets                                (45,582)     (116,371)
           Accounts payable                         (2,468,612)   (1,898,972)
	   Billings in excess of costs and earnings
                 on uncompleted contracts              288,420      (315,447)
           Commissions payable                        (209,617)       81,765
           Accrued liabilities                        (743,193)       21,717
                                                     ---------    ----------
                                                     1,183,668      (423,858)
                                                     ---------    ----------
	   Net cash provided by (used in) operating
                 activities                          1,895,232       212,471

Cash flows from investing activities:
   Net sales (purchases) of short-term investments           0        (1,587)
   Net sales (purchases) of property and equipment    (115,364)     (195,972)
                                                     ---------    ----------
	   Net cash provided by (used in) investing
                 activities                           (115,364)     (197,559)

Cash flows from financing activities:
   Net change in short-term borrowings                (200,000)    1,550,000
   Dividends paid                                     (364,374)     (362,999)
                                                     ---------    ----------
           Net cash used in financing activities      (564,374)    1,187,001
Effect of exchange rate on cash and cash equivalents    18,786        15,598
                                                     ---------    ----------
	   Net increase (decrease) in cash and cash
                 equivalents                         1,234,280     1,217,511
Cash and cash equivalents at beginning of period       428,482       772,553
                                                     ---------    ----------
Cash and cash equivalents at end period             $1,662,762    $1,990,064
                                                     =========     =========

The accompanying notes are an integral part of these statements.

                                  5 of 14
</TABLE>
<PAGE>
                            PEERLESS MFG. CO.

           NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


1.   The accompanying consolidated financial statements of
     Peerless Mfg. Co. and its subsidiaries (the "Company") have
     been prepared by the Company without audit.  In the opinion
     of the Company's management, the financial statements
     reflect all adjustments necessary to present fairly the
     results of operations for the three and six months ended
     December 31, 1998 and 1997, the Company's financial position
     at December 31, 1998 and June 30, 1998, and cash flows for
     the six months ended December 31, 1998 and 1997.  These
     adjustments are of a normal, recurring nature which are, in
     the opinion of management, necessary for a fair presentation
     of the financial position and results of operations for the
     interim periods.

     Certain notes and other information have been condensed or
     omitted from the interim financial statements presented in
     this Quarterly Report on Form 10-Q.  Therefore, these
     financial statements should be read in conjunction with the
     Company's Annual Report Form 10-K for the Fiscal year ended
     June 30, 1998 and the consolidated financial statements and
     notes thereto included in the Company's June 30, 1998,
     audited financial statements.


2.   The results for interim periods are not necessarily
     indicative of the results to be expected for the full year.
     Peerless Mfg. Co. designs and manufactures custom contracted
     pressure vessels and other products to customer
     specifications, sales of which are obtained by competitive
     bids and may result in material sales and profitability
     increases or decreases when comparing interim periods
     between years.  The Company generally recognizes sales of
     custom-contracted products at the completion of the
     manufacturing process, which is normally less than one year.
     The percentage-of-completion method is used for significant
     long-term contracts.


3.   The backlog of uncompleted orders and letters of intent at
     December 31, 1998 was approximately $25,000,000 as compared
     to a December 31, 1997 backlog of $26,800,000.  Of the
     $25,000,000 backlog at December 31, 1998, approximately 75%
     is scheduled to be completed in the current fiscal year.


                                  6 of 14
<PAGE>

4.   The Company has formal agreements with NationsBank N.A. and
     Chase Bank of Texas N.A. for $3,500,000 each for an
     aggregate of $7,000,000 continuing lines of credit,
     renewable annually.  Under the terms of these agreements,
     loans bear interest at the prevailing prime rate and the
     Company is required to pay 1/4 of 1% per annum on the unused
     portion of the facility.  In addition, Chase Bank of Texas
     provided the Company a LIBOR rate option.  As of December
     31, 1998, the Company had nothing outstanding and $1,550,000
     outstanding at December 31, 1997 against these lines of
     credit.


5.   The Company consolidates the accounts of its wholly-owned
     foreign subsidiaries, Peerless Europe Limited and Peerless
     Europe B.V.  All significant intercompany accounts and
     transactions have been eliminated in the consolidation.


                                  7 of 14
<PAGE>

Item 2.   Management's discussion and analysis of financial
-------   -------------------------------------------------
          condition and results of operations.
          ------------------------------------


                             PEERLESS MFG. CO.


  This report contains certain forward-looking statements within
  the meaning of Section 27A of the Securities Act of 1933 and
  Section 21E of the Securities Exchange Act of 1934.  Such
  statements are subject to inherent risks and uncertainties, some
  of which cannot be predicted or quantified.  Actual results could
  differ materially from those projected in the forward-looking
  statements as a result of changes in market conditions, increased
  competition, global and domestic economic conditions, or other
  factors.  The following discussion and analysis should be read in
  conjunction with the attached consolidated financial statements
  and notes thereto, and with the Company's audited financial
  statements and notes thereto for the fiscal year ended June 30,
  1998.


  Capital Resources and Liquidity
  -------------------------------

  As a general policy, the Company maintains corporate liquidity at
  a level adequate to support existing operations and planned
  internal growth, and to allow continued operations through
  periods of unanticipated adversity.

  Cash and equivalents increased $1,234,280 from June 30, 1998.
  Company operations provided $1,895,232 primarily from collecting
  accounts receivable of $4,205,518 and increasing billings in
  excess of costs by $288,420.  These positive cash flows were
  partially offset by reducing accounts payable $2,468,612,
  commissions payable $209,617 and accrued liabilities $743,193.
  Uses of cash for the six months ended December 31, 1998 included
  capital expenditures of $115,364, dividend payments of $364,374
  and repayment of short term borrowing of $200,000.

  The Company has historically and continues to finance plant
  expansion, equipment purchases, acquisitions and working capital
  requirements primarily through the retention of earnings, which
  is reflected by the absence of long-term debt in the Company's
  statement of financial position.  In addition to retained
  earnings, the Company has from time to time used two short-term
  bank credit lines totaling $7,000,000 to supplement working
  capital.  The Company currently has no material commitments for
  capital expenditures other than its established program of
  maintaining existing plant and equipment.

                                  8 of 14
<PAGE>

  REVENUE:  Revenue decreased to $10,931,835 for the three months
  ended December 31, 1998 from $11,041,772 for the three months
  ended December 31, 1997.  For the six month period, revenues
  increased 11% to $20,301,525 for the six months ended December
  31, 1998 from $18,247,561 for the six months ended December 31,
  1997.  Sales volumes continued to be firm for SCR products,
  filtration and separation products, nuclear steam dryers,
  commercial mist extractors, and other marine products, partially
  offset by reduced sales to Asian customers for the three and six
  months ended December 31, 1998 compared to the three and six
  months ended December 31, 1997.


  GROSS PROFIT:  Gross profit at $3,636,143 for the three months
  ended December 31, 1998 was down 3.5% on slightly lower volume
  compared to the $3,763,505 earned for the three months ended
  December 31, 1997.  For the six month period, gross profit
  increased 3.6% to $6,579,262 for the six months ended December
  31, 1998 from $6,353,690 for the six months ended December 31,
  1997.  The $225,572 increase in gross profit is attributable to
  the increased sales revenue.


  OPERATING EXPENSES:  Operating expenses decreased by 3% to
  $2,729,934 for the three months ended December 31, 1998 from
  $2,808,416 for the three months ended December 31, 1997.  For the
  six months, operating expenses remained stable at $5,321,089 for
  the six months ended December 31, 1998 from $5,319,887 for the
  six months ended December 31, 1997.


  OTHER INCOME/(EXPENSE):  The Company recognized net other expense
  of $60,000 and $101,000 for the three and six months ending
  December 31, 1998 for interest, foreign exchange losses and other
  expenses.  These expenses compare favorably to the $87,000 and
  $99,000 net other expense reported for the three and six month
  periods ending December 1, 1997.


                                  9 of 14
<PAGE>

  YEAR 2000 COMPLIANCE:

  The inability of computers, software and other equipment
  utilizing microprocessors to recognize and properly process data
  fields containing a two-digit year is commonly referred to as the
  Year 2000 Compliance issue.  As the Year 2000 approaches, such
  systems may be unable to accurately process certain date-based
  information.

  As the case with most other companies using computers in their
  operations, the Company is in the process of addressing the Year
  2000 Compliance issue.  The Company began converting its
  information systems in 1996 through the purchase of a new
  information system that is already Year 2000 compliant.  The
  Company has incurred approximately $450,000 to date in
  implementing this new system and expects to incur an additional
  $50,000 for future modifications, testing and services.
  Implementation is planned for the third quarter of Fiscal 1999
  with testing to be done simultaneously.  The vendor has assured
  management that the new system will be Year 2000 compliant.
  These cost and timing estimates are based on management's best
  estimates, which were derived utilizing numerous assumptions
  regarding future events, including the continued availability of
  certain resources and the accuracy of third-party
  representations.  However, there can be no guarantee that the
  estimates will be achieved and actual results could differ from
  those plans.

  The Company purchases computer hardware and software products
  from third parties for incorporation into the Company's products
  and such third-party products may be affected by the Year 2000
  problem.  There can be no guarantee, however, that these products
  or the systems of other companies on which the Company's systems
  and operations rely will be timely converted or that the failure
  of these systems would not have an adverse effect on the
  Company's systems.  The Company has advised its customers
  inquiring about this issue to contact the Company's vendors for
  Year 2000 information.  The Company has consulted with such
  vendors in an effort to assure that the vendors have minimized
  the risk of Year 2000 problems in the systems currently used by
  the Company.

                                 10 of 14
<PAGE>

  INTERNATIONAL MARKETS:

  The demand for our products in Southeast Asia has declined as a
  result of the current financial crisis there.  However, some
  projects remain active in the region and we continue to
  aggressively pursue these opportunities as well as opportunities
  in Australia, where economic conditions continue to be positive.
  It is expected that the Brazilian financial crisis will have an
  adverse impact on the Company's results of operations.
  The Company cannot assess whether such impact will be
  material.  Of significant concern is the competition with our
  products in Latin America from the Company's traditional
  competitors as well as local fabricators.  We are attempting to
  counter these competitive threats with new technology as well as
  global sourcing of materials and labor.

  Our SCR environmental product line is experiencing growth
  opportunities in the healthy U.S. domestic market.  The primary
  source of new SCR opportunities is the result of new gas turbine
  power electric generating facilities to fill the demand for
  electric power in the U.S.  These projects use clean burning
  natural gas, creating opportunities for our gas cleaning
  equipment.

                                 11 of 14

<PAGE>
                             PEERLESS MFG. CO.

                                  PART II

                             OTHER INFORMATION

Item 1 -- Legal proceedings
---------------------------

     Reference is made to Form 10-K Annual Report, as amended,
     Item 3, Page 6, "Legal Proceedings" for the Fiscal year
     ended June 30, 1998.  For the three months ended
     December 31, 1998 there were no new material proceedings
     filed against the Company.



Item 6 -- Exhibits and Reports -- Form 8-K
------------------------------------------

(a)       EXHIBITS:

          References to the Company's SEC File Number 0-05214.

3(a)      The Company's Articles of Incorporation, as amended to
          date (filed as Exhibit 3(a) to the Company's Quarterly
          Report on Form 10-Q, dated December 31, 1997, and
          incorporated herein by reference).

3(b)      The Company's Bylaws, as amended to date (filed as
          Exhibit 3(b) to the Company's Annual Report on Form 10-
          K, dated June 30, 1997, and incorporated herein by
          reference).

10(a)     Incentive Compensation Plan effective January 1, 1981,
          as amended January 23, 1991 (filed as Exhibit 10(b) to
          the Company's Annual Report on Form 10-K, dated June
          30, 1991, and incorporated herein by reference).

10(b)     1985 Restricted Stock Plan for Peerless Mfg. Co.,
          effective December 13, 1985 (filed as Exhibit 10(b) to
          the Company's Annual Report on Form 10-K, dated June
          30, 1993, and incorporated herein by reference).

10(c)     1991 Restricted Stock Plan for Non-Employee Directors
          of Peerless Mfg. Co., adopted subject to shareholder
          approval May 24, 1991, and approved by shareholders
          November 20, 1991 (filed as Exhibit 10(e) to the
          Company's Annual Report on Form 10-K dated June 30,
          1991, and incorporated herein by reference).


                                 12 of 14
<PAGE>

10(d)     Employment Agreement, dated as of April 29, 1994, by
          and between the Company and Sherrill Stone (filed as
          Exhibit 10(d) to the Company's Annual Report on Form
          10-K for the Fiscal year ended June 30, 1994, and
          incorporated herein by reference).


10(e)     Agreement, dated as of April 29, 1994 by and between
          Company and Sherrill Stone (filed as Exhibit 10(e) to
          the Company's Annual Report on Form 10-K dated June 30,
          1994 and incorporated herein by reference).


10(f)     Seventh Amended and Restated Loan Agreement, dated as
          of December 12, 1998, between NationsBank of Texas,
          N.A. and the Company.*


10(g)     Amended and Restated Loan Agreement, dated as of
          December 12, 1998, by and between Chase Bank of Texas
          N.A, and the Company.*


10(h)     Peerless Mfg. Co. 1995 Stock Option and Restricted
          Stock Plan, adopted by the Board of Directors December
          31, 1995 and approved by the Shareholders of the
          Company November 21, 1996 (filed as Exhibit 10(h) to
          the Company's Annual Report on Form 10-K dated June 30,
          1997 and incorporated herein by reference).


10(i)     Rights Agreement between Peerless Mfg. Co. and
          ChaseMellon Shareholder Services, L.L.C., adopted by
          the Board of Directors May 21, 1997 (filed as Exhibit 1
          to the Company's Registration Statement on Form 8-A
          (File No. 0-05214) and incorporated herein by
          reference).


21        Subsidiaries of the Company (filed as Exhibit 21 to the
          Company's Annual Report on Form 10-K dated June 30,
          1997, and incorporated herein by reference).


27        Financial Data Schedule.*

*Filed herewith


(b)       Reports on form 8-K.  None.


                                 13 of 14

<PAGE>
                                SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereto duly authorized.

                           PEERLESS MFG. CO.



Dated: February 12, 1999



 /s/ Sherrill Stone                /s/  Paul W. Willey
----------------------------       ----------------------------

By:  Sherrill Stone                By:  Paul W. Willey
     Chairman, President and            Chief Financial Officer
     Chief Executive Officer



                                   /s/  Kent J. Van Houten
                                   ----------------------------

                                   By:  Kent J. Van Houten
                                        Controller
                                        Chief Accounting Officer


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