Dallas Fed: Modest growth resumes in Texas manufacturing, but outlooks continue to worsen

March 27, 2023

DALLAS—Texas factory activity expanded slightly in March after contracting in February, according to business executives responding to the Texas Manufacturing Outlook Survey.

“Growth resumed in the Texas manufacturing sector in March after contracting slightly last month, though the pace of expansion is modest and demand continues to fall,” said Emily Kerr, senior business economist at the Dallas Fed. “Outlooks worsened further, and uncertainty continues to climb. A bright spot this month was the employment index, which rebounded into positive territory and suggests slightly above-average job growth. Price pressures receded and are no longer stronger than usual, while wage growth remains elevated.”

Key takeaways from this month’s survey: 

• The production index moved up from -2.8 to 2.5, a reading suggestive of a modest increase in output.
• The new orders index was negative for a 10th month in a row and came in at -14.3, little changed from February.
• Labor market measures suggest a resumption of employment growth and continued lengthening of workweeks.
• Price and wage pressures receded in March, though wage growth remained elevated relative to average.
• The general business activity index slipped two points to -15.7.
• The company outlook index remained negative but rose four points to -13.3.

The Dallas Fed asked a series of special questions on revenue outlooks and concerns in our March Texas Business Outlook Surveys and heard back from 384 business executives (services and manufacturing) March 14-22.

“While the January and February jobs reports surprised to the upside, not many Texas businesses have revised up their 2023 revenue outlook,” Kerr said. “Among those who have changed their outlook, more revised it down (28 percent) than up (17 percent). When reporting on primary outlook concerns, weakening demand still holds the top spot. The share citing that concern is similar to what it was in December 2022. Higher interest rates are a growing concern, particularly among services firms, while higher labor costs and labor shortages are retreating concerns.”

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Media contact:
Jon Prior
Federal Reserve Bank of Dallas
Phone: 214-922-6857
Email: jon.prior@dal.frb.org