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Dallas Fed: Texas manufacturing output contracts again

DALLAS—Texas factory activity declined in July, according to business executives responding to the Texas Manufacturing Outlook Survey.

“The Texas manufacturing sector contracted for a second month, and new orders continue to decline,” said Emily Kerr, senior business economist at the Dallas Fed. “A bright spot in the survey results was that employment growth picked back up, and more than half of responding manufacturers said they are currently trying to hire. Price pressures remained subdued. Looking ahead, manufacturing outlooks deteriorated amid heightened uncertainty.”

Key takeaways from this month’s survey: 

  • The production index held fairly steady at -4.8, a reading indicative of a modest contraction in output.
  • The new orders index has been in negative territory for more than a year and edged down to -18.1.
  • Labor market measures suggest faster growth in employment and longer workweeks in July.
  • Price pressures increased in July but remained subdued, and wage growth moderated.
  • The general business activity index stayed negative but ticked up to -20.0, while the company outlook index pushed further negative to -16.9.

The Dallas Fed asked a series of special questions on labor market conditions in the July Texas Business Outlook Surveys and heard back from 364 business executives (services and manufacturing) July 18-26.

“Most Texas firms report they are currently trying to hire, and a lack of applicants remains the top hiring impediment, though some improvement was reported in applicant availability over the past month,” Kerr said. “Workers looking for more pay than offered was also a top challenge.”

Key takeaways from the special questions:

  • The share of firms currently trying to hire rose to 52 percent, up from 50 percent in January but down from 62 percent a year ago.
  • More firms reported looking to hire mid-skill workers than other skill levels.
  • Hiring difficulty was pervasive across skill levels, and the share saying finding workers was “very difficult” was highest for high-skill positions.

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Media contact:
Jon Prior
Federal Reserve Bank of Dallas
Phone: 214-922-6857