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Dallas Fed: Texas manufacturing activity weakens in March

DALLAS—Texas factory activity weakened in March after stabilizing in February, according to business executives responding to the Federal Reserve Bank of Dallas’ Texas Manufacturing Outlook Survey.

“Texas’ manufacturing sector faltered this month, with output and demand indicators returning to negative territory after pushing positive in February,” said Emily Kerr, senior business economist at the Dallas Fed. “Employment growth continued, however, though the pace slowed. Weakening demand and domestic policy uncertainty, particularly around the national elections, are top outlook concerns among manufacturers.”

Key takeaways from this month’s survey:

  • The production index fell five points to -4.1.
  • The new orders index dropped 17 points to -11.8.
  • Labor market measures suggested slower job growth and shorter workweeks.
  • Wage and prices increased this month, including a resumption of selling price growth.
  • The general business activity and company outlook indexes slipped further negative.

The Dallas Fed asked a series of special questions on prices, wages and outlook concerns in March Texas Business Outlook Surveys and heard back from 349 business executives (services and manufacturing) March 12–20.

Key takeaways from the special questions:

  • On average, responding firms saw a 4.9 percent increase in wages over the past 12 months, and expect wage growth of 3.6 percent over the next 12 months. For input cost growth, the average was 5.0 percent (past 12 months) and 3.6 percent (next 12 months). For selling price growth the average was 3.0 percent and 2.9 percent, respectively.
  • Forty-two percent of firms noted weakening demand/potential recession as a primary concern for their firm’s outlook, down from 56 percent a year ago. The share citing labor shortages, higher interest rates, elevated input costs and supply-chain disruptions also fell from a year ago, while an increase was seen in the share citing geopolitical and domestic policy uncertainty as well as increased taxes and regulation.

“Texas firms see wage and price growth continuing to normalize, though still elevated compared with pre-COVID levels,” Kerr said. “They expect further easing in wage and input price pressures over the next 12 months. When asked about concerns around their firm’s outlook, business executives continued to cite weakening demand as their No. 1 concern. Domestic policy uncertainty, and high labor and input costs are also top concerns.”

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Media contact:
James Hoard
Federal Reserve Bank of Dallas
Phone: 214-922-5307