Dallas Fed Manufacturing Survey Sees Production Soaring As Tariff Terrors Fade

“Signs indicate business activity is improving,” according to one respondent from The Dallas Fed’s Manufacturing survey in November. However, the comments and the mixed data could leave readers confused…

Texas factory activity expanded at a markedly faster pace in November, according to business executives responding to the Texas Manufacturing Outlook Survey.

The production index, a key measure of state manufacturing conditions, rose 15 points to 20.5, indicating a notable pickup in output growth. Expectations for manufacturing activity six months from now remained positive. The future production index increased notably, to 33.7 from 21.0, while the future general business activity index edged up to 11.

Other measures of manufacturing activity also pointed to faster growth this month. The new orders index increased to 4.8 from -1.7. The capacity utilization index jumped 21 points to 19.4, and the shipments index increased nine points to 15.1. Price pressures remained flat as tariff talk in the survey’s respondents reduced significantly.

However, perceptions of broader business conditions worsened this month. The general business activity index fell further into negative territory to -10.4 from -5.0. Outlooks also worsened, with the company outlook index falling six points to -6.3 in November. 

In pictures, it looks like this: Texas manufacturers are pumping production higher (and expect more in the future) but their headline sentiment above business activity is tumbling to its lowest since June…

Choose your own adventure…

The respondents comments continue the dissonance. Bear in mind that data were collected Nov. 10–18 (right as the shutdown ended), and 70 of the 115 Texas manufacturers surveyed submitted responses.

Bad news (but hopeful)

• We don’t know if it’s the shutdown or just that demand has dropped, but our orders have dropped in half.

• We continue to see soft incoming orders, with poor general activity in our industry. It’s as if all the chaos in Washington is creating a lot of wait-and-see attitude among our customers’ customers. We are very hopeful that things will improve in the next 6 months.

• Business is as delicate today as it was under the previous administration. Small, established businesses have nowhere to turn for help when suddenly paying new tariffs.

• We’re currently facing challenging business conditions on several fronts…

• There is a continued weakness in the retail consumer market. 

Good News:

• November was our most profitable month this year. We are seeing increased business activity and many new projects.

• Looking forward to a tax rebate for the month of government shutdown.

• It seems even the modest decrease in interest rates has assuaged fears of inflation and provided comfort that we are indeed headed in the right direction. Tariff revenue has not dramatically impacted opportunity to grow in our industry, and it has seemingly improved our overall economy. We remain hopeful of continued progress through 2026.

• Signs indicate business activity is improving, i.e. lowering of interest rate, improving economy and consumer confidence for major purchases.

And finally, we have a simple question that raises our own doubts about how ‘real’ these responses are: 

A ‘Beverage and Tobacco product manufacturer’ is worried about Fed Independence and is unsure about uncertainty?

Concerns about the economy, the independence of the Fed and tariffs continue to cause uncertainty. We are not certain that [uncertainty] has actually increased as much as it has remained at an uncomfortably elevated level.

Perhaps they’d be better off just worrying about ‘beverages’?