Dallas Fed Flags Deepening Factory Gloom: Is Texas Warning Of Something Bigger?

The Dallas Fed released its April Texas Manufacturing Outlook Survey (TMOS) on Monday. Perceptions of broader business conditions continued to worsen notably.

The general business activity index fell 20 points to -35.8, its lowest reading since May 2020.

The company outlook index also retreated to a post-pandemic low of -28.3, while the outlook uncertainty index climbed 11 points to 47.1.

The production index, which measures manufacturing health, mainly remained the same at 5.1, indicating modest growth.

Also Read: ‘COVID-Like’ Shortages, Empty Shelves Expected Thanks To Trump Tariffs, Experts Say

The new orders index dropped sharply by 20 points to -20.0. The capacity utilization index also dipped slightly to -3.8, and the shipments index turned negative for the first time this year, falling into negative territory for the first time this year to -5.5 from 6.1.

The employment index remained steady at -3.9, with 9% of companies reporting hiring and 13% reporting layoffs. The hours worked index fell to -6.4 from -2.9, suggesting shorter workweeks.

Price pressures grew stronger in April. The raw materials prices index jumped 11 points to 48.4, the highest since mid-2022. The finished goods prices index also rose by nine points to 14.9, above the average.

Wage growth stayed steady, with the wages and benefits index holding at 14.3, slightly below its average.

Expectations for future manufacturing activity were mixed. The future production index remained positive but fell 13 points to 14.8. Meanwhile, the future general business activity index dropped further into negative territory at -15.2. Most other future activity measures stayed positive but weakened compared to past averages.

In April, a Wedbush analyst wrote that Trump’s tariff disaster has been weighing heavily on the stock market, creating uncertainty and dragging down prices.

Survey respondents in chemical manufacturing commented, “Tariff uncertainty and actual impact is likely to be significant for the business and ongoing projects.”

“…We expect to see roughly a 10–15 percent decline in sales in May. We believe that this is largely due to uncertainty in our customer base driven by the tariff situation and potential knock-on effects to the general economy,” commented Computer and electronic product manufacturing responders.

Responders from Food manufacturing said tariffs and uncertainty are disrupting supply chains and making it difficult to plan investments.

It’s still unclear how tariffs will affect the overall economy. The sector does not import or export much (other than spices), so the proposed tariffs won’t directly hit them.

However, they are still concerned about rising labor costs caused by the trade war and immigration issues.

In a new poll by The Associated Press-NORC Center for Public Affairs Research, roughly three-quarters of adults predict that tariffs will drive up consumer prices, while about six in ten disapprove of the president’s handling of economic and trade matters.

61% of respondents said they are troubled by soaring grocery bills, while about half voiced anxiety about an impending economic downturn and the affordability of major purchases.

In April, President Trump announced a 90-day pause on tariffs for countries that have not retaliated against U.S. trade measures. The news ignited a broad risk-on rally, catapulting major indices to multi-month highs and sending volatility plunging.

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