Even as orders shrink, costs rise and confidence sinks to its five-year low, production remained in the growth territory last month.
The production index of the Dallas FED (a key gauge of factory output) registers 5.1, remaining in the positive region for three consecutive times, signaling small but stable growth. However, the general business activity index plunges to minus 35.8, the weakest read since May 2020, reflecting deepening manufacturers’ unease over tariffs and wider economic uncertainty.
“The ability to predict and understand the driving forces of consumer modes of trust in basic materials, construction, the automotive market, etc. is the most difficult thing we’ve seen since the era of community.”
The mixed report suggests that the Texas industrial sector remains resilient, but is increasingly tackling volatile demand, rising input costs and supply chain challenges.
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According to S&P Global, domestic demand is growing domestically, despite factory output returning to growth nationwide and export orders continue to weaken under ongoing trade tensions pressures.
Survey respondents cited the widespread uncertainty surrounding tariffs as a major resistance to business planning.
“Most US customers continue to buy, but in April, there was a 25% decrease in received RFQ (quoting requests) in April compared to the previous month’s average,” the computer and electronics manufacturer wrote.
“Assuming this continues, we expect sales to drop by around 10-15% in May, which we believe we argue is due to the uncertainty of the customer base driven by the tariff situation and the potential knock-on effect on the general economy.”
A respondent in the Fabricated Metals sector said, “It’s difficult to plan because the business is not stable. Therefore, they are not committed to future growth without knowing whether future growth exists.”
Similarly, S&P Global reported that since August 2024, national manufacturers’ expectations for future production have fallen to the lowest level.
Although inflation fell to 2.8% in March, in addition to pressure, inflation remains an important concern. According to S&P Global, manufacturers in April raised prices at the fastest pace in over two years due to rising tariff-related input costs and rising wages. This is a trend that economists will complicate the Federal Reserve efforts to cut interest rates later this year.
President Donald Trump and his administration’s members have explained the drastic tariffs as part of a strategy to revive the US long-term industrial bases.
