Texas’ roughly $300 billion manufacturing sector grew last month, although at a slower pace than it did in February, according to a widely watched monthly survey report released this week by the Federal Reserve Bank of Dallas.
“Employment growth stalled and workweeks were flat in March,” Jesus Cañas, a senior economist at the Dallas Fed, said in a release. Cañas added that other manufacturing indicators, including new orders, also cooled, while price pressure on the sector was mostly unchanged compared with a month earlier and broader business perceptions were mixed.
The Dallas Fed’s monthly Texas Manufacturing Outlook Survey, one of several monthly surveys the bank conducts with the aim of collecting near real-time insight into the Texas economy, is based on data collected from 115 manufacturing executives from around the state, who answer questions about orders, employment, prices and other aspects of their business in relation to the previous month. The bank’s researchers then compile the data into various indices.
For March, the survey’s seasonally adjusted production index — a key indicator of overall manufacturing activity — came in at 6.8, a score that still represents growth, but was notably lower than February’s score of 12.5. It was the third month in a row the production index was in positive territory, although the score also suggested “a below-average pace” of growth, researchers said.
Several other indices, including capacity utilization, new orders and shipments, also remained in positive growth territory even as they cooled compared with a month earlier. The survey’s employment index actually dipped into negative territory, with slightly more executives reporting a net employment decrease than net increase. Respondents’ optimism also dipped, with more respondents reporting a worsening outlook than improving outlook.
The survey, which was conducted between March 17 and March 25 — less than a month after the U.S. and Israel initiated the Iran war — also revealed a large spike in uncertainty, with 38% of respondents reporting an increase in their business outlook uncertainty and 12% reporting a decrease.
Respondents cited geopolitical uncertainty as a concern more than business demand or inflation, the researchers noted, and in supplemental comments multiple anonymous respondents mentioned concerns about the Iran war specifically, with some citing rising energy and shipping costs.
Others mentioned tariffs and what they characterized as general dysfunction from Washington, while one executive from the chemical manufacturing sector cited a demand benefit for American companies stemming from shipping disruptions in the Strait of Hormuz.
Although the ongoing war in Iran has scrambled economic predictions, analysts have recently projected that Texas will still see modest jobs growth in 2026 after a flat 2025.