Texas factory activity declined in February after a notable rise in January, according to business executives responding to the Texas Manufacturing Outlook Survey, the Federal Reserve Bank of Dallas announced on Feb. 24.
Emily Kerr, senior business economist at the Dallas Fed, said, “A pullback was seen in Texas factory activity in February, with manufacturing executives noting mounting uncertainty, primarily regarding tariff policy. Employment levels were stable, though work hours declined. Raw materials prices rose at a notably faster pace this month. Outlooks worsened slightly, though expectations are still for increased manufacturing activity six months from now.”
The survey reported that the production index fell 21 points to -9.1 and the new orders index dropped 11 points to -3.5. Labor market measures indicated flat head counts and shorter workweeks for the month. Input cost pressures intensified while wage pressures eased slightly. Both general business activity and company outlook indexes moved into negative territory.
From Feb. 11–19, special questions on demand, labor, and U.S. trade policy were posed as part of the Texas Business Outlook Surveys to 327 business executives across services and manufacturing sectors. Kerr said, “We asked firms to comment on how U.S. trade policy uncertainty and tariffs are impacting their business, if at all—many cited higher costs and some are seeing a slowdown in business activity.”
Over the past year about one-third of firms have relied on hiring workers who moved from another U.S. state while about a quarter hired workers from other countries; reliance increased over the past year especially for immigrant workers among those who reported such hires. Eighteen percent of firms expect changes to immigration policy will impact their ability to hire or retain workers this year; many plan increased worker utilization or cross-training as well as implementing labor-saving technology.
Most Texas businesses expect demand for goods or services to increase over the next six months, with retail optimism rising but some waning noted among manufacturers.
