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All-Time Lows at Dallas Manufacturing Index

March 30, 2020
The general business activity gauge fell more than 70 points and the index for outlook uncertainty shot up to 62.6.

The Dallas Federal Reserve’s gauge of Texan manufacturing fell to all-time lows according to data released March 30. Manufacturers’ estimation of general business activity fell to -70 from 1.2 in February, and the individual company outlook index fell from 2.6 to -65.6. Both measures were the lowest recorded figures since the Dallas survey began collecting data in June 2004. The productivity index fell to -35.3, new orders dropped to -41.3 and order growth rate fell to -44.9.

Manufacturers surveyed also reported a dramatic increase in uncertainty. The index of manufacturers reporting uncertain outlooks jumped more than fifty points to 62.6, reflecting wide unease with the long-term prospects of the COVID-19 virus.

Manufacturers of essential businesses and nonessential businesses responded differently to supplemental questions on how, precisely, the coronavirus was impacting their business. One executive at a fabricated metal manufacturing company said “nothing has structurally changed in the economy,” and that the response to the virus would pose a “temporary setback.” Another executive from the same sector said, “With COVID-19, everything has changed.”

A number of executives reported problems caused by the shutdown of customers, suppliers, and partner companies. One executive reported that essential suppliers in New York and Illinois had been shut down, hamstringing an otherwise good bullet manufacturing business. Another company, a food manufacturer, noted that the popular shift to at-home food consumption had caused a massive surge in demand—along with an impending massive shortage of packaging materials. Manufacturers supplying aviation and furniture companies saw blowback from their customers’ economic woes.

One surveyed manufacturing executive who works with nonmetallic mineral products simply said, “I cannot answer the future-outlook questions—too many unknowns.” The sense of an unpredictable markets was a common one: The Dallas Fed's index of outcome uncertainty shot up to 62.6 in March results, from 11 in February. A plurality of respondents, 45.7%, said they were planning for the impact from the virus to last from between three to six months.

The data for the survey was collected between March 17-25 and records responses from 400 Texas business executives. It shows a worsening trend compared to figures reported earlier this month in surveys covering New York and parts of Pennsylvania, New Jersey, and Delaware. The Empire State Manufacturing survey and Philadelphia Fed’s survey both reported worsened general business conditions earlier this month, before the state governments in surveyed states began imposing more shelter-in-place orders.

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