Every month when the regional Fed manufacturing surveys drop, I find myself refreshing the page like a kid waiting for the ice-cream truck. Some reports barely move the needle, but every once in a while one comes along that actually feels like it matters. November’s Dallas Fed report? That was one of them.
The headline writers will probably focus on the part where overall business sentiment slipped deeper into negative territory. Fair enough, it did. But scroll past that single number and something far more interesting jumps out: Texas factories are suddenly running hotter than a jalapeño in July.
The One Number Everyone Should Actually Care About
Let me put it plainly. The production index – the single best real-time snapshot of what’s actually happening on factory floors across the Eleventh District – rocketed 15 points to 20.5. That’s not just “better.” That’s the strongest reading we’ve seen in months and a clear acceleration from October.
In my experience watching these reports for years, when production leads the way like this, the rest of the story usually catches up eventually. Companies don’t ramp output because they’re feeling charitable. They do it because orders are coming in and customers are finally willing to commit.
Sure enough, the details back that up.
Orders Turn Positive, Capacity Utilization Spikes
The new orders index flipped from negative to positive territory, climbing to 4.8. Shipments jumped nine points to 15.1. And perhaps most telling of all, the capacity utilization index surged a massive 21 points to 19.4 – one of the biggest one-month moves I can remember.
Think about what that actually means. Factories aren’t just filling existing orders. They’re pulling forward production, turning the lights back on in sections that have been dark, maybe even calling workers back from shortened weeks. That’s not sentiment. That’s real economic activity.
- Production index: +15 points to 20.5
- New orders: from -1.7 to +4.8
- Shipments: +9 points to 15.1
- Capacity utilization: +21 points to 19.4
Those aren’t marginal improvements. Those are the kind of moves you see when something fundamental shifts.
The Future Looks Even Brighter
Here’s where it gets really interesting. Companies aren’t just reacting to better conditions today – they’re betting on stronger growth tomorrow. The six-month forward production outlook jumped to 33.7, its highest level since spring. When manufacturers get this optimistic about the future, they start hiring again, ordering parts, and locking in raw materials.
I’ve found over the years that these forward-looking indexes often prove more accurate than people give them credit for. Businesses live or die by their ability to read demand trends. When hundreds of executives across different industries all start sounding the same bullish note, I pay attention.
Yes, But What About That Ugly Headline Number?
Fair question. The general business activity index did fall to -10.4, its lowest reading since June. The company outlook index dropped to -6.3. If you only read the headlines, you’d think Texas manufacturing is circling the drain.
But here’s what I’ve learned watching these reports cycle after cycle: the broader sentiment measures tend to lag the hard activity numbers. They capture mood more than reality. And right now, mood remains cautious – for understandable reasons.
The survey was taken November 10-18, right as Washington was emerging from yet another fiscal drama. Uncertainty about tariffs, about fiscal policy, about interest rates – all of that weighs on executives when they fill out these forms. But when you ask them about their actual orders and production schedules? Different story entirely.
“We continue to see soft incoming orders, with poor general activity in our industry. It’s as if all the chaos in Washington is creating a lot of wait-and-see attitude among our customers’ customers.”
That comment perfectly captures the disconnect. Customers are hesitant because of headlines. But the orders that are coming through? Companies are rushing to fill them.
Tariff Talk Notably Subdued
Perhaps the most telling detail buried in this report: mentions of tariffs in the comments section dropped sharply from recent months. For much of the past year, you couldn’t read three responses without someone complaining about import costs or supply chain disruptions.
Not this time. Either companies have adapted, or – more likely – the tariff environment feels less immediately threatening than it did during the height of the trade tensions. Several respondents actually sounded relieved on the topic.
“Tariff revenue has not dramatically impacted opportunity to grow in our industry, and it has seemingly improved our overall economy.”
That’s a notable shift in tone from what we were hearing even a few months ago.
The Interest Rate Relief Effect
Several executives specifically called out the Federal Reserve’s recent rate cuts as a positive factor. Lower borrowing costs matter enormously for manufacturers – everything from working capital lines to equipment financing gets cheaper.
“It seems even the modest decrease in interest rates has assuaged fears of inflation and provided comfort that we are indeed headed in the right direction.”
When combined with easing tariff fears and improving consumer confidence, you start to understand why production is accelerating even while broader sentiment remains guarded.
Not Every Sector Is Celebrating
To be clear, this isn’t a universal boom. Some industries continue to struggle. Retail-facing manufacturers mentioned weak consumer demand. Companies exposed to government spending noted the lingering effects of recent budget drama. One respondent bluntly said their orders had been cut in half and they weren’t sure why.
That’s the nature of these regional surveys – they capture a wide cross-section of experiences. But the weight of evidence clearly tilts toward improvement. The hard activity numbers are strong and getting stronger. The forward guidance is unambiguously positive. The anecdotal evidence, while mixed, contains more optimistic comments than we’ve seen in months.
What This Means Going Forward
Regional manufacturing surveys don’t always lead the national numbers, but when Texas turns – and especially when Texas turns this decisively – it usually matters. The Eleventh District includes energy, aerospace, tech hardware, chemicals, and heavy machinery. When those factories start running hot, it tends to pull the rest of the country along eventually.
We’re still early in this move. Capacity utilization has room to run before factories start hitting genuine constraints. Order backlogs remain modest. Labor markets, while tight, haven’t reached the point where companies can’t find workers.
In other words, this acceleration still has legs.
The broader sentiment indexes will probably catch up as the hard data continues to improve and Washington drama fades into the background. Or maybe they won’t – executives have been burned before, and caution is understandable.
Either way, the factories don’t lie. And right now, Texas factories are telling a story of genuine, accelerating recovery.
Sometimes the best insights come from ignoring the headline number everyone obsesses over and focusing instead on what companies are actually doing. In November, Texas manufacturers voted with their production schedules – and they voted for growth.
I’ll be watching the December report closely. If production keeps climbing and those forward-looking indexes hold or improve further, we may be looking at the early stages of a genuine manufacturing rebound – the kind that could surprise a lot of people who’ve been waiting for the other shoe to drop.
For now, the message from Texas is clear: the factories are back in business.
