Texas manufacturing activity accelerated sharply in September, with output, new orders, and hiring all rising well above their historical norms, according to the Federal Reserve Bank of Dallas.
The production index in the Dallas Fed’s Texas Manufacturing Outlook Survey, which the bank calls a key measure of state manufacturing conditions, jumped 13.4 points to 29.5, from 16.1 in August. That is roughly three times the index’s long-run average of 9.7 and marks the ninth consecutive month of expanding output. More than 41 percent of manufacturers reported higher production, while 12 percent reported a decline.
Demand strengthened alongside output. The new orders index rose to 30.7 from 22.0, more than six times its series average of 4.8. The growth rate of orders index climbed 11 points to 19.1, far above its historical average of negative 1.0.
Orders are arriving faster than factories can fill them. The unfilled orders index swung 24 points, from negative 1.3 in August to 22.7 in September, well above its long-run average of negative 2.6. Delivery times lengthened, with that index rising to 17.5 from 12.5, and finished goods inventories fell into contraction at negative 9.5, from 2.9 the month before.
Capacity utilization rose 11.1 points to 23.9, and the shipments index rose 10.7 points to 24.8. The Dallas Fed noted that the capacity utilization, shipments, and new orders indexes all posted above-average readings.
Texas manufacturers also stepped up hiring. The employment index rose 7.1 points to 15.1, more than double its series average of 7.1, marking a fifth consecutive month of job growth. Hours worked were essentially unchanged at 5.6.
Several manufacturers described swelling order books. A machinery manufacturer said it expects a record year of revenue and net income in 2026 on an ever-increasing backlog. Another reported “a sudden unexpected surge in new orders” after two to three months of slowing. A third said oil companies are spending at a much higher rate than expected.
Cost pressures intensified along with activity. The raw materials prices index rose 8.1 points to 52.2, well above its series average of 28.0, and the finished goods prices index rose to 27.6 from 22.7. The wages and benefits index increased to 27.4 from 21.1. Several respondents cited diesel fuel costs, and one said it was bidding new jobs assuming diesel at $6 a gallon.
Measures of broader business sentiment were mixed. The general business activity index, which gauges respondents’ views of overall economic conditions rather than their own operations, edged down to 9.8 from 11.6 but remained positive for a third straight month. The company outlook index stayed positive at 8.7 but improved more slowly than in August, when it registered 19.2.
Manufacturers expect growth to continue. The future production index held near its August level at 40.3, above its series average of 36.0, and the future new orders index was 39.5. The future general business activity index fell to 20.8 from 37.2 but remained well above its historical average of 12.5. Expectations for hiring six months from now cooled, with the future employment index dropping to 18.1 from 34.5. Respondents pointed to energy costs, interest rates, and trade policy as sources of uncertainty.
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