Dallas Fed Mfg Activity Holds Near One Year High Despite Plunge In Respondent Sentiment On Iran War

The Dallas Fed Manufacturing Index continues to straddle the unchanged line, and despite a tiny dip from 0.2 in February, the highest print since July, to -0.2 in March, just below the 1.5 median estimate, the index remained near the highest level in a year and absent a modest and brief, post-Trump election spike, this remains one of the highest prints since mid-2022.

Curiously, the headline index barely dropped even though most index components (9 out of 12) showed a sharp decline, with just a handful rising fractionally.

But it was the survey responses that showed a decidedly negative view on the economy, except for respondents in Machinery Manufacturing. Below is a snapshot from the latest survey:

Beverage and tobacco product manufacturing

• We have seen decreases in some of our costs, in particular agricultural raw materials. We have seen increases in the costs of our packaging materials, some of this related to increase in energy costs. We expect the Iran war to cause increases in energy costs for a period extending at least six months and potentially longer. This has increased our uncertainty for the rest of the year.

Chemical manufacturing

• The Iran war and bottleneck in the Strait of Hormuz has caused significant supply chain disruption from China, allowing the U.S. chemicals sector to benefit from the supply bottleneck. We believe this to be short-lived and the situation to return to the lower demand levels in the latter half of 2026.

Computer and electronic product manufacturing

• I am thinking about recommending to our board to close the company.
• We have seen no impact yet from higher fuel prices. However, we expect to see this very soon, as our vendors will increase raw materials prices to include the increased cost for transportation.
• We would like to see lower interest rates throughout this year.

Food manufacturing

• Continuing confusion at the federal level, illiquid consumer base and falling federal government spending are not helping the food industry.
• High density Hispanic channels are down. Costs are up, and freight is increasing fast. Tariff chaos has wreaked havoc with all of our export customers and seasoning suppliers.
• We are worried about costs increasing due to fuel price increases. We are worried about a slowdown in the economy due to geopolitics.

Furniture and related product manufacturing

• The Iran war and impact on energy prices are concerns as consumers have to deal with the rapid increase in energy cost. Hopefully it will moderate as the conflict curtails. That said, the more demoralizing impact of the constant circus out of Washington and inability to fund critical infrastructure like TSA is killing the animal spirits of our economy.

Machinery manufacturing

• We are beating our competition due to the continued vertical integration plans that we are focused on implementing and improving. This requires a great deal of planning and money, but the payout is very sound.
• Spring has sprung. It’s truly like the balm of Gilead. After an extended period of ailment and woe, the healing has occurred and we are on our way to greater things.  Our business growth thus far in 2026 is like a sweet fragrance that is healing our loss and hardship from prior years.
• We are still seeing strong business activity with our backlog increasing.
• Our company is seeing an increase in activity totally unrelated to the current geopolitical conditions. The effect of uncertainty delayed the start of a new manufacturing project in the U.S. (tariffs, capital expenditures) in 2025. Project 2025 is underway with a six-month delay and scaled back to accommodate a less ambitious picture for 2026. We are still recovering from 2025 plus a more conservative outlook for 2026. Things are trending upward in our field but at a much slower pace.

Miscellaneous manufacturing

• Many external factors contributing to an unstable market.
• If we could get our tariff reimbursement back, that would put us in a position to invest in growth. Without it, though, we don’t have the capital to invest in growth.

Nonmetallic mineral product manufacturing

• We are waiting for home building activity to pick up, which is dependent upon interest rates.

Paper manufacturing

• Overall business still slow. Have achieved limited price reductions in some raw materials that are in an oversupply condition but not enough to keep up with the decline in selling prices of our products. We still see upward pressure on labor and benefits cost. Margins are reduced from 12 months ago.

Plastics and rubber products manufacturing

• Importing from China is precarious. The costs of product and freight are higher and slower. Suppliers are apprehensive. Their costs are increasing, especially a certain raw material plastic impacted by petrochemicals affected by cost of oil.

Printing and related support activities

• We have been stupid slow recently, slower than we can recall in many years. We continue to believe it’s from the chaos and confusion coming out of Washington. In addition, now with the Iran war, prices are going to shoot up due to shipping costs, and tariffs are still in effect. So, there is no telling when business will start to improve. We have some nice work coming in soon, but it’s work we knew was coming.  We are seeing some improvement in our estimating backlog, which is a good sign of better days to come. The war is causing a disruption of raw materials prices as we are producing plastic-based products, virtually all of our raw materials are hydrocarbon based. Fifteen percent increases are normal.