Dallas Fed manufacturing business index +14.1 vs +3.4 prior

• Prior was +3.4 (revised to +4.5)
• Production +12.2 vs +5.3 prior
• New orders +7.7 vs +1.5 prior
• Outlook +18.7 vs +12.3 prior

Comments in the report:

Computer and electronic product manufacturing

• The outlook is improved because we are subcontractors to a large
  government grant that got a funding notice. There are some worries—one
  being the impact of the new administration on the existing grant
  structure.
• There are clear signs of markets starting to inflect up with the
  exception of automobiles. The China automobile market remains strong,
  all other markets are weak, and Europe is very weak.
• We are seeing generally good spirits among our customers. We
  continue to see pushback against price increases, and people are more
  aware of pricing than they had been in the past, especially during
  2021–22. We continue to invest in new equipment to increase
  productivity. Wages continue to increase due to inflation. We
  definitely see more people looking for work than in the past, so our
  voluntary turnover is almost zero.

Fabricated metal product manufacturing

• We saw demand and production dip in November/December 2024 and
  are expecting a tick up in the first quarter. We do not expect a
  significant full year increase in production this year versus 2024.
• We are still waiting on some large projects to be released that have been on hold.
• We are not able to forecast even six months forward. Any changes
  will be based off the Fed, economy, and inflation. Two or three rate
  cuts in 2025 should offer sustained betterment. No further rate cuts
  and timing a longer pause than expected might be the best path forward
  for inflation but will definitely depress betterment for our business
  and customer demand.

Food manufacturing

• New customers and new orders from existing customers are driving production volume growth.
• Tariffs, tariffs, tariffs.

Machinery manufacturing

• The start of the year has been extremely positive with a sharp
  increase in volume of new orders received. With a positive business
  environment, we expect this trend to continue.
• There is a lot of chatter in the market about President Trump’s
  plans. We believe that they will turn into a robust economy over the
  next few months.
• The pall has lifted. Our industry is absolutely giddy with
  November’s election outcome and the proposed Cabinet members hopefully
  soon to be confirmed. Personally, I feel our state is more optimistic
  now that an open border will close, common sense in policymaking will
  prevail, and free enterprise will be the beneficiary. Our phones are
  thankfully ringing like they haven’t in quite some time.
• Inflation is killing us. With finished goods inventory and raw
  material inventories both substantially reduced, our cost of operation
  increased over 20 percent in 2024, which is disastrous considering we
  cannot raise prices to offset the costs.
• 2025 is going to be great.

Paper manufacturing

• We have experienced weakness in orders for the last four weeks. Our outlook is starting to be affected.

Printing and related support activities

• We are still in a low volume of activity funk with signs of
  things picking up soon. It’s crazy how slow we have been over the past
  four months. Right now we are not hearing about many price increases;
  however, with the threat of tariffs, if they do occur, we will be forced
  to pass them through since our raw material costs subject to tariffs
  will increase.

Textile product mills

• We have seen sales dip from December but improve year over year
  (to be expected as December is one of our busiest months). It seems
  peer companies and consumers are more optimistic about the economy this
  year versus last quarter but we aren’t sure the impact potential
  tariffs may have on our raw materials.

Transportation equipment manufacturing

• We are starting to see an improvement in the confidence of our customers with the new administration.

This article was written by Adam Button at www.forexlive.com.