Dallas Fed Manufacturing Index

At A Glance#

What It Is#

The Dallas Fed Manufacturing Index is a monthly diffusion index measuring the health of the factory sector in Texas. It comes from the Texas Manufacturing Outlook Survey, in which executives at Texas factories say whether activity is rising, flat, or falling versus the prior month. Because Texas is one of the largest manufacturing states, the survey gives an early, regional sense of where U.S. industry is heading before the big national reports land.

The headline most people quote is the General Business Activity Index. For how a diffusion index turns "up / same / down" answers into a single number, see PMI Diffusion Index Explained.

Who Provides It#

The Federal Reserve Bank of Dallas, one of the twelve regional Reserve Banks. It has run the Texas Manufacturing Outlook Survey since 2004. Several regional Fed banks publish their own factory surveys (Empire State from New York, the Philadelphia Fed survey, Richmond, Kansas City); the Dallas index is the Texas member of that family.

How It Is Collected#

• The Dallas Fed sends the survey to a panel of Texas manufacturing executives in the middle of each month.
• Respondents report on their own company's operations for the current month versus the previous month.
• For each measure (production, new orders, employment, and so on) they pick one of three answers: increased, no change, or decreased.
• Responses are collected over roughly one week and published at month-end.

How It Is Computed#

Each question becomes a diffusion index:

$$\text{Index} = \%\ \text{reporting an increase} - \%\ \text{reporting a decrease}$$

Because it subtracts the falling share from the rising share, the index is centred on zero, not 50:

• Above 0 → the measure is expanding across more firms than it is shrinking
• Below 0 → the measure is contracting

Note this differs from ISM and S&P Global PMIs, which centre on 50. A Dallas Fed reading of 0 plays the same role as a PMI reading of 50: the breakeven line. The General Business Activity Index is the broad sentiment gauge and is reported alongside component indexes for production, new orders, capacity utilisation, employment, and prices.

Indicator Type#

Leading. Like the PMI surveys, it captures order books, production plans, and hiring intentions before they show up in official output and payroll data, so it tends to turn ahead of the hard numbers. It is also timely, landing at the very end of the reference month, which is part of why markets read the regional Fed surveys as an early preview of the national ISM release.

Why It Matters#

On its own, one state's survey is a narrow signal, which is why it sits below the national ISM and S&P Global PMIs in importance. Its value is timing and confirmation: it is one of the first manufacturing reads each month, so a sharp move can hint at the direction of the bigger national surveys still to come. Analysts often watch the regional Fed surveys (Dallas, Empire State, Philadelphia) together, since a common swing across several regions is a stronger signal than any single one.

Related Notes#

• ISM Manufacturing PMI — the national, market-moving manufacturing benchmark this survey previews
• S&P Global Manufacturing PMI — alternative national manufacturing gauge
• PMI Diffusion Index Explained — how diffusion indexes turn survey answers into a number

Sources#

• Texas Manufacturing Outlook Survey