New Dallas Fed Report Contains Warning For The Economy: ‘Preparing for the Recession’

The latest Texas Manufacturing Outlook Survey from the Federal Reserve Bank of Dallas paints a concerning picture of the state’s manufacturing sector.

Based on surveys of producers, the report indicates weakness in Texas manufacturing and includes some stark warnings from respondents about the broader economic landscape.

Several manufacturers shared insights that suggest consumers may be feeling the pinch.

One food producer noted an uptick in dinner sausage sales, explaining, “This category tends to grow when the economy weakens, as sausage is a good protein substitute for higher-priced proteins and can ‘stretch’ consumers’ food budgets.” This shift in buying habits could be seen as a canary in the coal mine for tougher economic times ahead.

The agricultural sector appears to be facing particular challenges. A food manufacturer pointed out, “Agriculture is hurting. No farm bill, weather and falling prices for our commodities while input costs increase are putting a big squeeze on our industry.” This squeeze on farmers could have ripple effects throughout the food supply chain and rural economies.

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Some manufacturers are bracing for worse conditions, with one bluntly stating, “We are preparing for the recession.” This sentiment was echoed by machinery manufacturers, with one reporting, “The slowdown is settling in with business activity at a very low level.”

A common thread among respondents was uncertainty surrounding the upcoming presidential election between former President Donald Trump and Vice President Kamala Harris.

The political climate seems to be affecting business decisions, with one machinery manufacturer noting, “It’s like we all know the world will continue regardless of who wins, but we’re all sitting on our hands until a winner is announced.”

Some respondents expressed concerns about potential policy changes. One manufacturer commented, “All small business owners that I talk to are very concerned about the high-tax, anti-growth and anti-small business policies that [we think] are certain to come from a [Kamala] Harris presidency.”

Beyond domestic politics, global issues are also weighing on manufacturers’ minds. One respondent raised concerns about the United States’ position on the world stage, stating, “It is increasingly looking like the U.S. has lost its position of strength in geopolitics, and the vacuum is encouraging war and violence, which pose significant risk to international trade and reduce opportunities for U.S. companies.”

The same respondent also touched on competitiveness issues, particularly with China, saying, “Anti-business, tax and spend rhetoric is not conducive for long-term investments and is going to further reduce U.S. busines competitiveness especially against China’s government-supported industries and firms.”

It is important to point out that these comments were edited for publication by the Dallas Fed and are likely just a sampling of what they actually received.

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From consumer spending shifts to geopolitical concerns, the manufacturing industry appears to be navigating a complex and seemingly turbulent economic landscape. It is clear the outcome of the presidential election will determine next steps in the industry.