Texas Manufacturing Activity Jumps in August — Evening Brief – 08.31.26

Texas factory activity accelerated in August as production, new orders and shipments all rose at a faster pace, according to the Federal Reserve Bank of Dallas, signaling renewed momentum in one of the country’s largest manufacturing states.

The Dallas Fed’s general business activity index climbed to 11.6 in August from 1.3 in July. The production index, a key measure of factory output, rose to 16.1 from 10.1 in July. New orders, often viewed as an indicator of future production, surged to 22 from 6.4. The shipments index increased to 14.1 from 8.8, while capacity utilization advanced to 12.8 from 5.9.

The improvement followed a mixed first half of the year. Texas manufacturing conditions were largely flat in June, when the general business activity index registered zero, before the measure moved modestly positive in July. The August report suggests that activity broadened as companies reported stronger demand and a faster pace of output.

Labor-market measures were more mixed. The employment index fell to 8 from 12.2, indicating that payrolls continued to expand but at a slower pace. The hours-worked index increased to 5.9 from 4.3, suggesting employers extended work schedules even as the pace of hiring moderated.

Manufacturers also became more optimistic about the next six months. The future company outlook index rose to 35.3 from 28.7, and the future general business activity index increased to 37.2 from 26.5. Both readings were well above their respective historical averages, suggesting firms expect demand and business conditions to improve further.

Texas plays an outsized role in U.S. manufacturing, accounting for roughly 9.5% of national manufacturing output, second only to California. The improvement comes as Texas manufacturers continue to navigate a tightening labor market, with wage growth in the sector reaching 4.8% over the past year, the strongest pace since December 2023, according to recent Dallas Fed reporting.