Dallas Fed Manufacturing Index Holds Near Year-High, but Outlook Grows More Cautious — Evening Brief – 03.30.26

Texas manufacturing is losing some near-term momentum but still looks considerably healthier than it did through most of the past year. The Dallas Fed Manufacturing Index slipped back into slightly negative territory in March, signaling a sector that is effectively flat rather than contracting decisively. At the same time, a sharp jump in uncertainty highlights how sensitive producers remain to shifting demand, policy and geopolitical risks. 

The Index slipped marginally to -0.2 in March from 0.2 in February, coming in just below expectations but remaining near its highest level in a year. Despite the slight dip, the index continues to hover around the breakeven line, signaling broadly flat conditions but a notable recovery from the weaker readings seen through much of 2023 and early 2024. 

Beneath the headline, however, the data points to moderating momentum. The production index, a key gauge of manufacturing output, fell six points to 6.8, while shipments declined sharply to 1.8 from 9.9. Capacity utilization eased to 7.2 from 11.8, and new orders dropped to 6.1 from 11.1, suggesting softer demand conditions across the region. 

Business sentiment also weakened. The general business outlook index turned negative at -3.5, down from 3.1 in the prior month. At the same time, the outlook uncertainty index surged 20 points to 26.0, marking its highest level since April 2025 and signaling heightened concern among manufacturers around the economic trajectory. 

Still, forward-looking indicators remain constructive. The future production index held steady at a robust 35.7, while the future general business activity index stayed positive at 10.6, despite a modest decline. Other forward measures also improved, reinforcing expectations for increased activity over the next six months.