Dallas Fed manufacturing business index -35.8 vs -16.3 prior

• Prior was -16.3

• Production +5.1 vs +6.0 prior
• New orders -20.0 vs -0.1 prior
• Capex -0.4 vs -0.6 prior
• Employment -3.9 vs -4.6 prior
• Outlook -28.3 vs -10.7 prior
• Future production +14.8 vs +27.6 prior

34% of firms reported declining new orders.

Comments in the report:

Chemical manufacturing

• It is a very dynamic time. I agree with the approach and need
  to bring manufacturing back to the U.S. so that we have the internal
  capability for national security interests. The ability to forecast and
  to understand consumer confidence drivers to the basic materials,
  construction, automotive markets, etc., are the most difficult we have
  seen since the COVID era.
• Tariff uncertainty and actual impact is likely to be significant for the business and ongoing projects.

Computer and electronic product manufacturing

• This has been a crazy few weeks in the news. We export about 20
  percent of our production. Our largest customers are in the United
  Kingdom and France, but we also export to China and many other
  countries. We import a few raw materials, but this isn’t directly
  significant. The current tariff negotiations are having an effect in
  several ways. We accelerated one order to China to beat the reciprocal
  tariffs, and we expect our China sales to go to zero until the tariff
  situation changes. We are seeing some European customers stock up on
  inventory in anticipation of future tariffs. Most of our U.S. customers
  continue to buy, but we have seen a 25 percent drop in incoming RFQs
  [requests for quotations] in April compared with the average of previous
  months. Assuming this continues, we expect to see roughly a 10–15
  percent decline in sales in May. We believe that this is largely due to
  uncertainty in our customer base driven by the tariff situation and
  potential knock-on effects to the general economy.
• There is really no way to predict anything accurately six
  months out or even six weeks out now for our industry due to the tariff
  and trade uncertainty. Carve-outs for large electronics businesses
  (cellphones and laptops) leaves small business burdened to deal with
  tariffs on our own, which are likely to cause delays, cancellations and
  early product obsolescence on existing products and orders. We have
  already had to turn around and refuse shipments because customers
  cannot afford the tariffs, delaying our ability to build, which will
  eventually lead to job losses. If this continues for any length of
  time, many small companies are likely to be significantly hurt or even
  gone. If we want to bring manufacturing back to the U.S., can we try
  not to kill the companies that can actually help do that before we get
  the chance? Maybe we can think about using a scalpel rather than a
  sledgehammer? The risk we face now is far greater and less understood
  than what we saw during the COVID shutdown. Consumers and businesses
  will limit investment and orders until there is some sense of
  stability, and we have already experienced this with smaller orders and
  delayed orders. It’s chaos right now.
• Please lower interest rates. We need it in order to boost the economy due to the uncertainty and tariffs.
• President Trump, tariffs and maximum business uncertainty [are
  issues affecting our business]. [We see a] probable recession soon.

Fabricated metal product manufacturing

• There is no stability in business, so it is difficult to plan.
  Thus, we are not making commitments for future growth, not knowing if
  or when future growth will exist.
• Our backlog is not building. Bid activity is moderate, but projects are not being released/started.
• There was a temporary supply hiccup in April on a key component; we expect it to resolve in the next month or two.

Food manufacturing

• The current economic environment is confusing. President Trump
  keeps things in turmoil, and we do not know what he will do next. So
  far, import prices for raw materials have not increased. Food service
  and retail sales have maintained their growth projections.
• Chaos at the federal level, tariffs and resulting raw
  ingredient costs, decimation of partner relationships due to canceled
  contracts “for convenience” along with stagflation concerns [are issues
  affecting our business]. DOGE [Department of Government Efficiency] is
  needed. The DOGE without a follow-up plan does nothing for the domestic
  tranquility needed (stable arena for business to function within).
• Tariffs and tariff uncertainty are wreaking havoc on our supply lines and capital spending plans.
• It is unknown what effect the tariffs are going to have on the
  general economy. Luckily, we do not import or export many items (except
  for spices), so we are not directly impacted by the contemplated
  tariffs.
• We are still worried about labor price increases due to the trade war and immigration.

Machinery manufacturing

• Nothing is easy. Forecasting is extremely challenging in this
  time of uncertainty. Committing to growth initiatives is
  anxiety-riddled. Helping our employees keep beans on their table and a
  roof over their heads is harder. We believe the direction the current
  administration is leading our country is on target, but the pain to get
  there may be longer and more intense than originally anticipated.
• We are experiencing a strong month and, hopefully, this trend will continue.
• Due to tariffs, we do not know what to expect.

Miscellaneous manufacturing

• There is too much uncertainty all over for any increases [in business] soon.
• Tariffs and the general market have made decisions challenging.
  Items we are only able to source internationally are making our daily
  business decisions difficult. Raw materials have increased, and there
  is not an easy way to pass those increases to our customers.
• Tariffs are causing uncertainty and a reduction in demand for
  our products. We buy all raw materials domestically but are still
  experiencing adverse business climate due to reduction in demand.
• Tariffs may drive us out of business.
• Tariffs [are an issue affecting our business].

Nonmetallic mineral product manufacturing

• Tariffs. Tariffs. Tariffs. There was a better way to do this.

Paper manufacturing

• We have seen continued slow order entry now for four months.

Plastics and rubber products manufacturing

• Tariffs are impacting factory input costs significantly.

Primary metal manufacturing

• Capital expenditures are focused on adding new product offerings.
• The aluminum industry is currently in a holding pattern,
  awaiting final decisions on tariffs. If the Section 232 tariffs on
  Mexico and Canada remain in place, it would help level the playing field
  and remove their pricing advantage when selling into the U.S. However,
  if Mexico and Canada continue to receive exemptions—as they have since
  the initial implementation of Section 232 during the first Trump
  administration—it will likely lead to further job losses in our segment
  of the aluminum industry. Our company, for example, has put a
  multimillion-dollar project on hold until we receive clear direction on
  this issue. China is now building aluminum plants in Mexico to avoid
  tariffs if they ship from China. Our company is a proponent of tariffs
  to combat dumping and subsidies other countries are doing for shipments
  into the U.S.

Printing and related support activities

• The tariff issue is a mess, and we are now starting to see
  vendors passing along increases, which we will have to in turn pass
  along to our customers. Because of this, we are very concerned about
  general business activity for the next six to nine months or until these
  trade agreements get worked out.
• The administration’s tariff policy is insanity. It is creating havoc in the manufacturing business.

Textile product mills

• Sales are down, and uncertainty is very high. We import raw
  materials and finished goods and are very nervous about tariff impacts
  (especially China). We will likely need to increase prices, which will
  likely hurt demand/sales. We are expecting to get hit on both the supply
  and demand side. There is a lot of uncertainty.

Transportation equipment manufacturing

• We are unsure of the tariff impact.
• There is too much uncertainty, including a possible recession.
  Interest rates are too high. The Federal Reserve always seems to be
  late for their own party.

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