Dallas Fed analysis: Texas economy cooling

After years of rampant growth and a strong summer, the Texas economy appears to have cooled this fall, according to a recent analysis by researchers at the Federal Reserve Bank of Dallas.

The cooling trend was evident in both the manufacturing and service sectors, the Fed researchers concluded in a survey published last Friday. They pointed to President Donald Trump's trade policies as a major source of the weakness.

"Tariffs and the surrounding uncertainty continue to impact the Texas economy," Luis Torres, a Dallas Fed economist who coauthored the analysis, said in accompanying comments. "Nearly half of all the businesses surveyed are seeing their costs go up because of these tariffs, and over a quarter of them are passing those higher costs onto customers."

"But there's good news," Torres added. "While firms anticipate continued pass through of tariff costs, a significant jump in pricing is not anticipated."

The analysis was based on data collected through the Dallas Fed's widely watched monthly Texas Business Outlook Surveys, which include responses from representatives of hundreds of Texas businesses across different sectors. The surveys aim to provide regular insight into the Texas economy.

The Lone Star State's booming economy has tempered recently. Overall, the state saw limited hiring in September and October, the Dallas Fed analysts determined based on data the reserve branch collected. The surveys suggested the manufacturing sector managed modest growth in October, while the services sector saw slight net job losses.

The service sector reading was actually the worst the state has seen since July 2020, with 27% of respondents reporting a decrease in revenue and 18% reporting a decrease in employment. Both figures outpaced the percentage of respondents who reported increases.

— Dallas Morning News