Two Regional Factory Gauges Moved in Opposite Directions in August. Both Say the Same Thing About Metal.

Two regional factory surveys landed three days apart at the end of August and told opposite stories about the direction of manufacturing. Read together they are less contradictory than they look, and the line they agree on is the one about costs.

Texas, August 31

The Dallas Fed's Texas Manufacturing Outlook Survey, released Monday, showed its general business activity index at 11.6, up from 1.3 in July. The internals moved with it.

• New orders: 6.4 to 22.0
• Production: 10.1 to 16.1
• Capacity utilisation: 5.9 to 12.8
• Shipments: 8.8 to 14.1
• Growth rate of orders: -0.4 to 8.1
• Company outlook: 13.4 to 19.2

Two series went the other way. Employment fell from 12.2 to 8.0, and wages and benefits fell from 30.8 to 21.1. Hours worked edged up from 4.3 to 5.9. Expectations six months out were stronger still: general business activity at 37.2, production at 40.9, new orders at 42.4.

Chicago, August 28

The Chicago Business Barometer fell to 47.1 in August from 57.6 in July, against a market forecast of 58.3. That is a drop of more than ten points and a miss of more than eleven. The reading marks a renewed contraction in business activity and the steepest since December 2025.

New orders dropped 15.4 points. Production fell 8.8 points into its first sizeable contraction since December. Employment, unusually, went the other way, rising 4.3 points into positive territory for the first time in five months.

They are not the same kind of number

Before treating this as a contradiction, note the construction. The Chicago barometer is a purchasing managers' index, where 50 divides expansion from contraction; 47.1 is below the line. The Dallas Fed publishes diffusion indexes centred on zero, calculated as the share of firms reporting an increase minus the share reporting a decrease. A Dallas reading of 11.6 means more Texas firms reported improvement than deterioration. It does not say by how much, and it is not comparable to 47.1 on its face.

Both are also regional and both are surveys of sentiment about direction rather than measured output.

Where they agree

On costs, the two point the same way. Dallas prices paid for raw materials rose from 41.3 to 44.1 while prices received for finished goods fell from 25.6 to 22.7 - a gap of 21.4 points between what firms say they are paying and what they say they are charging. In Chicago, prices paid rose 3.8 points to their highest level since February 2022, with respondents citing higher metal costs.

The Dallas survey's published comments point at the same input. A primary metals firm told the Dallas Fed that if Section 232 tariffs on aluminium from Canada and Mexico were reduced, it could create an economic advantage for additional imports, particularly Chinese material. A machinery manufacturer, by contrast, described a season of productivity and prosperity, adding that interest rates are stable enough to allow customers to make investments.