Construction work on a new apartment building in Austin, Texas in February 2023.
Brandon Bell/Getty Images
The Federal Reserve’s interest rate hikes are having a negative impact on the economy.The Dallas Fed’s Texas Manufacturing Outlook survey included some choice words from respondents.“Interest rates are killing our industry,” said an executive from the transportation equipment sector.
The Federal Reserve’s aggressive interest rate hikes over the past year and a half are having a negative impact on the economy, according to the most recent Dallas Fed’s Texas Manufacturing survey.
The August survey found that the production index, which helps measure factory activity in the state, fell again in August, dropping 6 points to -11.2, the lowest level since May 2020. Weakness has also been seen in the new orders index, which has been in negative territory for more than a year.
Federal Reserve Bank of Dallas
“Perceptions of broader business conditions continued to worsen in August. The general business activity index stayed negative but ticked up,” the report said. “Uncertainty regarding outlooks continued to rise, with the corresponding index remaining positive, though it fell eight points in August to its lowest reading in more than two years.”
The comments from respondents of the survey paint a mostly negative picture when it comes to the Federal Reserve’s monetary tightening policy and its impact on business.
“High interest rates are affecting industrial production like never before… interest rates have placed an inverted incentive to grow due to a major slowdown in capital equipment expenditures. This is the time to stop raising interest rates,” one survey respondent in the computer and electronic product manufacturing industry said.
Other survey respondents from the same industry said, “For the first time in a long time, we are seeing customers reduce or cancel orders due to softening end-use demand. We expect this trend to continue over the next few months” and “Customer orders came to a sudden halt. The overall volume dropped 51% year-over-year.”
An executive from the food manufacturing industry said “customer discretionary spending capability has decreased.”
Warning signs of a slowing economy could also be seen in the machinery manufacturing industry, according to the survey.
A respondent from that sector said, “The phone is not ringing. Our sales team is working harder with less results. Projects are being postponed and, perhaps even more telling, payments are increasingly protracted.”
Finally, a survey respondent from the transportation equipment manufacturing industry had this to say about what the Fed is doing with interest rates: “Interest rates are killing our industry.”
Whether Fed Chairman Jerome Powell is listening to these concerns remains to be seen. He said at Jackson Hole last week that taming inflation still remains the top problem for the Fed to solve, and that further interest rate hikes might be necessary.