Texas economy was a mixed bag in March. Austin could be an exception to the slowdown.

Welcome to another month of up-and-down economic showings in Texas.

In March, manufacturing and service sectors showed modest gains, but both see negative outlooks, according to business executives responding to a new Federal Reserve Bank of Dallas report.

The anonymous survey is based on responses from 384 CEOs in manufacturing and services received from March 14 through March 22.

What is going on, and how might Austin be an exception to the downturn? Here is what the survey reports:

Why is manufacturing growing, while showing a negative outlook?

Texas factory activity expanded slightly in March after contracting in February, according to the business executives responding to the Texas Manufacturing Survey Outlook.

"The pace of expansion is modest and demand continues to fall,” said Emily Kerr, senior business economist at the Dallas Fed. “Outlooks worsened further, and uncertainty continues to climb."

More:Austin's job market is confusing. Here's what to know.

• Based on responses, the March index for general business activity, a key measure of broad business conditions, slipped two points to -15.7.

• The new orders index was negative for the 10th month in a row and came in at -14.3, little changed from February. That suggests a decrease in demand.

• On the upside for manufacturers, price and wage pressures receded in March, though wage growth remained elevated relative to average.

“While the January and February jobs reports surprised to the upside, not many Texas businesses have revised up their 2023 revenue outlook,” Kerr said. “Among those who have changed their outlook, more revised it down than up."

When it comes to top concerns, "weakening demand still holds the top spot," Kerr said.

Is Austin an exception to the slowdown?

Central Texas is experiencing a manufacturing boom, led by automaker Tesla, which has made Austin its headquarters. The company opened a $1.1 billion manufacturing facility in southeastern Travis County, where it is producing its Model Y electric SUVs.

In addition, tech giant Samsung is building a $17 billion semiconductor manufacturing facility in Taylor.

According to documents filed with the state, Samsung is considering building 11 chipmaking facilities in the Austin area over the next two decades, a move that could lead to nearly $200 billion in new investment and create more than 10,000 jobs with the technology giant.

More:Samsung weighs huge Austin-area growth: $200 billion investment, 11 new fabs, 10,000 new jobs

Across the Austin region, commercial real estate firm Transwestern is tracking 13.8 million square feet of industrial space that is under construction, a 445% increase over pre-pandemic construction levels, according to Karen Judson, Transwestern's senior vice president of marketing and research in Austin.

In addition, more than 24 million square feet of proposed industrial projects are in the pipeline and ready to start, most of which are along the Texas 130 corridor between Georgetown and San Marcos, Judson said.

In a report late last year, commercial real estate services firm CBRE said Central Texas' growing population, increased manufacturing led by companies including Tesla and Samsung, and other factors are expected to continue to drive strong demand for industrial space for the foreseeable future.

"The big manufacturing and chip companies are adding to this industrial growth since suppliers and ancillary companies want to locate near the big Samsung and Tesla sites, causing developers to snatch up land around these campuses," Judson said. "Even with Amazon pulling back on their warehouse footprint nationally, industrial demand in the Central Texas market will remain strong for the foreseeable future."

What's happening in the service and retail sectors?

The Texas service sector — which includes retail and hospitality-related businesses as well as technical services — saw modest expansion in March, although the outlooks are worsening, according to survey respondents.

The service sector's performance has a major impact on the Texas job market — it represents almost 70% of the state’s economy and employs about 9.5 million workers.

"Labor market indicators pointed to mostly flat employment and a slight contraction in workweeks,” said Jesus Cañas, Dallas Fed senior business economist. “Perceptions of broader business conditions worsened further in March as uncertainty picked up.”

Meanwhile, retail sales were not encouraging this month, according to the Dallas Fed survey.

More:There's not enough space in Austin's retail market. So where are new merchants opening shop?

“Retail sales activity flattened in March while retail labor market indicators reflected contraction in employment and notably shorter workweeks,” Cañas said. “Retailers’ perceptions of broader business conditions continued to worsen in March.”

Despite the gloomy outlook, Waco economist Ray Perryman said Austin is well prepared to weather any future economic downturn.

"The Austin economy is diverse and has a number of large-scale ongoing projects that will serve as a buffer," Perryman told the American-Statesman. "The diversity of the tech sector itself — chips, software, gaming, computers, life sciences, etc. — also helps to cushion swings. Beyond that, the state government and the University of Texas are sources of stability."

This article originally appeared on Austin American-Statesman: Texas manufacturing, service sectors are feeling strain, survey says