Special Questions

Texas Manufacturing Outlook Survey

Data were collected September 13–21, and 88 Texas manufacturers responded to the survey.

NOTE: 87 responses.

NOTE: 87 responses.

NOTE: 87 responses.

Special Questions Comments

These comments have been edited for publication.

• I could probably select more than three [primary concerns around our outlook]. The geopolitical situation in Russia/Ukraine/European Union is creating significant supply chain, currency exchange rate and commodity feedstock impacts around the globe. Higher labor costs are a reality, and we are making adjustments to our pay structure out of cycle to retain experienced employees. Interest rate impacts are a significant impact to the cost of capital. We are still experiencing a labor shortage in skilled trades and technical professional disciplines.

• Supply-chain constraints, particularly from overseas-based suppliers, continue to be a massive concern. Lead times on some items have become nonsustainable, forcing us to seek domestic options which could be more expensive. Additionally, raw materials continue to be an issue. Certain grades and sizes of metal have become more scarce. Pricing for these has become first come, first serve and is typically pricey. Certain polymers and chemicals used in the manufacturing of raw elastomers are still periodically being placed on force majeure or have just been made “no longer available.”

• A huge negative factor for our industry is foreign countries “dumping” aluminum products in the U.S. while being subsidized as well as not having Section 232 tariffs to pay on their raw material. In the early 2000s and again in 2008 and 2009, we lost several aluminum extrusions plants in the U.S. China was the main problem as they were being subsidized by the Chinese government to export to the U.S. Countervailing duties and tariffs were put in by the U.S. government that helped stop the closures. We are entering a similar period now with foreign countries dumping. Mexico is a leader now in shipping products below market into the U.S.

• Over the past three years, we’ve vertically integrated our business and purchased large quantities of inventory at cheaper prices than today’s cost; therefore, we’ve avoided the problems that others have seen. However, we have raised our prices as if we hadn’t increased our inventory because we know that at some point we will be paying higher prices.

• There is too much uncertainty on input factors (cost, resources, hiring, supply chain) as well as the global environment and its impact on demand and competitors’ and customers’ actions.

Texas Service Sector Outlook Survey

Data were collected September 13–21, and 296 Texas business executives responded to the survey.

NOTE: 294 responses.

NOTE: 292 responses.

NOTE: 293 responses.

Special Questions Comments

These comments have been edited for publication.

• Geopolitical uncertainty and Russia’s actions are dampening the outlook.
• In the last few months, we have seen labor costs flatten and, while we have seen inflation across the board, it has not inverted consumer spending trends in most product categories we are exposed to. Our customers are mostly manufacturers and retailers. They report that supply-chain disruptions are still of major concern, in addition to weakening demand. Their concerns are our concerns. We see these headwinds as much more threatening at this point in time than inflation.

• Client needs and expectations are increasing faster than revenues.

• I am concerned about [many issues]. Higher labor costs are bordering on the ridiculous today. Our supply chain is just as bad as it was a year ago and continues to limit growth, profitability, efficiency and productivity (all that stuff the government is clueless about). We are a debt-free company with a fortress balance sheet because we run our company that way so interest rates are of no concern. Inflation is an insidious margin-eating [problem]...ignore it at the risk of your own survival!

• From a consulting standpoint, supply chains don’t directly impact me. However, they impact the projects that I am advising. Supply chains being disrupted extends the time frame of projects and, hence, the cost.
• The administration's energy policies represent a direct threat to the well-being of the U.S. economy.
• Virtually all forecasters are predicting a recession starting within the next six months (probably not until next year), and we are taking some defensive steps for a slowing of revenue growth. The obvious question is how deep and how long, and what will be the local impact? If there is a recession, will it mitigate the labor issues? Uncertainty breeds concern, and that breeds caution.
• Labor shortages and wage inflation continue to be a concern in the Dallas–Fort Worth area. Although this should relax over the next six months, if recession fears are realized, the general insulation DFW enjoys relative to other areas of the country also means these concerns will persist.
• Availability of child care continues to put pressure on young working parents. We are seeing more disruptions at work due to family obligations such as taking care of young children or elderly parents. Productivity is definitely down.
• I have limited input costs, but the few specialty items I do use are either more expensive or completely unavailable. I asked one vendor about one particular item, and supply-chain disruption was the reason the item I regularly purchased is no longer available. The vendor didn't know if the item would be available in the future and has no plans to source it from another vendor (specialty color and material).

• We need more people with skill sets outside of tech work and retail. More craftsmen and mechanical types are desperately needed.
• Health care costs are going to put us out of business. The ACA [Affordable Care Act] has us in a real bind. We have just enough employees to require a group, but not enough revenue to support it with the employee portion so low.

• We face small, unqualified workforce pools.

Texas Retail Outlook Survey

Data were collected September 13–21, and 59 Texas retailers responded to the survey.

NOTE: 58 responses.

NOTE: 57 responses.

NOTE: 58 responses.

Special Questions Comments

These comments have been edited for publication.

• The Federal Reserve is the main culprit.
• The Russia–Ukraine war is having a direct effect on the inflation cost of raw materials and commodities like fuel and proteins, which are being passed to my customers. It's hard to separate what is specifically causing supply-chain disruptions at this point in time. During COVID, it was a labor shortage. Now, it appears other factors are coming into play. As the Fed [Federal Reserve] interest rate was raised, I have seen immediate moderation of demand, which has allowed the restaurant supply chain to "catch up." As long as the interest rates don't become burdensome to the consumer, I think the overall impact will be positive.

• The uncertainty around labor as it relates to transportation and supply-chain disruption is the most concerning [issue].