Special Questions

Texas Manufacturing Outlook Survey

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

NOTES: 79 responses. Averages are calculated as trimmed means with the lowest and highest 5 percent of responses omitted.

NOTE: 84 responses.

Texas Service Sector Outlook Survey

Data were collected December 13–21, and 304 Texas business executives responded to the survey.

NOTES: 265 responses. Averages are calculated as trimmed means with the lowest and highest 5 percent of responses omitted.

NOTE: 287 responses.

Texas Retail Outlook Survey

Data were collected December 13–21, and 67 Texas retailers responded to the survey.

NOTES: 58 responses. Averages are calculated as trimmed means with the lowest and highest 5 percent of responses omitted.

NOTE: 62 responses.

Special Questions Comments

These comments have been edited for publication.

Texas Manufacturing Outlook Survey

• Higher mortgage rates will defer housing demand, which will lower customer needs and lead to lower sales volume.

• We still have several open positions that we cannot fill due to a lack of qualified applicants. Turnover remains higher than normal for entry-level positions. Wage rates have been raised across most positions. That has had some impact. However, the increased wage rates with the inflation in other input costs is creating a margin squeeze as steel prices decline. Supply chains are still not 100 percent healthy.
• Regulations calling for all steel to be made in the U.S. and all castings to be poured in the U.S. are hurting the water and wastewater industry because of a lack of material availability in the supply chain. Also, costs have increased by 20 to 200 percent on certain items.
• Labor and overall costs of doing business are our greatest [areas of] focus.

• We are still challenged by a poor labor market. The supply chain is still a major issue with some items.
• Central planners are distorting the free market, and the entire country is suffering as a result.

• We are a small business. The current administration seems happy to push through an ever-increasing regulatory burden with zero consideration for the negative impact it has on us. We need blue-collar employees, and their price continues to increase while their productivity falls. The only solution is to invest in automation where we can, pay more to the best people and raise prices everywhere we can.
• Our largest German customer has put new orders on hold because of the current business outlook in Europe and the effects of the Ukraine/Russia war on energy costs in Europe.

Texas Service Sector Outlook Survey

• We increased our head count by almost 20 people in the recently approved budget but are still doubtful of being able to hire them after falling 40 employees short this year.

• Our prospects (and clients who are renewing services) are more cautious in all buying transactions due to the unknowns in the economy for 2023 and 2024.

• Our primary fear is the Federal Reserve continuing to hike rates without waiting for the effects of prior rate hikes to flow through the economy, thereby triggering a national recession. This will increase unemployment and slow demand for leasing commercial real estate space, causing increased vacancy rates and downward pressure on rental rates. In addition, financing costs for commercial projects are rising, putting downward pressure on margins. Also, [we are] concerned about a worldwide slowdown/recession, exacerbated by the China COVID-19 shutdown/slowdown.

• Land sellers are not reducing their prices, and labor is just as high in price. For our Dallas customers, the epic time delays in zoning and permitting are causing fewer to do projects in the city. The real estate fundamentals are quite challenging.
• The U.S. and global economies are not improving like we thought they would in both 2022 and 2023.
• We are in dire straits with a shortage of experienced staff. We simply cannot find qualified candidates. It takes years to train staff, and we are not seeing the necessary pipeline in the works. People are job-hopping and being poached. Wages are climbing higher than actual output and value. Employers are dealing with much instability in the workforce. Productivity and growth are being stunted. We need a way to import a qualified labor force to meet the demand.
• Our deal flow has dropped, and labor costs continue to rise.
• Higher labor costs and difficulty hiring combined with tighter monetary policy put significant pressure on the business. We are currently near a breaking point.
• [It's] an unprecedented situation in terms of complexity and uncertainty.

• Margins are narrowing substantially and will continue to narrow. We've continued to absorb higher labor and supply costs without any associated revenue offsets for several years. We are concerned about the difficult hiring market and higher costs of doing business. Supply-chain issues continue to be present for critical medical supplies.

• Inflation is impacting input prices, and workers are not available.

• We were forced to increase wages and benefits in 2022 to attract and retain employees. We were forced to increase selling prices in 2022 as a result of increases in supplies and labor expenses. We have seen a decrease in business in 2022. In late November, we were forced to lower employee wages as a result of the decrease in business. We cannot raise prices anymore.

• [A possible] recession is an ongoing concern.

Texas Retail Outlook Survey

• Borrowing at the current interest rates makes business activity impossible.

• Health care reimbursements are getting squeezed more and more to support conglomerate pharmacy benefit managers, which own their own pharmacies and force patients to use them over competitive independent pharmacies. The collusion of wholesalers, specialty contracts, manufacturers and payors can cause supply-chain disruptions and higher labor costs.

• We expect higher taxes and regulation, continuing labor shortages due to government transfer payments and higher labor costs. We see a storm brewing—a unique combination of negative factors on the horizon that will affect our company.