Special Questions

Texas Manufacturing Outlook Survey

Data were collected March 14–22, and 92 Texas manufacturers responded to the survey.

NOTE: 90 responses.

NOTE: 91 responses.

Texas Service Sector Outlook Survey

Data were collected March 14–22, and 292 Texas business executives responded to the survey.

NOTE: 287 responses.

NOTE: 285 responses.

Texas Retail Outlook Survey

Data were collected March 14–22, and 67 Texas retailers responded to the survey.

NOTE: 62 responses.

NOTE: 63 responses.

Special Questions Comments

These comments have been edited for publication.

Texas Manufacturing Outlook Survey

• The supply chain remains an issue even though we have seen modest improvements. Costs are continuing to rise even though availability has increased. We are cautious that demand later in the year may decline as prices and interest rates continue to rise.

• March activity has picked up in quoting and sales volume. However, for the year, the potential negative factors still outweigh the positive factors.

• Beef prices are forecast to rise over the next six months, which could impact margins. The cost of debt is also a concern as our working capital financing is variable-rate debt.
• Our biggest concern for maintaining growth is labor. We offer a starting wage more than twice the minimum wage but are having problems finding applicants.
• I would say the leading concern is the growing instability of our federal government and the disastrous leadership across the cabinet positions.

• Our outlook is the worst it’s been in years. This administration is a complete failure.
• We have China-sourced components, and that supply chain, given the potential for conflict (Taiwan, Russian ally), is cause for concern.

• We are still experiencing a labor shortage.

• The uncertainty of the economy and a potential recession weighs heavily on our minds. The expectation is that it will pass us over, but the market was already weakening pre-COVID, collapsed during COVID and has been limping along since then. We are positioned to weather another storm, but there is only so much that can be done ahead of time. The supply chain, particularly anything coming out of China, is a huge problem. Material prices continue to increase almost monthly. We had one material that saw a 49 percent increase from December 2022 to January 2023 just go up again, another 114 percent, for March 2023. Our customers are rightfully concerned. North America needs more domestic options to offset issues like this. As always, the labor shortage is a big problem. The jobs are out there, but when we’re competing with the Wal-Marts and the McDonald's of the world who are giving equivalent hourly rates, it makes hiring difficult. Sure, we offer great benefits, but the 20-something-year-old only cares about a paycheck and less about planning for the future.

• Inflation and higher taxes are the main culprit.

Texas Service Sector Outlook Survey

• We see continued upward pressure on wages and increased uncertainty in the debt markets.

• We are experiencing longer lead times on our accounts receivable from many of our customers, both large and small. This has a negative effect on cash flow and growth.
• China and Russia and the implications to supply chains and a potential recession are my biggest concerns now.

• My consulting work is partially dependent upon energy projects being executed. Supply chains significantly impact engineering and construction. The uncertainty caused by the Ukraine–Russia war and its impact on our government is of significant concern to me. We're still holding off on hiring until our balance sheet improves a bit. But the near-term workload is high, so it's a balancing act. The talk of recession has us concerned but not overly. The supply chain across the commercial real estate construction industry is very troubling.
• Labor costs remain high as well as the overall cost of construction. The most vexing problem, however, is rising interest rates and difficulty in finding funding for projects.
• Our business model depends heavily on contract workers. The changing definition of an independent contractor is likely to have a significant impact on our ability to obtain qualified talent for our projects. This will significantly change our business model by forcing independent contractors to take full-time jobs. This will have the effect of increasing our overall cost to customers, both because of increased tax and insurance liabilities and also due to carrying costs for underutilized full-time talent.
• The high interest rates are slowing the economy much faster than we envisioned. The soft landing everyone has been talking about is starting to look like a hard landing. This coupled with the recent bank takeovers has everyone concerned.
• Overall political uncertainty and divisiveness in the U.S., the proxy war in Ukraine with the attendant billions of U.S. taxpayer dollars spent outside the U.S., and the planned tax increases are causing unease and uncertainty within my client base.

• Wage inflation, rising mortgage rates and continuing consumer uncertainty around big-ticket purchases [are causing concerns].
• We feel that there is a tremendous amount of positive [activity] in the U.S. economy with reshoring activity, infrastructure investment, general business growth, increased salaries, production of war materials for the Ukraine, increased spending on environmental upgrades, etc. But all of these demands point to higher production costs, higher material costs, increased hiring, lower unemployment—all good things, but things that will make inflation a tougher and more difficult problem to deal with. Perhaps we should commit to continued work to reduce inflation but acknowledge that it will take longer.
• Interest rate increases are moving us to recession, and now we’re seeing banks failing and government bailouts of banks.
• We own and manage apartments. Ownership is getting tougher, but when this happens, it creates new opportunities for our management business. Some lenders are already inquiring about our ability to take on distressed assets.

• We are quietly looking for small acquisitions, and increased interest rates could affect our borrowings.

• We still cannot find talent with the required skill level.
• Demand for commercial real estate lease space was relatively stable through 2022 and so far into 2023. However, risk of recession will cause companies that otherwise might be looking to expand to not do so or to reduce their footprint and seek to give back existing space. Higher interest rates have already reduced the economic viability of proposed ground-up new development.

• We are really concerned about the availability of credit from commercial banks and the increase in our cost of funding.

Texas Retail Outlook Survey

• We are seeing a higher number of consumers looking for financing. If lending institutions keep tightening up, this could have a negative impact on us.

• Internally, higher interest rates increase our carrying costs of inventory. We are a low-margin business, and it can be challenging to pass along the higher borrowing costs. Externally, inflation (the currency exchange) is driving our export customers to look for alternative sources.