Special Questions

Texas Manufacturing Outlook Survey

Data were collected August 18–26, and 68 Texas manufacturers responded to the survey.

NOTE: 67 responses.

NOTES: 66 responses. Prior to Aug. '26, the question asked compared to three months ago.

NOTE: 67 responses.

The following question was posed to those answering increased/decreased substantially to question 3.

• Tighter supply.

• Price flexibility.

• Product sales mix and price increases to customers.

• Increases in wages are not being offset by increases in prices for goods sold.

• Freight costs due to higher fuel costs. Raw materials have increased a little more than selling prices.

• Lack of work.

• Price and tariff increases. We got a significant tariff refund, so that may improve the numbers once they are calculated.

NOTE: 67 responses.

Survey respondents were given the opportunity to also provide comments, which can be found in the Comments tab above.

Texas Service Sector Outlook Survey

Data were collected August 18–26, and 236 Texas business executives responded to the survey.

NOTE: 232 responses.

NOTES: 224 responses. Prior to Aug. '26, the question asked compared to three months ago.

NOTE: 233 responses.

The following question was posed to those answering increased/decreased substantially to question 3.

• Expense control.

• More activity and sales.

• Steady improvement in contracted projects while holding staff size constant resulted in increased margin. We had the capacity to handle the additional workload without hiring.

• Productivity improvements.

• Inflated prices and high interest rates.
• New vehicle margins have declined considerably.

• Lower gross margins on sales, increased expenses.

• Fuel prices.

• Gas prices.

• Lack of additional revenue.

• Cost increases and decreased demand.

• We got very busy and needed to add manpower. The people we have been able to find have not been as productive as our core employees, and that lack of productivity has led to working more overtime and reduced margins.

• Client attrition.
• Interest rates.
• High wages.

• Less demand for executive search, contingency hiring and interim contractors. Less demand, less opportunity for revenue, expenses higher (software providers raising prices).
• Cost of everything, limited ability to pass on the costs to customers.

• Fixed costs have gone up while sales have gone down.
• Inflation. The price of labor and goods continues to increase.
• Declining sales and increased expenditures.

NOTE: 233 responses.

Survey respondents were given the opportunity to also provide comments, which can be found in the Comments tab above.

Special Questions Comments

Survey participants are given the opportunity to submit comments. Some comments have been edited for grammar and clarity.

• We have seen 2-3 percentage points of operating margin compression over the last six months. Three major factors: raw material costs, labor costs and health insurance costs. Our health insurance cost went up 30 percent over last year at our Sept. 1 renewal. Other business owners tell me they are seeing the same thing. Our employees need this benefit, so our only option is to either pass this cost to our customers or accept margin compression. We're doing our best to raise prices, but it is easy to get behind when our costs increase this much and this quickly.

• Overhead costs are increasing as well as overtime with labor increasing.
• We are seeing margin improvement over the past six months due primarily to operational improvements within our COGS (cost of goods sold). We are using AI and other technology-related tools to improve processes and workflows to eliminate non-value-added costs.

• We took a bath last year trying to figure out tariff uncertainty. We have clawed back a little improved operating margin thanks to price increases this year.

• We are hopeful that more business will continue to be onshored in the months ahead, but that will be directly influenced by whether the administration provides tariff relief to Canada and Mexico. If it does, our business will suffer.

• We need to pass along 100 percent of the cost increases in raw materials driven by the tariffs.

• It is difficult to hold or grow operating margins in a stagnant revenue cycle with high inflation impacting input pricing.

• I am hoping to hire a new full-time employee, and that will lower operating margin for a time.

• Supply and vendor service costs are all up 15-30 percent, while our revenue per patient has stayed relatively flat. Availability of qualified staff has improved, but asking pay rates are well above our budgeted range, by 20-30 percent.

• The demand for loans had softened. The increase in government spending and the level in the U.S. debt is a major concern.
• We are experiencing customers slow-paying.

• It is tough being in business.

• Our consumers cannot take any more price increases.

• Since we are a food-based company, it is not possible to increase pricing at this time.  We have asked our customers about this, and their response is that they are stretching their dollar as far as it will go.

• Selling, general and administrative costs are significantly higher, which has eroded EBIT (earnings before interest and taxes) margins.

• We are adding new business, and we're able to gain some economic efficiencies that will contribute to our gross margin through the end of 2026.

• Wages and occupancy costs continue to climb faster than price increases.

• Our manufacturers continue to feel the effects of tariffs; they have an impact on pricing as well as manufacturer incentives. New vehicle inventories are growing, compounding the margin problem.

• If fuel prices stay high, our customers will have less money to spend on other things.

• We have increased IT spending to address AI operational efficiency and productivity efforts.
• Inflation is affecting the profitability of our firm.
• Use of AI, particularly Grok Bot, will significantly improve productivity and reduce costs.

• Because we are good at improving challenged multifamily deals, our business is growing. But it is hard.
• The number of projects under contract for the next six months has decreased. But the value has increased significantly, and we have been able to capture more costs and a higher operating margin in them. We should be able to do more volume with less manpower. This should result in much better productivity.

• The war in Iran is definitely causing issues with our pricing.