Texas Manufacturing Outlook Survey

June 27, 2016

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June 27, 2016

Comments from Survey Respondents

These comments are from respondents' completed surveys and have been edited for publication.

Primary Metal Manufacturing

• I have a feeling that business has slowed down. New orders have decreased and phone activity has been slowing over the past two months.
• Projected sales improved slightly in June.

Fabricated Metal Product Manufacturing

• Summer is the slowest time of the year for our business. We will be going to a four-day workweek.
• Bookings have become less choppy and are gaining some momentum. Steel prices are rising, which necessitated passing price increases on to our customers. We view this positively. Our three publicly-available leading indicators for low-rise (less than five stories) nonresidential construction starts measured in square feet are single family residential starts, mixed practice Architecture Billings Index, and the Conference Board Leading Economic Index. Together and seasonally adjusted these three indicators have a 97 percent correlation with Dodge historically-reported actual low-rise nonresidential construction starts and point to 7-8 percent year-over-year growth for the remainder of the year.
• Some Midcontinent and Permian Basin oil and gas exploration and production companies have increased their activity and demand for our products. However, the consensus remains a wait-and-see approach. We have seen a slight increase in order activity but orders are relatively small and short-lived while continuity is questionable.
• Based on year-to-date customer orders compared with the same period in 2015: 25 percent of customers have increased purchases (including new customers), 55 percent of customers have decreased purchases, and 20 percent of customers have ordered nothing. Revenue has declined 28 percent over the same period. Customers remain very cautious with their inventory levels.

Machinery Manufacturing

• Low oil prices continue to have a negative effect on general industry and business in South Texas.
• The oil industry is suffering due to the crude price plunge worse now than in the 1980s. For the ninth month U.S. industrial production declined year over year. This is a recession. There is a continued significant negative impact due to the downturn in the energy industry as a result of weak commodity prices. Recent slight improvement in commodity prices is having no positive impact on business conditions, although it may be slowing the pace of deceleration in business activity.
• Orders continue to be steady. Wages and benefits are rising at an increased rate that will require price increases to be implemented or a deterioration in margins.
• Tariffs applied to steel imports are adversely affecting small to medium business and consumers to a greater extent than the help provided to the large U.S. steel producers. With tariff protection, steel companies are reducing capacity and simultaneously raising pricing beyond just the basics of supply and demand. This is not good for the majority over the long run.
• There are some prospects for improvements in land drilling, but our business—deepwater drilling—looks to be in deep trouble. The number of rigs that are being stacked and the long lead time to bring those rigs back into service makes the outlook very pessimistic. We'll have to find an alternative or face a shell of a company.

Computer and Electronic Product Manufacturing

• Industrial production and machinery exports are hurting big time. The global economy, dollar and EuroAsia financial problems are not helping American manufacturers.
• Macroeconomic concerns are causing softening in demand.

Electrical Equipment, Appliance, and Component Manufacturing

• We are at a pretty steady state. It is hard to completely judge June until it is over. The last week of the month can be pretty big due to our industry’s accounts receivables dating, which lures people to take shipments after the 25th of any month. In general we have been telling people for a couple years that things are "ok" or "good," but not great. Pricing for our products is dependent on competitors to a large degree and that is also very unpredictable.

Transportation Equipment Manufacturing

• Our business is seasonal, so we generally see a downturn in fall/winter. This is not an indication of economic conditions.
• The economy is nervous, shaky and uncertain. Fed policy has us locked into a lethargic and tenuous position. It appears the Fed doesn’t know how to get off the horse it created. The Fed talks interest rate increases but looks for every reason not to do it. Until the Fed backs out of trying to manage the economy, we will be stuck on the cusp of slow growth and a recession. Add the difficulty in getting commercial and retail financing and rising employee costs (health care, minimum wage threats and the ridiculous overtime executive order), and hiring for many of us will be minimal. We cannot have millions of people out of the workforce and be healthy economically—they are a burden not a benefit.

Food Manufacturing

• We are bringing on another facility in March 2017, which will increase our capacity significantly.
• Business remains fairly flat other than some new product successes.

Textile Product Mills

• Labor availability in Juarez and other areas of Mexico has tightened considerably.

Wood Product Manufacturing

• We are nearly halfway through the year, and results exceed expectations by slightly more than 5 percent. Customer demand remains elevated. We expect the second half to equal or exceed the first, with monthly results within a tight range +/-. Our market is exclusively single-family new home builders in Dallas–Fort Worth.

Paper Manufacturing

• We saw a slight increase from May, although it was an easy comparison as May was a very slow month.

Printing and Related Support Activities

• June has become stupid slow for us, and we are not sure why. We have a decent backlog of work but nothing is here for us to work on now. We are very worried about this goofy decision by the Department of Labor to adjust salary levels for overtime; that makes zero sense to us and will have a negative impact on how we go about compensating office people.

Miscellaneous Manufacturing

• We are experiencing major demand instability in the U.S. Continued management focus on upcoming regulatory changes is keeping us from pursuing new markets (especially internationally) and delaying making long-term investments. Major human resources policy updates and changes have resulted in eliminating positions (in the future as people are promoted or leave the company they will not be replaced) and considering moving all salary people who do not travel to hourly. Although we need more people, we are increasing the requirements for the open positions to reflect higher cost thresholds and most likely will delay hiring decisions for most positions until the impacts of the changes are fully understood.
• The Affordable Care Act (ACA) continues a downward push on productivity as it limits our hiring because we can't afford the estimated 60 percent increase in health care premiums that an ACA-compliant policy would cost. Steel raw material costs are rising, but the steel scrap is falling, therefore increasing our costs. Customers are not accepting price increases. It is slow, and the general business climate seems tepid at best.

Historical Data

Historical data can be downloaded dating back to June 2004.

Indexes

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All Data

Download indexes and components of the indexes (percentage of respondents reporting increase, decrease, or no change). For the definitions of all variables, see Data Definitions.