Texas Manufacturing Outlook Survey

Texas Manufacturing Outlook Survey

Data were collected Sep. 12–20, and 108 Texas manufacturers responded to the survey. Among responding firms, 23 are located along the Gulf Coast*.

1. What has been Hurricane Harvey’s net impact to your firm’s revenue/production?

   	Gulf Coast (percent)	Rest of Texas (percent)	All Firms (percent)
   Negative	83	28	40
   No impact	9	64	52
   Positive	9	8	8

2. What do you expect the hurricane’s net impact to your firm’s revenue/production will be over the next six months?

   	Gulf Coast (percent)	Rest of Texas (percent)	All Firms (percent)
   Significant decrease	18	5	8
   Slight decrease	32	17	20
   No change on net	27	52	47
   Slight increase	14	21	19
   Significant increase	9	5	6

3. Because of Hurricane Harvey, how do you expect your firm’s ability to find and hire workers to change over the next six months?

   	Gulf Coast (percent)	Rest of Texas (percent)	All Firms (percent)
   Become significantly more difficult	25	6	10
   Become slightly more difficult	35	19	22
   No change on net	35	68	61
   Become slightly easier	5	8	7
   Become significantly easier	0	0	0

The following three questions were posed only to firms that noted a negative net impact from Hurricane Harvey.

4. Due to Hurricane Harvey, for how many days, if any, did your establishment experience…

   	A Complete Shutdown			A Reduction in Revenue/Production
   	Gulf Coast (percent)	Rest of Texas (percent)	All Firms (percent)	Gulf Coast (percent)	Rest of Texas (percent)	All Firms (percent)
   None	6	83	39	0	21	11
   One to five days	50	8	32	31	42	37
   More than five days	44	8	29	69	37	51
   Average number of days	6.1	0.9	3.9	10.8	8.4	9.5
   Average number of nonzero days	6.5	5.5	6.4	10.8	10.6	10.7
   Note: Of the firms who experienced a reduction in revenue/production, 48 percent noted that it is still ongoing.

5. Because of Hurricane Harvey, to what extent will the following impede your firm getting back to business as usual over the next six months?
   For each disruption, firms reported whether it will be a major or minor disruption or none at all.

   	Major Extent (percent)	Minor Extent (percent)	Not at All (percent)
   Personnel disruptions	14	38	48
   Transportation and/or supply chain disruptions	14	57	29
   Loss of customer base	10	45	45
   Repair of facility	10	24	67
   Repair/replacement of other capital (inventory/equipment)	5	24	71
   Restoration of utilities (power/water/gas)	5	19	76
   Ability to hire workers	0	33	67
   Other	0	0	100
   Note: This question was posed only to firms that expect the hurricane’s net impact to be a decrease in revenue/production over the next six months.

6. To what extent will your firm’s damages and/or losses due to Hurricane Harvey be covered by insurance (if applicable)?

   	Physical capital losses (percent)	Revenue/ Production losses (percent)
   Not at All	68	81
   Somewhat	21	15
   Mostly	11	4

*For our analysis, Gulf Coast includes the metropolitan statistical areas of Houston, Beaumont-Port Arthur, Corpus Christi and Victoria.

Special Questions Comments

These comments have been edited for publication.

Chemical Manufacturing

• Hurricane Harvey, while it did not have a direct effect on our revenue or production times, is going to decrease our profitability due to our increased raw material costs (price increases are coming quicker than we can raise prices) and will reduce our cash flow due to higher inventory requirements.

Primary Metal Manufacturing

• Technical people will become more in-demand in the regions of the hurricanes, making them harder to find for normal business.

Fabricated Metal Product Manufacturing

• We have two significant production equipment machines that we are still trying to troubleshoot to repair/restore electrical systems. The machines are too expensive to replace, and flood insurance only covers depreciated value, so we may be out of production longer than anticipated.
• Shipments to Southeast Texas customers were delayed a few days following Hurricane Harvey, but we have not seen any other impact to date.
• We haven’t been able to hire employees all year. Houston is at full employment.

Machinery Manufacturing

• Though our facility did not have any physical damage (even inside Houston), many of our employees were unable to come to work due to blocked roads, damage to their homes or damage to their relatives’ homes. This caused our office to be shut down for several days.

Transportation Equipment Manufacturing

• We are about to begin hiring again in earnest. Our guess is that it may be easier to find workers since some may have been displaced from businesses that experienced major or total losses due to Hurricane Harvey. But we haven’t yet started that process, so we really won’t know for a month or two.

Furniture and Related Product Manufacturing

• There has been a labor shortage of skilled trades for installation of our product for a while already. Hurricane Harvey may cause that to increase, which, if it does, will force lower construction rates in other areas where that labor was pulled from.

Food Manufacturing

• We were not affected by the storm, but many customers in areas hard-hit have lost facilities or are now producing less due to their demand decreasing.

Printing and Related Support Activities

• We were not impacted at all, but many of our Houston-area customers were, and we lost a very nice quick-turn job that was going to be produced in Houston. But because they couldn’t find truckers to bring printed materials into Texas amid worries about fuel shortages and closed roads, the job went to a different part of the country. It was worth 10 percent of our monthly billing.

Miscellaneous Manufacturing

• I feel that construction pay increases in Houston will cause Central Texas workers to migrate that way, thus exacerbating the current labor shortage and wage increases we have been facing.

Texas Service Sector Outlook Survey

Data were collected Sep. 12–20, and 282 Texas business executives responded to the survey. Among responding firms, 55 are located along the Gulf Coast*.

1. What has been Hurricane Harvey’s net impact to your firm’s revenue/production?

   	Gulf Coast (percent)	Rest of Texas (percent)	All Firms (percent)
   Negative	75	33	41
   No impact	11	59	50
   Positive	15	8	10

2. What do you expect the hurricane’s net impact to your firm’s revenue/production will be over the next six months?

   	Gulf Coast (percent)	Rest of Texas (percent)	All Firms (percent)
   Significant decrease	15	3	5
   Slight decrease	40	27	29
   No change on net	19	52	45
   Slight increase	19	15	16
   Significant increase	8	4	5

3. Because of Hurricane Harvey, how do you expect your firm’s ability to find and hire workers to change over the next six months?

   	Gulf Coast (percent)	Rest of Texas (percent)	All Firms (percent)
   Become significantly more difficult	8	5	6
   Become slightly more difficult	31	17	19
   No change on net	59	76	73
   Become slightly easier	2	2	2
   Become significantly easier	0	0	0

The following three questions were posed only to firms that noted a negative net impact from Hurricane Harvey.

4. Due to Hurricane Harvey, for how many days, if any, did your establishment experience…

   	A Complete Shutdown			A Reduction in Revenue/Production
   	Gulf Coast (percent)	Rest of Texas (percent)	All Firms (percent)	Gulf Coast (percent)	Rest of Texas (percent)	All Firms (percent)
   None	6	52	31	3	15	10
   One to five days	75	36	54	35	43	40
   More than five days	19	12	15	62	42	49
   Average number of days	4.7	2.7	3.6	10.1	6.3	7.8
   Average number of nonzero days	5.0	5.7	5.3	10.4	7.4	8.7
   Note: Of the firms who experienced a reduction in revenue/production, 64 percent noted that it is still ongoing.

5. Because of Hurricane Harvey, to what extent will the following impede your firm getting back to business as usual over the next six months?
   For each disruption, firms reported whether it will be a major or minor disruption or none at all.

   	Major Extent (percent)	Minor Extent (percent)	Not at All (percent)
   Personnel disruptions	20	49	31
   Loss of customer base	19	51	30
   Transportation and/or supply chain disruptions	14	49	38
   Repair of facility	11	33	56
   Repair/replacement of other capital (inventory/equipment)	8	24	68
   Restoration of utilities (power/water/gas)	8	25	67
   Ability to hire workers	7	25	68
   Other	10	7	83
   Note: This question was posed only to firms that expect the hurricane’s net impact to be a decrease in revenue/production over the next six months.

6. To what extent will your firm’s damages and/or losses due to Hurricane Harvey be covered by insurance (if applicable)?

   	Physical capital losses (percent)	Revenue/ Production losses (percent)
   Not at All	56	72
   Somewhat	29	19
   Mostly	15	10

*For our analysis, Gulf Coast includes the metropolitan statistical areas of Houston, Beaumont-Port Arthur, Corpus Christi and Victoria.

Special Questions Comments

These comments have been edited for publication.

Credit Intermediation and Related Activities

• We are waiting to determine what delayed impacts the hurricane will have on our market areas. We have a low percentage of our loan portfolio in the affected areas and are waiting on assessments of those credits. We anticipate we will see the increased cost for gas continue and building materials as well. Our community saw an increase in occupation rates at hotels and provided sanctuary for a number of people in available facilities but expect that to be short term.
• Our employees and physical facilities were not impacted, but we had several prospects about to sign a contract with us that had to delay their decision-making due to Hurricane Harvey. We believe they will sign at some point, but this will have an impact on our sales bookings for the third and fourth quarters of 2017.
• We are a commercial bank, and the survey questions are difficult to answer because the major impact will be determined by the impact on our customers, and it's much too early to determine that impact.

Insurance Carriers and Related Activities

• As a managing general agent for specialty carriers underwriting wind-exposed risks along the coast and inland including Houston, we expect to see 5 to 10 percent rate increases in premiums on new and renewal business over the next 12 months. We don't expect either Hurricanes Harvey or Irma to significantly impact the underwriting availability of coverage for wind-exposed risks.
• Our business is 300 miles inland. We have some clients who were in Hurricane Harvey's path, but most of their losses were insured (wind or flood) losses.

Real Estate

• While we do not feel we will be directly impacted, we do recognize that any construction-related work we need in Austin, San Antonio or any of the Rio Grande Valley markets will probably be more costly and harder to accomplish due to labor or materials costs or shortages.

Rental and Leasing Services

• I think there will be many opportunities to finance equipment to new and old customers, as many will have difficulty getting the down payment that lending firms require today. Their business has been flooded, and they don't have a cash flow right now; some will be new companies and not have sufficient credit history to meet the regulatory rules lenders require today, who will need quick, simple, easy, fast, skip payment, delayed payment, low interest rate, low down payment money available.

Professional, Scientific and Technical Services

• We lost time in the office but a number of our lawyers can work remotely. I expect we will see increased activity in hurricane-related claims in the months ahead.
• The economic impact of Hurricanes Harvey and Irma will have a significant impact upon the state of Texas.
• We are a professional engineering firm. We are expecting an uptick in project work. It is still too early to see if funding will be forthcoming for infrastructure projects.
• We were fortunate in that this was not a direct hit on the Houston metro area, and for the most part, power was maintained. This was key to us keeping folks—who were water-locked at home—engaged and working as best they could, particularly work-at-home staff, and also professionals who could work remotely. Some clients were no doubt offline. Our business continuity/disaster recovery plans worked very well, and we saw no systems disruption. The impact was isolated to Houston-based personnel and their inability to access the building for a couple of days, as folks were limited in ability to travel with widespread road flooding.
• I expect the rebuilding activity to have a net positive effect for the economy—notwithstanding the immediate negative impact—and therefore be an indirect positive effect on the economy throughout Texas.
• We expect significant cost increases on select building materials for our projects, possibly to the point of endangering going forward with construction on some projects. The increases are expected in drywall, metal studs and flooring materials.
• The overall effects of Hurricane Harvey on our business will be slight. We will have slightly higher costs this month due to lost production, but that will be made up in short order. About 15 percent of our staff were effected by flooding in their homes but all have returned to work while repairs are being made.
• We have received two small orders due to hurricane disruption but nothing significant enough to record. We cover San Antonio, Austin and South Texas and, thankfully, did not have much flooding in our footprint.

Management of Companies and Enterprises

• We have two assessment areas. Only one was impacted to some extent. The impacted area was slightly affected, and the loss of production was due to power outage and not flooding. The impacted area is 100 percent operational. Some clients were negatively impacted but not a large segment. There has been some slowdown but minimal overall impact.   

Administrative and Support Services

• The effect we most see with Hurricane Harvey is the shipment of customers’ parts to and from our lab.

Educational Services

• With construction/repair increasing in the Houston and Gulf Coast area, we are concerned about construction costs rising in Texas as well as availability of workers, etc.

Hospitals

• We are too far from the coast to be materially impacted.
• We expect costs to increase around Texas.

Social Assistance

• As a food bank, we have sent a significant amount of food to the areas affected by Hurricane Harvey and have been providing meals to evacuees. We have also seen increased donations and volunteers in response to the disaster.

Food Services and Drinking Places

• We got busier for a week or so because the hotels around us (Dallas suburbs) filled up with displaced Houstonians. That said, the hurricane had a very adverse effect on our Houston stores.
• Revenues for the recent period were down at the five stores impacted in Corpus Christi, Victoria and Houston. We were one of the first to reopen, and our sales have been very strong post-reopening. We are not sure how long this will last as other businesses get back on their feet.

Personal and Laundry Services

• Our business has not been impacted by Hurricane Harvey.

Texas Retail Outlook Survey

Data were collected Sep. 12–20, and 61 Texas retailers responded to the survey. Among responding firms, 16 are located along the Gulf Coast*.

1. What has been Hurricane Harvey’s net impact to your firm’s revenue/production?

   	Gulf Coast (percent)	Rest of Texas (percent)	All Firms (percent)
   Negative	63	24	34
   No impact	0	53	39
   Positive	38	22	26

2. What do you expect the hurricane’s net impact to your firm’s revenue/production will be over the next six months?

   	Gulf Coast (percent)	Rest of Texas (percent)	All Firms (percent)
   Significant decrease	0	0	0
   Slight decrease	44	30	33
   No change on net	19	34	30
   Slight increase	25	25	25
   Significant increase	13	11	12

3. Because of Hurricane Harvey, how do you expect your firm’s ability to find and hire workers to change over the next six months?

   	Gulf Coast (percent)	Rest of Texas (percent)	All Firms (percent)
   Become significantly more difficult	13	7	9
   Become slightly more difficult	38	21	26
   No change on net	44	71	64
   Become slightly easier	6	0	2
   Become significantly easier	0	0	0

The following three questions were posed only to firms that noted a negative net impact from Hurricane Harvey.

4. Due to Hurricane Harvey, for how many days, if any, did your establishment experience…

   	A Complete Shutdown			A Reduction in Revenue/Production
   	Gulf Coast (percent)	Rest of Texas (percent)	All Firms (percent)	Gulf Coast (percent)	Rest of Texas (percent)	All Firms (percent)
   None	0	67	27	0	0	0
   One to five days	89	33	67	30	71	47
   More than five days	11	0	7	70	29	53
   Average number of days	4.3	1.2	3.0	9.7	5.3	7.9
   Average number of nonzero days	4.3	3.5	4.1	9.7	5.3	7.9
   Note: Of the firms who experienced a reduction in revenue/production, 70 percent noted that it is still ongoing.

5. Because of Hurricane Harvey, to what extent will the following impede your firm getting back to business as usual over the next six months?
   For each disruption, firms reported whether it will be a major or minor disruption or none at all.

   	Major Extent (percent)	Minor Extent (percent)	Not at All (percent)
   Transportation and/or supply chain disruptions	29	57	14
   Loss of customer base	13	67	20
   Personnel disruptions	7	57	36
   Restoration of utilities (power/water/gas)	7	33	60
   Repair of facility	0	47	53
   Repair/replacement of other capital (inventory/equipment)	0	47	53
   Ability to hire workers	0	33	67
   Other	0	0	100
   Note: This question was posed only to firms that expect the hurricane’s net impact to be a decrease in revenue/production over the next six months.

6. To what extent will your firm’s damages and/or losses due to Hurricane Harvey be covered by insurance (if applicable)?

   	Physical capital losses (percent)	Revenue/ Production losses (percent)
   Not at All	63	63
   Somewhat	25	25
   Mostly	13	13

*For our analysis, Gulf Coast includes the metropolitan statistical areas of Houston, Beaumont-Port Arthur, Corpus Christi and Victoria.

Special Questions Comments

These comments have been edited for publication.

Merchant Wholesalers, Durable Goods

• We have done business in Houston for over 35 years; we are serving and responding to our customer's needs for gypsum, insulation, roofing, doors, moulding and other related products as homeowners begin to repair their homes.

Motor Vehicle and Parts Dealers

• We are in the marine business and expect some revenue from repair or replacement of damaged boats, motors and equipment.
• We will experience a slight increase as a result of the number of vehicles being totaled. We aren't close enough to experience a major impact. Generally, the dealers in the impacted area will see a big increase in their overall business (new, preowned, certified preowned, rental, service loaner, parts, and service and collision centers).

Clothing and Clothing Accessories Stores

• Our corporate headquarters recovery took about a week; most stores took about five days to recover, but 10 stores had damage that will keep them closed until approximately Thanksgiving. 

General Merchandise Stores

• We have eight locations in Houston. One was flooded and will be closed for up to a couple of months.

Nonstore Retailers

• I expect our ability to hire personnel may be impacted to a minor extent but could be major. I expect the cleanup, repair and rebuild efforts will absorb a great deal of the workforce we would typically draw from, although I don't know to what extent this may be offset by companies and individuals from outside Houston coming in to assist/benefit from these efforts. I see this driving wages higher in the area.