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Texas Manufacturing Outlook Survey

Report in PDF

August 31, 2020

Recovery Continues in Texas Manufacturing

What’s New This Month

For this month’s survey, Texas business executives were asked supplemental questions on the impacts of COVID-19. Results for these questions from the Texas Manufacturing Outlook Survey, Texas Service Sector Outlook Survey and Texas Retail Outlook Survey have been released together. Read the special questions results.

Texas factory activity expanded in August for the third month in a row following a record contraction in the spring after the onset of the COVID-19 pandemic, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, came in at 13.1, down slightly from July but still indicative of moderate growth.

Other measures of manufacturing activity also point to expansion this month. The new orders index advanced three points to 9.8, and the growth rate of orders index surged more than 10 points to 11.8. The shipments index rose from 17.3 to 23.3, while the capacity utilization index inched down but remained positive at 10.9.

Perceptions of broader business conditions improved in August. The general business activity index turned positive after five months in negative territory, coming in at 8.0. The company outlook index registered a third consecutive positive reading, shooting up 11 points to 16.6, its highest reading in nearly two years. The index measuring uncertainty regarding companies’ outlooks remained positive but retreated to 8.2.

Labor market measures indicated solid growth in employment and workweek length. The employment index pushed up from 3.1 to 10.6, suggesting more robust hiring. Twenty-three percent of firms noted net hiring, while 13 percent noted net layoffs. The hours worked index pushed up five points to 10.5.

Input and labor costs continued to increase, while selling prices remained fairly flat in August. The raw materials prices index rose 10 points to 19.4, and the wages and benefits index rose six points to 15.2. The finished goods prices index remained near zero, suggesting no change in selling prices from July.

Expectations regarding future activity were more positive in August. The future production index pushed up to an above-average reading of 43.0, and the future general business activity index jumped 10 points to 20.4. Other measures of future manufacturing activity advanced further into positive territory.

Next release: Monday, September 28

Data were collected Aug. 18–26, and 111 Texas manufacturers responded to the survey. The Dallas Fed conducts the Texas Manufacturing Outlook Survey monthly to obtain a timely assessment of the state’s factory activity. Firms are asked whether output, employment, orders, prices and other indicators increased, decreased or remained unchanged over the previous month.

Survey responses are used to calculate an index for each indicator. Each index is calculated by subtracting the percentage of respondents reporting a decrease from the percentage reporting an increase. When the share of firms reporting an increase exceeds the share reporting a decrease, the index will be greater than zero, suggesting the indicator has increased over the prior month. If the share of firms reporting a decrease exceeds the share reporting an increase, the index will be below zero, suggesting the indicator has decreased over the prior month. An index will be zero when the number of firms reporting an increase is equal to the number of firms reporting a decrease. Data have been seasonally adjusted as necessary.

August 31, 2020

Results Summary

Historical data are available from June 2004 to the most current release month.

Business Indicators Relating to Facilities and Products in Texas
Current (versus previous month)
IndicatorAug IndexJul IndexChangeSeries
Average
Trend*% Reporting Increase% Reporting No Change% Reporting Decrease

Production

13.1

16.1

–3.0

9.8

3(+)

35.4

42.2

22.3

Capacity Utilization

10.9

14.0

–3.1

7.5

3(+)

30.9

49.1

20.0

New Orders

9.8

6.9

+2.9

5.6

3(+)

33.2

43.4

23.4

Growth Rate of Orders

11.8

1.3

+10.5

–0.6

2(+)

28.7

54.4

16.9

Unfilled Orders

7.8

7.9

–0.1

–3.1

2(+)

27.1

53.6

19.3

Shipments

23.3

17.3

+6.0

8.5

3(+)

42.0

39.4

18.7

Delivery Time

7.1

3.2

+3.9

–0.6

2(+)

19.2

68.7

12.1

Finished Goods Inventories

–17.3

–9.9

–7.4

–3.3

17(–)

11.8

59.1

29.1

Prices Paid for Raw Materials

19.4

9.7

+9.7

23.9

4(+)

28.1

63.2

8.7

Prices Received for Finished Goods

0.9

–1.5

+2.4

5.9

1(+)

13.5

73.9

12.6

Wages and Benefits

15.2

9.0

+6.2

18.4

3(+)

21.2

72.8

6.0

Employment

10.6

3.1

+7.5

6.1

2(+)

23.4

63.8

12.8

Hours Worked

10.5

5.8

+4.7

2.3

2(+)

25.1

60.3

14.6

Capital Expenditures

0.0

–3.0

+3.0

6.1

1()

14.7

70.6

14.7

General Business Conditions
Current (versus previous month)
IndicatorAug IndexJul IndexChangeSeries
Average
Trend**% Reporting Improved% Reporting No Change% Reporting Worsened

Company Outlook

16.6

5.9

+10.7

6.2

3(+)

33.8

49.0

17.2

General Business Activity

8.0

–3.0

+11.0

1.8

1(+)

29.5

48.9

21.5

IndicatorAug IndexJul IndexChangeSeries
Average
Trend*% Reporting Increase% Reporting No Change% Reporting Decrease

Outlook Uncertainty†

8.2

20.9

–12.7

13.4

27(+)

25.5

57.3

17.3

Business Indicators Relating to Facilities and Products in Texas
Future (six months ahead)
IndicatorAug IndexJul IndexChangeSeries
Average
Trend*% Reporting Increase% Reporting No Change% Reporting Decrease

Production

43.0

37.2

+5.8

38.1

4(+)

57.8

27.4

14.8

Capacity Utilization

41.0

30.7

+10.3

35.0

4(+)

53.8

33.4

12.8

New Orders

42.5

38.6

+3.9

35.9

4(+)

54.4

33.7

11.9

Growth Rate of Orders

39.2

30.4

+8.8

26.5

4(+)

46.0

47.3

6.8

Unfilled Orders

7.8

2.7

+5.1

3.8

3(+)

21.2

65.4

13.4

Shipments

36.0

33.2

+2.8

36.7

4(+)

50.0

36.0

14.0

Delivery Time

7.1

4.8

+2.3

–1.7

3(+)

15.7

75.7

8.6

Finished Goods Inventories

1.0

1.0

0.0

–0.5

3(+)

18.3

64.4

17.3

Prices Paid for Raw Materials

22.1

22.3

–0.2

33.1

5(+)

25.0

72.1

2.9

Prices Received for Finished Goods

7.8

10.9

–3.1

18.9

4(+)

17.5

72.8

9.7

Wages and Benefits

28.1

22.5

+5.6

37.5

4(+)

31.0

66.1

2.9

Employment

27.6

11.1

+16.5

21.7

3(+)

34.9

57.8

7.3

Hours Worked

14.9

9.9

+5.0

9.2

4(+)

27.4

60.1

12.5

Capital Expenditures

13.0

11.6

+1.4

19.5

3(+)

26.4

60.2

13.4

General Business Conditions
Future (six months ahead)
IndicatorAug IndexJul IndexChangeSeries
Average
Trend**% Reporting Increase% Reporting No Change% Reporting Worsened

Company Outlook

27.8

18.7

+9.1

20.2

3(+)

41.5

44.8

13.7

General Business Activity

20.4

10.6

+9.8

13.8

3(+)

37.4

45.5

17.0

*Shown is the number of consecutive months of expansion or contraction in the underlying indicator. Expansion is indicated by a positive index reading and denoted by a (+) in the table. Contraction is indicated by a negative index reading and denoted by a (–) in the table.

**Shown is the number of consecutive months of improvement or worsening in the underlying indicator. Improvement is indicated by a positive index reading and denoted by a (+) in the table. Worsening is indicated by a negative index reading and denoted by a (–) in the table.

†Added to survey in January 2018.

Data have been seasonally adjusted as necessary, with the exception of the outlook uncertainty index, which does not yet have a sufficiently long time series to test for seasonality.

August 31, 2020

Production Index

Downloadable chart

August 31, 2020

Comments from Survey Respondents

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

Chemical Manufacturing

  • Although orders and, thus, capacity utilization are increasing month over month, the pace is somewhat slower than hoped due to the continued COVID-19 impacts to the general economy and, thus, the basic materials sector.

Plastics and Rubber Product Manufacturing

  • There hasn't been much change in the overall outlook. COVID-19 restrictions continue to be a hindrance to a rebound in the oil market. U.S. oil rig operations are down around 70 percent from last year. However, current projections show that there should be a rebound in late third quarter or early fourth quarter in oil demand. This should allow drillers to rehire any laid-off workers and resume normal operations. That being said, this is all contingent on COVID-19.

Nonmetallic Mineral Product Manufacturing

  • The six-months-from-now rosy projection we submitted assumes a Trump reelection. Flip this projection completely from very positive to very negative if Biden is elected. We are not expanding our capacity or making any capital expenditures now and will not until the election. If Biden is elected, we anticipate that interest rates will rise fast, and the new-home construction market will drop fast. If Trump is reelected and this increased market demand continues, then we must increase our capacity, factory space and employment levels.

Primary Metal Manufacturing

  • Most of our customer base is busy and openly stating they hope the current administration stays in place. All seem to be concerned if there is a change.

Fabricated Metal Manufacturing

  • We are having difficulty receiving favorable terms on our bank refinancing since we are classified as being associated with the energy and petrochemical sectors. Although we expect to be able to renew, the bank has made it clear there will be no “new money” to finance capital expenditures or contract financing.
  • We have benefited from the shift in consumer buying patterns toward home and property improvement. It is not possible to determine if this is a long-term change or a short-term change.
  • New construction project opportunities are decreasing steadily, demand overall is decreasing and competitive end-product pricing has our margins declining.

Machinery Manufacturing

  • Back in May, I forecasted we would be entering a full-blown depression by fall if government policies did not change and we didn't get this economy open. Well, thanks to the governors running their states into the ground, Texas included, that is exactly what is happening. Our July sales collapsed 50 percent from an already bare-minimum base. One simply cannot take away people’s ability to make an honest living and expect no repercussions. The horror of facing a Biden/Harris economic "policy" would be the nail in the coffin.
  • Business is back for both of our primary customer segments, electronics and medical, and we are absolutely booming.

Computer and Electronic Product Manufacturing

  • Auto [business] has rebounded as expected. We are taking capacity utilization up as inventories normalize from elevated levels. Channel inventory remains low. We continue to be cautious about demand, as we believe it could still weaken quickly.
  • The city and state government will begin to get new budgets in October. We expect to see shortfalls and cuts in budgets.
  • Our short-term outlook has worsened primarily because of the oil and gas industry. Those customers are delaying more orders due to high inventory and reduced demand. Other industries seem to continue to be ordering, and that demand seems mostly stable in the other industries we serve. The supply chain has become more difficult to manage with many manufacturing and shipping delays. In short, there is work available, but it is harder to manage with personnel and supply-chain delays, leading to a significant loss of efficiency.
  • The volume of new orders is slowly increasing since the low point in April. We exceeded early COVID-19-adjusted forecasts but revised downward late-year forecasts. We have exceeded forecasts each month since April and expect to meet or slightly beat adjusted forecasts moving forward.
  • We are unsure of economic activity in 2021 due to the virus and if there are lagging consequences for our business.

Transportation Equipment Manufacturing

  • The only effect of COVID-19 now is that a small percentage of workers are unwilling to return to work, so labor is just a bit more scarce, contributing to more overtime.
  • We build ambulances, so near-term orders have increased as counties have received additional funding related to COVID-19 that must be used this year.
  • The supply chain for some materials has slowed and, in some cases, stopped. COVID-19 has slowed production, and a significant number of workers are reluctant to reenter the workforce due to the virus and/or the supplemental federal unemployment payment.

Food Manufacturing

  • New relationships with significant financial capability to buy our product are in the negotiation stage or are, in fact, purchasing.

Textile Product Mills

  • The home quarantine is apparently causing people to reevaluate their bedding and pillows, therefore benefiting our direct-to-consumer orders. This is offsetting the decrease in wholesale store orders. We are cautiously optimistic about the future.

Paper Manufacturing

  • In August versus July, we are still running at about 80 percent.
  • Though we haven’t seen them yet, we do expect unemployment to have widespread economic consequences at some point.
  • I understand there is a need to help some people with additional unemployment benefits, but we have general-labor needs that are not being met because it is too easy for some people to stay home and draw enough money that it makes working an unattractive option.

Printing and Related Support Activities

  • We have been so very fortunate to be quite busy during these pandemic times, but it's truly because of one customer who has become a large customer on overflow work, and then some infusion of general work from our everyday customers. We also had a super nice, unexpected reorder on a job we have been doing for eight years now that we keep thinking will finally die on the vine, and it was for 30 percent of a normal month’s billing. Without these nice jobs landing in our laps, it would be dismally slow for us, as it is for many of our customers. We are grateful for the work, but we’re not counting on it continuing like this much longer.

Miscellaneous Manufacturing

  • We’ve increased production hours in August compared to July but are not back to 40 hours per week yet. Business in all markets served is increasing.

Historical Data

Historical data can be downloaded dating back to June 2004.

Indexes

Download indexes for all indicators. For the definitions of all variables, see Data Definitions.

Unadjusted
Seasonally adjusted

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.

Unadjusted
Seasonally adjusted

Questions regarding the Texas Manufacturing Outlook Survey can be addressed to Emily Kerr at emily.kerr@dal.frb.org.

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