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Texas Manufacturing Outlook Survey

October 26, 2020

Texas Manufacturing Expands for Fifth Straight Month

What’s New This Month

For this month’s survey, Texas business executives were asked supplemental questions on financing. 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.

NOTE: We have discontinued the report PDF, but the page is formatted for your printer and will look similar to the PDF previously provided. You can either print the report or save it as a PDF via the print function of your browser.

Texas factory activity expanded in October for the fifth month in a row following a record contraction due to 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, rose three points to 25.5, indicating a slight acceleration in output growth.

Other measures of manufacturing activity also point to stronger growth this month. The new orders index advanced five points to 19.9, and the growth rate of orders index inched up to 14.3. The capacity utilization index rose from 17.5 to 23.0, while the shipments index was largely unchanged at 21.9.

Perceptions of broader business conditions continued to improve in October. The general business activity index pushed further above average, coming in at 19.8, a two-year high. The company outlook index moved up three points to 17.8, also a two-year high. Uncertainty regarding companies’ outlooks continued to rise, with the index moving up four points to 11.0.

Labor market measures indicated continued but slower growth in employment and work hours. The employment index remained positive but fell from 14.5 to 8.7, suggesting less-robust hiring. Twenty percent of firms noted net hiring, while 11 percent noted net layoffs. The hours worked index remained positive but moved down from 6.9 to 3.7.

Prices and wages increased in October. The raw materials prices index edged up three points to 29.4, a reading several points above the series average. The finished goods prices and wages and benefits indexes inched up to 6.8 and 16.5, respectively. Both readings are roughly in line with their respective average readings.

Expectations regarding future activity remained positive in October. The future production index held steady at 47.2, and the future general business activity index was unchanged at 28.4. Other measures of future manufacturing activity showed mixed movements but remained solidly in positive territory.

Next release: Monday, November 30

Data were collected Oct. 13–21, and 110 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.

October 26, 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)
IndicatorOct IndexSep IndexChangeSeries
Average
Trend*% Reporting Increase% Reporting No Change% Reporting Decrease

Production

25.5

22.3

+3.2

9.9

5(+)

39.3

46.9

13.8

Capacity Utilization

23.0

17.5

+5.5

7.6

5(+)

35.3

52.4

12.3

New Orders

19.9

14.7

+5.2

5.7

5(+)

36.8

46.3

16.9

Growth Rate of Orders

14.3

13.2

+1.1

–0.4

4(+)

28.3

57.7

14.0

Unfilled Orders

4.1

6.0

–1.9

–3.0

4(+)

17.6

68.9

13.5

Shipments

21.9

21.5

+0.4

8.6

5(+)

35.1

51.7

13.2

Delivery Time

5.1

10.1

–5.0

–0.5

4(+)

13.5

78.1

8.4

Finished Goods Inventories

–1.9

–1.9

0.0

–3.3

19(–)

15.9

66.4

17.8

Prices Paid for Raw Materials

29.4

26.2

+3.2

23.9

6(+)

31.4

66.6

2.0

Prices Received for Finished Goods

6.8

5.2

+1.6

5.9

3(+)

14.8

77.2

8.0

Wages and Benefits

16.5

15.9

+0.6

18.4

5(+)

18.5

79.5

2.0

Employment

8.7

14.5

–5.8

6.1

4(+)

19.9

68.9

11.2

Hours Worked

3.7

6.9

–3.2

2.3

4(+)

16.2

71.3

12.5

Capital Expenditures

2.6

2.8

–0.2

6.1

2(+)

15.8

71.0

13.2

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

Company Outlook

17.8

14.9

+2.9

6.3

5(+)

30.2

57.4

12.4

General Business Activity

19.8

13.6

+6.2

2.0

3(+)

31.3

57.2

11.5

IndicatorOct IndexSep IndexChangeSeries
Average
Trend*% Reporting Increase% Reporting No Change% Reporting Decrease

Outlook Uncertainty†

11.0

6.7

+4.3

13.1

29(+)

25.7

59.6

14.7

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

Production

47.2

47.8

–0.6

38.2

6(+)

58.7

29.8

11.5

Capacity Utilization

43.7

40.8

+2.9

35.0

6(+)

52.6

38.5

8.9

New Orders

38.2

49.3

–11.1

35.9

6(+)

48.8

40.7

10.6

Growth Rate of Orders

37.9

37.6

+0.3

26.6

6(+)

47.7

42.5

9.8

Unfilled Orders

3.9

15.3

–11.4

3.8

5(+)

14.0

75.9

10.1

Shipments

37.9

41.4

–3.5

36.7

6(+)

50.5

36.9

12.6

Delivery Time

9.9

7.0

+2.9

–1.6

5(+)

16.7

76.5

6.8

Finished Goods Inventories

–1.0

11.0

–12.0

–0.5

1(–)

16.2

66.7

17.2

Prices Paid for Raw Materials

34.4

33.4

+1.0

33.1

7(+)

35.4

63.6

1.0

Prices Received for Finished Goods

24.0

21.6

+2.4

19.0

6(+)

30.0

64.0

6.0

Wages and Benefits

29.9

38.1

–8.2

37.5

6(+)

30.3

69.3

0.4

Employment

23.1

23.3

–0.2

21.7

5(+)

36.5

50.1

13.4

Hours Worked

7.9

10.6

–2.7

9.2

6(+)

17.3

73.3

9.4

Capital Expenditures

19.0

23.9

–4.9

19.5

5(+)

33.5

52.0

14.5

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

Company Outlook

31.7

32.5

–0.8

20.4

5(+)

44.1

43.5

12.4

General Business Activity

28.4

28.0

+0.4

13.9

5(+)

40.7

46.9

12.3

*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.

October 26, 2020

Production Index

Downloadable chart

October 26, 2020

Comments from Survey Respondents

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

Chemical Manufacturing

  • Normal annual shutdown/turnaround cycles have production rates down. Business demand is slightly higher, with some horizon for increased sales despite being in the fourth quarter, which is traditionally a lower sales period due to inventory destocking by customers.

Primary Metal Manufacturing

  • Our future outlook on profits and general business all hinges on the election. If President Trump wins, our future looks bright, and if Mr. Biden wins, it will be gloom and doom for a long period of time.
  • We are experiencing increased demand for building and construction products as well as some increase within the transportation products industry.

Fabricated Metal Manufacturing

  • Restaurant, hospitality and retail construction [sectors] are still in decline
  • Finding people to hire and [employee] attendance are big problems.
  • Our backlog is building, which is a good indication there are some positive forces in the business community regarding steel fabrication projects. Most of our backlog buildup is not related to the energy sector.

Machinery Manufacturing

  • We are now running three shifts to keep up with the current high demand for our products. We anticipate this demand to last throughout 2021; however, the election outcome could adversely affect this prognosis toward the end of next year.
  • With the prolonged depression in the oil market, the closing of many of our customers, the increase in cost per employee and the inability to forecast this market, our company is looking to make drastic changes to keep our doors at least partially open.
  • The election is the cause of much uncertainty.
  • With the press writing more and more of a change [coming] in Washington, we’ve noticed a substantial pullback in orders and people worried about a change in administrations. They are holding cash and withholding orders until after the elections. The blue wave spoken about will be very hard on the oil industry and associated companies. It appears that all common sense in politics is out the window, and the politics driving energy are now either renewables or nothing. Savings rates are extremely high and will be going higher with a new administration. And as an owner of an oil-related company, we are already cutting back drastically in every area of our business to protect what we’ve gained over the past few years.

Computer and Electronic Product Manufacturing

  • Business remains somewhat muted but still at a survivable level. We expect the near term to be rocky around the elections, but next year should be an improvement over 2020.
  • Our outlook is still changing every month; our current lower outlook is not catastrophic but a bit painful.
  • The results of the election will have a significant impact on the future outlook of our business; right now, we seem to be in limbo. Both sides imply if they lose, there will be chaos.
  • We are unusually slow for October. It’s normally our highest-growing month, and we are at about half of the sales.
  • We have seen general broad-based strength, with pockets of potential weakness developing. Uncertainty still lingers as demand is driven by strong inventory replenishment and automotive customers restarting factories. At this point, demand looks to carry through the fourth quarter and even into the first quarter 2021 based on current trends. It will take until late January/early February to see if demand pull-through will allow growth to continue. Fingers crossed.
  • There is still a lot of uncertainty in the industries we are working with. The election can’t be here soon enough! This economy has to gear back on with business confidence.

Transportation Equipment Manufacturing

  • Our outlook has changed due to uncertainty about national leadership, and COVID is still a cloud over much of the economy. With respect to our industry supply chain, delays in receiving materials are disruptive to production and finished good deliveries and [lead to] higher costs associated with alternative sourcing.
  • Business activity remains significantly slower than normal, with a marginal increase in new requests for quotations and purchase orders over the past month. By taking steps toward just-in-time purchasing, we will achieve lower inventory levels at the expense of higher prices. Multiple customer contracts expire and/or renew within the next six months, and we will be taking advantage of the opportunity to increase prices for most items.

Furniture and Related Product Manufacturing

  • We’ve seen an increased amount of bid requests, and the number of outstanding bids without disposition has increased. We are seeing other segments bidding in areas they generally don’t compete in. Some projects are being awarded for the cost of materials. There’s a good deal of client uncertainty in making decisions.

Food Manufacturing

  • We have had volatility in rice prices. All in all, our supply chain remains stable.

Paper Manufacturing

  • We’re currently experiencing COVID-related production delays that are affecting deliveries. Unhappy customers.

Printing and Related Support Activities

  • Dislocations in the economy created by COVID have caused and are causing difficult-to-manage changes in demand patterns. Strong demand in the consumer goods segment is causing overstocking and then a sudden falloff in demand, on top of drastic demand declines in institutional business (restaurants, hotels, stadiums, schools, etc.) and an erratic recovery.
  • We have been very fortunate to have a large amount of overflow work that is starting to come to an end, and now we are faced with significantly reduced order volume and overall anemic business activity. While there is quite a bit of quote activity, we are not confident this will turn into live jobs anytime soon.

Miscellaneous Manufacturing

  • The rise and general acceptance of socialistic and communalistic principles in America is truly frightening, and the risks for our way of life and economic future are a real concern. Higher taxes, uncontrolled spending and overregulation will be a major deciding factor if we [will] continue to expand, invest, hire, innovate and focus on business or not. If our freedoms are further eroded in the name of safety, or if our property is seized in the name of equality, then many of us will be looking for a new place to utilize our time, talents and efforts.

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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