Texas Economy

Texas Manufacturing Outlook Survey

November 30, 2020

Texas Manufacturing Expansion Moderates

What’s New This Month

For this month’s survey, Texas business executives were asked supplemental questions on the impact 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 November for the sixth consecutive month, though at a markedly slower pace, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, fell from 25.5 to 7.2, indicating a deceleration in output growth.

Other measures of manufacturing activity also point to slower growth this month, as the indexes remained positive but came in below last month’s readings. The new orders index dropped 13 points to 7.2, and the growth rate of orders index fell five points to 9.7. The capacity utilization index dropped from 23.0 to 6.9, and the shipments index fell from 21.9 to 13.7.

Perceptions of broader business conditions continued to improve in November, though the indexes retreated from their October levels. The general business activity index remained positive but fell from 19.8 to 12.0. Similarly, the company outlook index fell from 17.8 to 11.0. Uncertainty regarding companies’ outlooks continued to rise, though the index declined from 11.0 to 7.2.

Labor market measures indicated stronger growth in employment and work hours. The employment index ticked up three points to 11.7, suggesting a slight pickup in hiring. Twenty-five percent of firms noted net hiring, while 13 percent noted net layoffs. The hours worked index moved up from 3.7 to 9.7.

Prices and wages continued to increase in November. The raw materials prices index climbed nearly six points to 35.0, a reading well above the series average. The finished goods prices and wages and benefits indexes edged down to 4.7 and 13.6, respectively. Both readings are slightly below their respective average readings.

Expectations regarding future activity remained positive in November, though several key indexes moved down from their October readings. The future production index fell six points to 40.8, and the future general business activity index edged down three points to 25.8. Other measures of future manufacturing activity showed mixed movements but remained solidly in positive territory.

Next release: Monday, December 28

Data were collected Nov.16–24, 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.

November 30, 2020

Results Summary

Business Indicators Relating to Facilities and Products in Texas Current (versus previous month)
Indicator	Nov Index	Oct Index	Change	Series Average	Trend*	% Reporting Increase	% Reporting No Change	% Reporting Decrease
Production	7.2	25.5	–18.3	9.9	6(+)	31.1	44.9	23.9
Capacity Utilization	6.9	23.0	–16.1	7.6	6(+)	29.3	48.3	22.4
New Orders	7.2	19.9	–12.7	5.7	6(+)	34.3	38.5	27.1
Growth Rate of Orders	9.7	14.3	–4.6	–0.4	5(+)	28.8	52.1	19.1
Unfilled Orders	8.4	4.1	+4.3	–2.9	5(+)	23.5	61.4	15.1
Shipments	13.7	21.9	–8.2	8.7	6(+)	31.9	49.9	18.2
Delivery Time	12.2	5.1	+7.1	–0.4	5(+)	17.5	77.2	5.3
Finished Goods Inventories	–14.7	–1.9	–12.8	–3.3	20(–)	11.0	63.3	25.7
Prices Paid for Raw Materials	35.0	29.4	+5.6	24.0	7(+)	36.0	63.0	1.0
Prices Received for Finished Goods	4.7	6.8	–2.1	5.9	4(+)	13.8	77.1	9.1
Wages and Benefits	13.6	16.5	–2.9	18.3	6(+)	18.1	77.4	4.5
Employment	11.7	8.7	+3.0	6.1	5(+)	24.8	62.1	13.1
Hours Worked	9.7	3.7	+6.0	2.4	5(+)	19.5	70.7	9.8
Capital Expenditures	9.0	2.6	+6.4	6.1	3(+)	18.7	71.6	9.7

General Business Conditions Current (versus previous month)
Indicator	Nov Index	Oct Index	Change	Series Average	Trend**	% Reporting Improved	% Reporting No Change	% Reporting Worsened
Company Outlook	11.0	17.8	–6.8	6.4	6(+)	25.2	60.6	14.2
General Business Activity	12.0	19.8	–7.8	2.0	4(+)	28.0	56.0	16.0


Indicator	Nov Index	Oct Index	Change	Series Average	Trend*	% Reporting Increase	% Reporting No Change	% Reporting Decrease
Outlook Uncertainty†	7.2	11.0	–3.8	13.0	30(+)	23.6	60.0	16.4

Business Indicators Relating to Facilities and Products in Texas Future (six months ahead)
Indicator	Nov Index	Oct Index	Change	Series Average	Trend*	% Reporting Increase	% Reporting No Change	% Reporting Decrease
Production	40.8	47.2	–6.4	38.2	7(+)	53.5	33.8	12.7
Capacity Utilization	36.2	43.7	–7.5	35.0	7(+)	47.5	41.2	11.3
New Orders	43.2	38.2	+5.0	36.0	7(+)	54.3	34.6	11.1
Growth Rate of Orders	31.3	37.9	–6.6	26.6	7(+)	44.1	43.1	12.8
Unfilled Orders	12.0	3.9	+8.1	3.9	6(+)	22.4	67.2	10.4
Shipments	36.7	37.9	–1.2	36.7	7(+)	49.5	37.7	12.8
Delivery Time	7.2	9.9	–2.7	–1.6	6(+)	15.3	76.6	8.1
Finished Goods Inventories	1.9	–1.0	+2.9	–0.4	1(+)	18.4	65.0	16.5
Prices Paid for Raw Materials	42.2	34.4	+7.8	33.2	8(+)	45.1	52.0	2.9
Prices Received for Finished Goods	21.4	24.0	–2.6	19.0	7(+)	31.1	59.2	9.7
Wages and Benefits	37.0	29.9	+7.1	37.5	7(+)	41.0	55.0	4.0
Employment	27.5	23.1	+4.4	21.7	6(+)	40.3	47.0	12.8
Hours Worked	14.6	7.9	+6.7	9.2	7(+)	25.0	64.6	10.4
Capital Expenditures	16.2	19.0	–2.8	19.5	6(+)	30.6	55.0	14.4

General Business Conditions Future (six months ahead)
Indicator	Nov Index	Oct Index	Change	Series Average	Trend**	% Reporting Increase	% Reporting No Change	% Reporting Worsened
Company Outlook	22.5	31.7	–9.2	20.4	6(+)	33.1	56.3	10.6
General Business Activity	25.8	28.4	–2.6	14.0	6(+)	37.3	51.2	11.5

*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.

November 30, 2020

Production Index

November 30, 2020

Comments from Survey Respondents

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

Chemical Manufacturing

General business activity has increased in the fourth quarter. Uncertainty still lingers as to the impact of the resurgence of COVID-19 cases in the U.S. and abroad. Everyone is optimistic that the resurgence will have limited impact on basic and specialty materials demands after such a long period of low demand. Finished-goods inventories for business-to-consumer suppliers remain low, hence the current increased demand for materials should remain stable if the resurgence is short lived.

Plastics and Rubber Products Manufacturing

The downturn in the oil and gas industry has had a negative impact, but it has been offset by the improvement in the agricultural industry.

Nonmetallic Mineral Product Manufacturing

We definitely had a dip in new order intake in the 10 days before the election, but this has bounced back to the same level as before. We don't know if this was due to all the uncertainty associated with the election. And the election continues to add uncertainty.

Primary Metal Manufacturing

With the election results in and the pandemic having a resurgence, our outlook is grim for a time.

Fabricated Metal Manufacturing

Steel inventories are tightening significantly. Demand continues to remain high for consumer retail customers. Demand for large commercial customers is also increasing. Domestic steel pricing is on the verge of eclipsing foreign steel pricing with tariff costs. With the longer lead times associated with foreign steel, inventory shortages are likely to occur.
It is an uneven market. Some customers are very busy, others are down 70 percent. Steel pricing is way up over the last 30 days. We envision a broad challenge in the first half of 2021 for our supply chain if the economy grows as planned. We are feeling it now.
[These are] very uncertain times—hard to make plans. Expectations are it will get worse.
This is our slow time, but it's slower than usual.
We have contracts in place for current business but have not received the amount of new business that was expected for this quarter. We expect that pent-up demand will drive first-quarter increases.

Machinery Manufacturing

With the promising news of a vaccine, we anticipate an increase in oil consumption. However, the timeline and the rate of increased consumption are uncertain, as is the timeline for our customers to increase their purchasing.
Biden is a disaster for my industry.
Election results have led to a lot of uncertainty. Not knowing is making things bad, but if Joe Biden ends up winning, I think it will get worse.
It's just plain tough out there. If Biden actually won this election, then I anticipate business to get even worse with his diametric reversal of the good that Trump has done economically in lowering tax rates and cutting regulations, particularly in the energy sector. Going green will have a devastating impact on industrial activity for the industries we serve.
Business in the fourth quarter usually increases, but it has increased substantially this year. We think it’s because there is so much demand that was put on hold due to COVID-19 and the end-of-the-year need to spend the money or lose it. We’ve done a whole year’s worth of business in the fourth quarter.
Business remains extremely strong, and we are headed toward a record year.

Computer and Electronic Product Manufacturing

Demand appears to be strong and will carry through the first quarter and likely into the second quarter. Many peers in our industry have supply constraints pushing lead times out, which will lead customers to eventually build excess inventory, but that is still several quarters away from happening.
High uncertainty still exists in the marketplace regarding prices paid for goods, continued COVID-19 impact through missed work, increasing lead times and new administration policies, which may not be as friendly to manufacturing, particularly when related to oil and gas. The uncertainty offsets the recent uptick in activity with regard to planning because it is hard to tell what exactly is driving the activity and if those drivers will remain. Can we trust it?

Transportation Equipment Manufacturing

Potential changes implemented by a new presidential administration have introduced uncertainty, coupled with rising coronavirus cases tempered with improved prospects for widely available vaccines. It is unclear how the confluence of these factors will impact economic prospects for 2021, if at all.
The election outcome is likely adverse in nature. Supply chain disruption is expected to continue as COVID-19 has been hard to shake.
Continued work from home due to COVID-19 and likely longer-term changes to the workplace have a direct impact on our current and future business. The impact to corporate, hospitality and civic projects is immense.

Food Manufacturing

This is somewhat of a seasonal drop for us. Obviously, demand is there via the hurricanes, COVID-19 and the unemployed. We have expanded our very strong distribution network. Our challenge is funding. We can provide a meal for 4 cents.

Apparel Manufacturing

The Department of Defense has a glut of inventory of military apparel.

Paper Manufacturing

Major raw material prices have seen a 12 percent increase. It is hard to pass along to customers at this time. We expect to get it passed along in the next month. The business level is OK at present, but a partial lockdown would change that.
Though demand for corrugated packaging is very strong (primarily e-commerce driven), a current (and six-month) increase in raw material and finished goods pricing is driven primarily by an industry-wide paper (containerboard) shortage of a magnitude not seen since 1995.

Printing and Related Support Activities

We are definitely feeling the effects of the nice large jobs we had in shop that carried us through the lean months of the pandemic, and now that they are completed, we are getting very slow. Had we had to live off normal everyday work, we might have been at 30 percent of our normal activity levels. Usually, October through December is our busiest time, and right now, we are easily off by 50 percent of what it should be. Hopefully things will improve soon.

Miscellaneous Manufacturing

Thank goodness for e-commerce. I think that the present election problem is causing havoc with customer confidence. Small business needs another stimulus from Washington.

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.