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Texas Manufacturing Outlook Survey

December 28, 2020

Texas Manufacturing Activity Expands at a Faster Pace

What’s New This Month

For this month’s survey, Texas business executives were asked supplemental questions on the impact of COVID-19, as well as wages and prices. 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.

Expansion in Texas factory activity picked up in December, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, rebounded from 7.2 to 25.5, indicating an acceleration in output growth.

Other measures of manufacturing activity also point to stronger growth this month. The new orders index pushed up 11 points to 17.8, and the growth rate of orders index rose from 9.7 to 16.5. The capacity utilization index moved up 11 points to 17.7, and the shipments index advanced from 13.7 to 21.9.

Perceptions of broader business conditions continued to improve in December. The general business activity index remained positive but edged down from 12.0 to 9.7. Meanwhile, the company outlook index pushed further into positive territory, rising from 11.0 to 16.8. Uncertainty regarding companies’ outlooks continued to rise; the index increased six points to 13.4.

Labor market measures indicated an increase in employment and work hours. The employment index increased from 11.7 to 19.6, suggesting a pickup in hiring. Thirty percent of firms noted net hiring, while 10 percent noted net layoffs. The hours worked index held steady at 9.3.

Price and wage pressures accelerated in December. The raw materials prices index shot up 14 points to 49.0, a two-year high. The finished goods prices index rose notably as well, pushing up 13 points to 17.4, also a two-year high. The wages and benefits index edged up to 19.1 and is back in line with its series average, pulling out of a slump that began in March.

Expectations regarding future activity remained positive in December, though some key indexes moved down from their November readings. The future production index rose seven points to 47.3, while the future general business activity index moved down eight points to 17.6. Other measures of future manufacturing activity showed mixed movements but remained solidly in positive territory.

Next release: Monday, January 25

Data were collected Dec. 14–22, and 113 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.

December 28, 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)
IndicatorDec IndexNov IndexChangeSeries
Average
Trend*% Reporting Increase% Reporting No Change% Reporting Decrease

Production

25.5

7.2

+18.3

10.0

7(+)

40.3

44.8

14.8

Capacity Utilization

17.7

6.9

+10.8

7.6

7(+)

35.0

47.7

17.3

New Orders

17.8

7.2

+10.6

5.8

7(+)

37.6

42.6

19.8

Growth Rate of Orders

16.5

9.7

+6.8

–0.3

6(+)

31.8

52.9

15.3

Unfilled Orders

8.7

8.4

+0.3

–2.9

6(+)

21.9

64.9

13.2

Shipments

21.9

13.7

+8.2

8.7

7(+)

37.1

47.7

15.2

Delivery Time

10.2

12.2

–2.0

–0.4

6(+)

21.2

67.8

11.0

Finished Goods Inventories

–8.1

–14.7

+6.6

–3.4

21(–)

13.5

64.9

21.6

Prices Paid for Raw Materials

49.0

35.0

+14.0

24.1

8(+)

50.2

48.6

1.2

Prices Received for Finished Goods

17.4

4.7

+12.7

5.9

5(+)

20.6

76.2

3.2

Wages and Benefits

19.1

13.6

+5.5

18.3

7(+)

19.3

80.5

0.2

Employment

19.6

11.7

+7.9

6.2

6(+)

29.5

60.6

9.9

Hours Worked

9.3

9.7

–0.4

2.4

6(+)

21.8

65.7

12.5

Capital Expenditures

8.5

9.0

–0.5

6.1

4(+)

19.1

70.3

10.6

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

Company Outlook

16.8

11.0

+5.8

6.4

7(+)

31.0

54.8

14.2

General Business Activity

9.7

12.0

–2.3

2.1

5(+)

27.6

54.5

17.9

IndicatorDec IndexNov IndexChangeSeries
Average
Trend*% Reporting Increase% Reporting No Change% Reporting Decrease

Outlook Uncertainty†

13.4

7.2

+6.2

13.0

31(+)

26.8

59.8

13.4

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

Production

47.3

40.8

+6.5

38.2

8(+)

56.8

33.7

9.5

Capacity Utilization

42.9

36.2

+6.7

35.1

8(+)

52.4

38.1

9.5

New Orders

38.8

43.2

–4.4

36.0

8(+)

51.5

35.8

12.7

Growth Rate of Orders

33.5

31.3

+2.2

26.6

8(+)

44.9

43.7

11.4

Unfilled Orders

9.7

12.0

–2.3

3.9

7(+)

19.7

70.3

10.0

Shipments

40.3

36.7

+3.6

36.7

8(+)

52.5

35.3

12.2

Delivery Time

2.5

7.2

–4.7

–1.6

7(+)

17.6

67.3

15.1

Finished Goods Inventories

19.8

1.9

+17.9

–0.3

2(+)

28.3

63.2

8.5

Prices Paid for Raw Materials

50.0

42.2

+7.8

33.2

9(+)

52.8

44.3

2.8

Prices Received for Finished Goods

32.0

21.4

+10.6

19.0

8(+)

37.7

56.6

5.7

Wages and Benefits

45.7

37.0

+8.7

37.5

8(+)

46.7

52.3

1.0

Employment

32.5

27.5

+5.0

21.8

7(+)

40.6

51.3

8.1

Hours Worked

14.6

14.6

0.0

9.2

8(+)

26.4

61.8

11.8

Capital Expenditures

27.3

16.2

+11.1

19.5

7(+)

35.3

56.7

8.0

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

Company Outlook

24.1

22.5

+1.6

20.4

7(+)

40.1

44.0

16.0

General Business Activity

17.6

25.8

–8.2

14.0

7(+)

31.7

54.2

14.1

*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.

December 28, 2020

Production Index

Downloadable chart

December 28, 2020

Comments from Survey Respondents

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

Chemical Manufacturing

  • With the coming of the COVID-19 vaccine, overall hope and our outlook are improving related to pandemic business impacts. With a lack of clarity on how the global marketplace will rebound and concerns with the new administration coming into office, overall uncertainty remains unchanged.

Primary Metal Manufacturing

  • Most of our customer base remains busy but concerned about the overall economy after the election. Most of our customer base doesn’t think a Democratic administration will be good for the manufacturing industry in the long run.
  • The volume of shipments will be down in December due to shop employees on vacations and COVID-related absences.

Fabricated Metal Manufacturing

  • As a small (16 employee) machining business, we are not seeing a concrete increase in business for 2021. We feel it will not get better until the end of second quarter 2021.
  • We are completely unable to forecast into the six-month mark.
  • Watch for raw material inflation.
  • President Trump has really screwed up the economy due to his nonaction since the election. Prices for raw material are on the rise again, if you can even find the stuff. Inaction on COVID-19 has the economy so messed up—even the vaccine distribution is fouled up.
  • We currently have a larger backlog than this time last year but have no additional work scheduled for later in the first quarter.
  • There is an extreme price increase and shortage in raw materials. We are unable to quote and hold pricing for the usual 30 days; it’s been reduced to 14 days and we’ve had to manage quotes on an individual basis. Raw materials quotes were not being honored [for] 24 hours in some cases. Others are not even quoting at this time.

Machinery Manufacturing

  • We are currently running at capacity and making new production machinery. We are fortunate to be supplying a large international company with a highly specialized COVID-related product, which is increasing our sales dramatically.
  • Two of our competitors are virtually bankrupt, and we’ve actually offered to buy out one of them. But instead of selling out, they are firing employees and furloughing them without pay for weeks at a time. The lengths that others are taking to stay in business are to the point of severe desperation. However, we are the beneficiaries of this COVID economy that has wrecked this oil and gas energy economy. Our business is down, but we are not out of opportunities. Consequently, we will keep moving forward even at the slow pace that is keeping us in business but not making any real profits. At least we are able to pay our employees and pay our bills.
  • Prices for raw material (steel) are escalating rapidly, with availability becoming an issue. The downward pressure on finished goods, however, remains strong.
  • Our order activity typically slows from Thanksgiving through the end of the year. This is occurring now as well.
  • Though we are confident the economy will improve next year with the suppression of the coronavirus, there is no clear path for improvement in the offshore oil market.

Computer and Electronic Product Manufacturing

  • Leaving the pro-business environment does hurt the confidence in the industrial machinery segment.

Transportation Equipment Manufacturing

  • Our primary customer is the United States government. We have a large amount of uncertainty due to the change in administration.
  • The political impact on the economy is uncertain. If Democrats win the majority in the Senate, uncertainty rises even more.

Food Manufacturing

  • The demand side of our equation is endless. Funding and distribution are a challenge. The supply chain is holding.

Apparel Manufacturing

  • Military uniform inventory has skyrocketed with the cutback in activity during the pandemic, significantly diminishing demand for the next year or so.

Paper Manufacturing

  • We are experiencing some COVID-related production interruptions that have us behind on filling orders. We expect that to correct itself in the coming months. Major raw material cost increases have been passed through due to a current shortage of supply.

Printing and Related Support Activities

  • Availability of semi-skilled labor is the primary impediment to achieve growth opportunities.
  • We continue to see very sluggish business activity, and normally we would be quite busy this time of year. Many of our customers report the same thing,

Furniture and Related Product Manufacturing

  • We are seeing price pressure from owners and general contractors at a time when materials and skilled labor costs are increasing. Projects related to hospitality, entertainment, higher education, and corporate headquarters and office buildings are on hold.

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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