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Texas Manufacturing Outlook Survey

January 25, 2021

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, as well as the new Paycheck Protection Program. 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.

This month’s data release also includes annual seasonal factor revisions. Once per year, the Federal Reserve Bank of Dallas revises the historical data for the Texas Manufacturing Outlook Survey after calculating new seasonal adjustment factors. Annual seasonal revisions result in slight changes in the seasonally adjusted series. Read more information on seasonal adjustment.

Texas factory activity continued to expand in January, albeit 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 26.8 to 4.6, indicating a sharp deceleration in output growth.

Other measures of manufacturing activity also point to more muted growth this month. The new orders index dropped 13 points to 6.3, and the growth rate of orders index fell from 15.9 to 5.9. The capacity utilization index declined 10 points to 9.2, and the shipments index fell from 23.4 to 13.5.

Perceptions of broader business conditions continued to improve in January. The general business activity index remained positive but edged down from 10.5 to 7.0. The company outlook index also stayed in positive territory but retreated, from 18.2 to 10.3. Uncertainty regarding companies’ outlooks continued to rise; the index increased six points to 19.3.

Labor market measures indicated slightly slower growth in employment and a continued increase in work hours. The employment index came in at 16.6, down from 20.9 but still indicative of increased head counts. Twenty-seven percent of firms noted net hiring, while 11 percent noted net layoffs. The hours worked index pushed up from 9.5 to 12.6.

Price and wage indexes showed mixed movements in January but continued to reflect increases. The raw materials prices index rose from 50.8 to 55.0, its highest reading in nearly 10 years. The finished goods prices index remained elevated but slipped from 19.0 to 13.9. The wages and benefits index remained positive but edged down two points to 17.6, roughly in line with its series average.

Expectations regarding future activity remained positive in January, though some key indexes weakened from their December readings. The future production index ticked down from 47.3 to 43.7, while the future general business activity index shot up 12 points to 29.6. Other measures of future manufacturing activity showed mixed movements but remained solidly in positive territory.

Next release: Monday, February 22

Data were collected Jan. 12–20, 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.

January 25, 2021

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)
IndicatorJan IndexDec IndexChangeSeries
Average
Trend*% Reporting Increase% Reporting No Change% Reporting Decrease

Production

4.6

26.8

–22.2

10.0

8(+)

27.3

50.0

22.7

Capacity Utilization

9.2

19.2

–10.0

7.7

8(+)

28.7

51.8

19.5

New Orders

6.3

19.6

–13.3

5.9

8(+)

27.3

51.7

21.0

Growth Rate of Orders

5.9

15.9

–10.0

–0.3

7(+)

22.7

60.5

16.8

Unfilled Orders

5.7

9.5

–3.8

–2.8

7(+)

15.4

74.9

9.7

Shipments

13.5

23.4

–9.9

8.8

8(+)

30.6

52.3

17.1

Delivery Time

9.2

11.3

–2.1

–0.3

7(+)

19.3

70.6

10.1

Finished Goods Inventories

–9.3

–8.1

–1.2

–3.4

22(–)

13.1

64.5

22.4

Prices Paid for Raw Materials

55.0

50.8

+4.2

24.3

9(+)

57.3

40.4

2.3

Prices Received for Finished Goods

13.9

19.0

–5.1

6.0

6(+)

20.4

73.1

6.5

Wages and Benefits

17.6

19.6

–2.0

18.4

9(+)

18.4

80.8

0.8

Employment

16.6

20.9

–4.3

6.3

7(+)

27.4

61.8

10.8

Hours Worked

12.6

9.5

+3.1

2.5

7(+)

22.3

68.0

9.7

Capital Expenditures

12.1

9.2

+2.9

6.2

6(+)

22.4

67.3

10.3

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

Company Outlook

10.3

18.2

–7.9

6.5

8(+)

23.6

63.1

13.3

General Business Activity

7.0

10.5

–3.5

2.1

6(+)

23.7

59.6

16.7

IndicatorJan IndexDec IndexChangeSeries
Average
Trend*% Reporting Increase% Reporting No Change% Reporting Decrease

Outlook Uncertainty†

19.3

13.4

+5.9

13.1

32(+)

29.4

60.6

10.1

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

Production

43.7

47.3

–3.6

38.3

9(+)

52.9

37.9

9.2

Capacity Utilization

44.2

42.8

+1.4

35.1

9(+)

51.6

41.0

7.4

New Orders

40.1

38.1

+2.0

36.0

9(+)

50.2

39.6

10.1

Growth Rate of Orders

29.8

34.9

–5.1

26.7

9(+)

40.3

49.2

10.5

Unfilled Orders

4.0

10.1

–6.1

3.9

8(+)

15.1

73.8

11.1

Shipments

40.9

41.4

–0.5

36.8

9(+)

51.8

37.3

10.9

Delivery Time

–0.3

2.4

–2.7

–1.6

1(–)

14.4

70.9

14.7

Finished Goods Inventories

4.0

19.8

–15.8

–0.3

3(+)

16.0

72.0

12.0

Prices Paid for Raw Materials

53.9

50.0

+3.9

33.3

10(+)

55.9

42.2

2.0

Prices Received for Finished Goods

41.2

32.0

+9.2

19.2

9(+)

46.1

49.0

4.9

Wages and Benefits

48.3

46.2

+2.1

37.6

9(+)

50.2

47.8

1.9

Employment

31.9

33.4

–1.5

21.9

8(+)

43.0

45.9

11.1

Hours Worked

17.2

15.1

+2.1

9.3

9(+)

25.1

67.0

7.9

Capital Expenditures

26.2

28.6

–2.4

19.6

8(+)

34.3

57.6

8.1

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

Company Outlook

27.7

24.7

+3.0

20.5

8(+)

36.4

55.0

8.7

General Business Activity

29.6

17.8

+11.8

14.1

8(+)

40.4

48.8

10.8

*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.

January 25, 2021

Production Index

Downloadable chart

January 25, 2021

Comments from Survey Respondents

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

Chemical Manufacturing

  • The initial COVID-19 vaccinations getting to the higher-risk population, along with increasing vaccine availability, has certainly helped increase the business outlook and general spirits of the nation. The political unrest in both the U.S. and abroad has put some damper on the overall outlook, with unknowns regarding policy changes that may or may not impact our industry directly or indirectly.

Primary Metal Manufacturing

  • We continue to have difficultly hiring, and it appears additional stimulus money given by the Biden administration will make it even harder to find factory workers.

Fabricated Metal Manufacturing

  • New orders and business remain stagnant.
  • We are facing a banking change midyear, which could be problematic depending on the bank’s attitude toward energy-related business.
  • There are many unknowns with respect to the executive actions and legislation that will occur over the next several months. This has increased the uncertainty for our economic outlook.
  • Uncertainty is still the main issue. Inflation of metal is expected and will be an issue, as well as supply-chain disruption.
  • We can’t forecast anything six months or even one month out.

Machinery Manufacturing

  • COVID is causing key personnel to be out for an extended period, and not all positions have an equivalent backup.
  • Pray for the best, prepare for the worst. I have zero confidence in any economic improvement under the Biden/Harris administration’s destructive policies.
  • We are anticipating better business opportunities in the coming six to 12 months. This typically happens when the past year has been restrictive on industry spending and growth. Also, with the new outlook and hopes with a new government, we believe that the outlook could be very favorable for spending.
  • We are running at capacity 24 hours a day, six days a week. New machinery is being made to increase capacity and is expected to be online in February. We are absolutely booming.

Computer and Electronic Product Manufacturing

  • We see no change in current economic conditions. We expect that in the second half of 2021, the pent-up demand will start to show and we will see some more normalized business conditions.
  • The supply chain is becoming tougher to manage, with lead times extending as companies still grapple with COVID-impacted capacity (employees out for unplanned extended periods of time) and prices increasing for raw materials. We are facing rising materials costs, rising logistics costs, longer lead times and still-uncertain policy changes with a new administration and new security and political threats each day.
  • Demand is strong and broad based. Industry supply constraints are impacting demand, and customers are ordering to protect themselves against supply shortages.

Transportation Equipment Manufacturing

  • Government policies are expected to bring continued uncertainty about the business environment, which makes capital expenditures risky.

Food Manufacturing

  • Increasing wages is a concern in the short- and mid-term.

Textile Product Mills

  • We are benefiting from more people staying at home and wanting to surround themselves in more luxurious products. We are cautiously optimistic about our manufacturing future.

Printing and Related Support Activities

  • The Biden administration with a Democratic Congress will sadly have a negative impact on business, I'm afraid.
  • We continue to get slower and slower, which is probably from our customer base also being slow and impacted by COVID-related issues. We do have some potential for a few large jobs in the coming months, plus we should get busy with work from one specific customer that was our hero last year with the amount of work we ended up doing for that customer. We still need stability in all areas, including government, improvements in vaccine [distribution] for reduction in COVID cases, and the reopening of communities.

Furniture and Related Product Manufacturing

  • Several additional commercial projects were put on hold due to COVID. A potential acquisition was halted as the buyer was concerned about the impacts of COVID and a downturn in commercial [real estate], particularly the corporate and hospitality sectors.
  • We are seeing a decline in orders serving the direct builder market (residential housing) over the next three to nine months.

Miscellaneous Manufacturing

  • Small business needs strong help from the Fed to get us rolling ahead of where we are now.
  • I do not know what will happen with the new government. Higher taxes and spending will be negative for business.
  • The main constraint to meeting customer needs is the lateness and increasing costs of raw material. All metals, but especially steel, stainless steel and aluminum, are difficult to get. Domestic mills are shipping orders late.

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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