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Texas Manufacturing Outlook Survey

March 29, 2021

Texas Manufacturing Activity Accelerates Sharply

What’s New This Month

For this month’s survey, Texas business executives were asked supplemental questions on the impact of Winter Storm Uri and the lifting of state occupancy restrictions and mask mandates. 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 at a markedly faster pace in March, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, surged 28 points to 48.0, its highest reading in the survey’s 17-year history.

Other measures of manufacturing activity also pointed to sharply faster growth this month. The new orders index rose 18 points to 30.5, and the growth rate of orders index rose 11 points to 22.7. The capacity utilization index rocketed from 16.5 to 46.1, an all-time high. The shipments index rose 17 points to 33.1.

Perceptions of broader business conditions improved markedly in March. The general business activity index posted another double-digit increase, rising 12 points to 28.9. The company outlook index shot up 15 points to 25.8, its highest reading since mid-2018. The outlook uncertainty index edged down to 5.5.

Labor market measures indicated robust growth in employment and work hours. The employment index came in at 18.8, up from 12.7 and well above average. Twenty-nine percent of firms noted net hiring, while 10 percent noted net layoffs. The hours worked index doubled from 11.3 to 23.4.

Price and wage pressures accelerated further in March. The raw materials prices index rose from 57.4 to 66.0 amid continued reports of supply-chain disruptions driving up costs. The finished goods prices index climbed nine points to 32.2, its highest reading since 2008. The wages and benefits index posted a double-digit increase, rising 12 points to 28.0.

Expectations regarding future manufacturing activity remained positive in March. The future production index was largely unchanged at 38.3, and the future general business activity index held steady at 33.7. Other measures of future manufacturing activity showed mix movements but remained solidly in positive territory.

Next release: Monday, April 26

Data were collected March 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.

March 29, 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)
IndicatorMar IndexFeb IndexChangeSeries
Average
Trend*% Reporting Increase% Reporting No Change% Reporting Decrease

Production

48.0

19.9

+28.1

10.2

10(+)

60.9

26.2

12.9

Capacity Utilization

46.1

16.5

+29.6

7.9

10(+)

57.7

30.7

11.6

New Orders

30.5

13.0

+17.5

6.1

10(+)

46.3

38.0

15.8

Growth Rate of Orders

22.7

11.6

+11.1

–0.1

9(+)

35.2

52.3

12.5

Unfilled Orders

24.5

12.4

+12.1

–2.6

9(+)

39.5

45.6

15.0

Shipments

33.1

16.1

+17.0

9.0

10(+)

47.6

38.0

14.5

Delivery Time

31.2

9.5

+21.7

–0.1

9(+)

38.7

53.8

7.5

Finished Goods Inventories

–2.7

–12.8

+10.1

–3.4

24(–)

18.2

60.9

20.9

Prices Paid for Raw Materials

66.0

57.4

+8.6

24.7

11(+)

69.3

27.4

3.3

Prices Received for Finished Goods

32.2

23.0

+9.2

6.2

8(+)

35.8

60.6

3.6

Wages and Benefits

28.0

16.1

+11.9

18.4

11(+)

28.7

70.6

0.7

Employment

18.8

12.7

+6.1

6.4

9(+)

28.8

61.2

10.0

Hours Worked

23.4

11.3

+12.1

2.6

9(+)

33.1

57.2

9.7

Capital Expenditures

24.3

13.7

+10.6

6.3

8(+)

30.5

63.3

6.2

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

Company Outlook

25.8

10.7

+15.1

6.6

10(+)

36.3

53.2

10.5

General Business Activity

28.9

17.2

+11.7

2.3

8(+)

42.2

44.5

13.3

IndicatorMar IndexFeb IndexChangeSeries
Average
Trend*% Reporting Increase% Reporting No Change% Reporting Decrease

Outlook Uncertainty†

5.5

8.5

–3.0

12.8

34(+)

23.1

59.3

17.6

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

Production

38.3

40.2

–1.9

38.3

11(+)

49.9

38.5

11.6

Capacity Utilization

35.8

37.1

–1.3

35.1

11(+)

47.0

41.7

11.2

New Orders

44.6

32.3

+12.3

36.0

11(+)

53.2

38.2

8.6

Growth Rate of Orders

34.0

25.8

+8.2

26.7

11(+)

42.9

48.2

8.9

Unfilled Orders

7.4

4.5

+2.9

3.9

10(+)

23.2

61.0

15.8

Shipments

41.9

36.0

+5.9

36.8

11(+)

54.3

33.3

12.4

Delivery Time

3.7

5.9

–2.2

–1.5

2(+)

19.3

65.1

15.6

Finished Goods Inventories

11.2

11.5

–0.3

–0.2

5(+)

26.5

58.2

15.3

Prices Paid for Raw Materials

55.0

52.9

+2.1

33.5

12(+)

63.0

29.0

8.0

Prices Received for Finished Goods

43.9

44.9

–1.0

19.4

11(+)

49.0

45.9

5.1

Wages and Benefits

42.4

52.1

–9.7

37.7

11(+)

44.9

52.6

2.5

Employment

38.4

30.8

+7.6

22.0

10(+)

46.2

46.1

7.8

Hours Worked

5.4

11.0

–5.6

9.3

11(+)

17.9

69.6

12.5

Capital Expenditures

25.7

22.8

+2.9

19.6

10(+)

34.9

55.9

9.2

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

Company Outlook

26.2

32.3

–6.1

20.5

10(+)

35.8

54.6

9.6

General Business Activity

33.7

33.9

–0.2

14.3

10(+)

41.3

51.1

7.6

*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.

March 29, 2021

Production Index

Downloadable chart

March 29, 2021

Comments from Survey Respondents

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

Chemical Manufacturing

  • The freeze had a significant negative impact on deliveries and production.
  • The ice storm impact has caused major supply-chain disruptions for base oils, additives and components.
  • We took a significant loss of production due to both internal and external issues caused by the arctic weather in mid-February.
  • We are experiencing the real cost of inflation with much higher raw material and labor costs. We are passing along price increases where we can, but we are seeing marginal business go away. I am very concerned with the six-month forecast and unable to meet deadlines.

Nonmetallic Mineral Product Manufacturing

  • It is difficult to gauge changes since last month due to the adverse impact that the “great freeze” had on business. March's business activity is better than in the weather-impacted February, but the general level of activity is consistent with the prior month if the great freeze is filtered out of the comparison.

Primary Metal Manufacturing

  • We are still playing catch-up from the February mandated weather-related shutdown of our four manufacturing plants. Business demand remains strong, but there’s a raw material supply shortage that hopefully will correct itself by the end of the second quarter or first of the third quarter.
  • We are beginning to see activity pick up in several key areas, including mining, waterworks, gas transmission and fluid transmission. While overall energy sectors remain relatively flat, we have a few areas of improvement in the rebuild sectors. One of the key obstacles to recovery continues to be uncertainty with the administration's push on antibusiness/manufacturing rules and proposed legislation that will actually reverse many of the potential positive aspects of the economic recovery. The cast metals industry remains cautiously optimistic as we move through 2021.

Fabricated Metal Manufacturing

  • February was a very strange month. We got shut down by ERCOT [the Electric Reliability Council of Texas] and missed four days of production, which put us behind for February. That caused us now to spend considerable labor resources to catch up to our customers. We have almost dug out of the backlog with our customers.
  • With the significant increase in demand, steel shortages and manufacturing/logistics capacities are limiting factors. We can do very little about steel shortages. Government transfer payments are making finding labor problematic.
  • Material pricing is continuing to go up, and it is difficult for customers to understand that we cannot continue to absorb the extra cost. On the flip side, pricing for scrap material from processing has started to go up some, although it’s not what it was when China was buying. The stimulus is helpful for individuals but not for the small business with the “25 percent revenue loss in a quarter” stipulation. Our first quarter has really cost us due to COVID and the weather, but we are not considered for round two of the PPP [Paycheck Protection Program].
  • We have a good backlog, but it is not going to be predictable for six months to a year out. Bank willingness to renew or add to our loan program has been problematic even though we have never been in default. The bank now wants to limit capital expenditures, including maintenance. The bank has never put these restrictions in place before, and it will require us to seek a new financial partner.
  • The Texas winter storm has caused tremendous damage to HVAC systems. We are seeing record demand.

Plastics and Rubber Products Manufacturing

  • Order volume is steadily increasing, week by week. As such, we've begun rehiring to fill vacancies caused by the layoffs we experienced in 2020, in addition to filling positions to assist with production shortfalls. As with every hiring cycle, we are having problems getting in applicants in general. The extension of unemployment benefits may be a cause for concern since in some cases the benefits plus the extra is more than what an employee makes in a week. Overall, the market appears to be moving in the right direction. Hopefully, this trend continues.

Machinery Manufacturing

  • We are running at near-capacity; business has never been better.
  • Things are moving but slow to improve. The second half of 2021 is shaping up to be much improved.
  • This political climate is terrible for manufacturing. We were actually on the receiving end of a mass email sent out by a Chinese company selling the same products we manufacture—of course, undercutting our prices (which will get exponentially worse if the minimum wage is doubled) and offering “buy one get one free” deals.
  • Steel pricing is a concern, as are the increases in freight costs. Additionally, import transit times have increased, with a potential impact to outbound sales orders.
  • We are seeing increased costs for raw materials and components. We have not yet evaluated the scope and size of the increases to determine if our prices must be adjusted. We will continue to accumulate data in the weeks to come.
  • Sadly, we are seeing no improvement in (the lack of) sales.

Computer and Electronic Product Manufacturing

  • Demand continues to strengthen broadly. Peer lead times continue to stretch, and many are raising prices. I have not seen this dynamic in my 30-plus years in the industry. Many peers are requiring 12-month noncancelable, nonreschedulable orders. I believe it is hard to know what you will require in March of 2022, for example, and that will likely lead to over-ordering.
  • Our sales are up in March, but we are coming out of one of our worst quarters in the history of the company.
  • We see no real change to our current business or our outlook. As businesses reopen and people are out and about more when the vaccinations reach critical mass, then we will see a jump in business.
  • Supply-chain delays continue to plague the environment, which has caused delays leading to mismatched labor, inflated inventory and other generally increased costs. Efficiency has been lower the last few months. On one hand, there are positive signs of activity. On the other hand, we cannot count on accurate and timely delivery from suppliers, which is causing inefficiency internally. We can't get what we need when we need it, and raw material costs and freight are rising and we now see wage pressure on the horizon. In these environments, some companies over-order or desire safety stock, which creates more strain in the short term, and then when the supply chain catches up and inventory stabilizes, those orders are pulled back. It is hard to say at this point if the demand for products will be sustained over the coming months, but right now, demand is high and supply is low.

Transportation Equipment Manufacturing

  • The recent stimulus package that extends unemployment benefits and increases payments is making it more difficult to hire production workers and is increasing wage pressure to hire and retain competent staff. We have been very successful hiring higher-paid professional positions, but we have had a very difficult time hiring competent labor positions below $20 per hour. We attribute this in part to extended unemployment benefits, which reduce the need for people to work (some have told us as much).
  • We are still recovering from bad winter weather. We’re trying to catch up. There are still supply-chain shortages. Price increases, particularly for oil, are a threat and we can’t yet pass increases on to the retailer.

Furniture and Related Product Manufacturing

  • We are having logistics issues regarding ocean shipping.

Paper Manufacturing

  • Our March increase was mainly due to catch-up from February’s lost week due to temperatures. The outlook is still positive at this time. We are seeing tremendous price increases in raw materials at this time. We are passing them on to unhappy customers due to the shortage of supply.
  • February orders and production were significantly affected by the winter storm.

Printing and Related Support Activities

  • We have experienced slowdowns with customers, as they are still unsure of the reopening of the economy after COVID. In addition, the ice storm in Texas has significantly impacted prices of our raw materials, especially anything related to plastics.
  • Polyethylene supply shortages are becoming very difficult to manage around.
  • February was a horrible month, with slow activity plus a 4.5-day shutdown due to snow and lack of power and water. March will be much better, but that’s not saying much. We are starting to get busy with some products that should provide a decent level of activity for the next few months. Thank God for PPP and the Employee Retention Tax Credit; otherwise, we would be hurting in a big way.

Food Manufacturing

  • It seems that much more uncertainty has come up, primarily due to the consequences of the first days and actions of the Biden administration, the immigration and related issues in Texas and the possible re-explosion of COVID due to a number of variables.
  • All of our raw-ingredient input costs, such as corn, cardboard boxes and plastics, have risen. Our electric cost has slightly risen as well. Our main costs are approximately 15 percent higher across the board than in December of 2020. Price inflation is here, and it has caused our organization to start raising wholesale product pricing to our clients. The vast majority of our clients are wholesale buyers. They, in turn, will need to raise prices to stay in business.  

Textile Product Mills

  • Home goods seems to be a healthy segment, and we are thankful to be in that category.

Apparel Manufacturing

  • Our orders for military uniforms have dropped nearly to zero because of reduced demand during the pandemic.

Miscellaneous Manufacturing

  • Our company is facing massive government regulation that, if it passes, will cause us to significantly reduce investments and reduce payroll.
  • All raw materials used in our production—brass, steel, stainless steel and aluminum—have experienced large increases in price and extended lead times. What once had a 60-day lead time now has an 11-month lead time. Supply disruption and skyrocketing prices have slowed our sales.

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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