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Texas Manufacturing Outlook Survey

June 1, 2021

Texas Manufacturing Expansion Carries On

What’s New This Month

For this month’s survey, Texas business executives were asked supplemental questions on the labor market and price pressures. 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 but at a slower pace in May, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, fell 18 points to 15.7, a reading still well above average and indicative of healthy output growth. Other measures of manufacturing activity also pointed to slower but still-solid growth this month.

The new orders index came in at 20.8, down from 38.5 in April but more than triple the series average of 6.3. Similarly, the growth rate of orders index came in at 19.5, down from 32.3 but still elevated. The capacity utilization index remained high, though it slipped from 34.6 to 23.2, and the shipments index fell from 32.6 to 18.3.

Perceptions of broader business conditions improved markedly in May, though uncertainty picked up. The general business activity index came in at 34.9, just a couple points down from its April reading and markedly higher than its series average of 2.6. The company outlook index fell seven points to 22.0, a reading well above the series average. The outlook uncertainty index moved up from zero to 14.7, indicating that uncertainty is back on the rise.

Labor market measures indicate robust but slower growth in employment and steady growth in work hours. The employment index came in at 22.7, down from 31.3 but still highly elevated. Twenty-nine percent of firms noted net hiring, while 6 percent noted net layoffs. The hours worked index held fairly steady at 22.7.

Input prices and wage pressures accelerated further in May. The raw materials prices index rose another nine points to 79.9, reaching an all-time high. The finished goods prices index remained near its all-time high reached last month, coming in at 38.4. The wages and benefits index pushed to a new high of 39.0.

Expectations regarding future manufacturing activity remained highly positive in May. The future production index held steady at 47.6, and the future general business activity index slipped five points to 31.4. Other measures of future manufacturing activity showed mixed movements, but all remained solidly in positive territory.

Next release: Monday, June 28

Data were collected May 18–26, and 103 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.

June 1, 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)
IndicatorMay IndexApr IndexChangeSeries
Average
Trend*% Reporting Increase% Reporting No Change% Reporting Decrease

Production

15.7

34.0

–18.3

10.4

12(+)

40.0

35.7

24.3

Capacity Utilization

23.2

34.6

–11.4

8.1

12(+)

43.4

36.4

20.2

New Orders

20.8

38.5

–17.7

6.3

12(+)

44.5

31.9

23.7

Growth Rate of Orders

19.5

32.3

–12.8

0.2

11(+)

40.6

38.4

21.1

Unfilled Orders

19.8

23.1

–3.3

–2.4

11(+)

31.7

56.4

11.9

Shipments

18.3

32.6

–14.3

9.1

12(+)

41.4

35.5

23.1

Delivery Time

30.1

24.0

+6.1

0.2

11(+)

37.9

54.3

7.8

Finished Goods Inventories

0.0

–5.7

+5.7

–3.4

1()

24.8

50.5

24.8

Prices Paid for Raw Materials

79.9

71.4

+8.5

25.2

13(+)

81.8

16.3

1.9

Prices Received for Finished Goods

38.4

39.1

–0.7

6.5

10(+)

43.0

52.4

4.6

Wages and Benefits

39.0

37.1

+1.9

18.6

13(+)

40.0

59.0

1.0

Employment

22.7

31.3

–8.6

6.6

11(+)

29.0

64.7

6.3

Hours Worked

22.7

23.7

–1.0

2.8

11(+)

32.9

56.9

10.2

Capital Expenditures

23.2

19.8

+3.4

6.4

10(+)

29.7

63.8

6.5

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

Company Outlook

22.0

29.1

–7.1

6.8

12(+)

37.6

46.8

15.6

General Business Activity

34.9

37.3

–2.4

2.6

10(+)

47.8

39.3

12.9

IndicatorMay IndexApr IndexChangeSeries
Average
Trend*% Reporting Increase% Reporting No Change% Reporting Decrease

Outlook Uncertainty†

14.7

0.0

+14.7

12.6

1(+)

28.4

57.8

13.7

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

Production

47.6

47.2

+0.4

38.4

13(+)

56.0

35.6

8.4

Capacity Utilization

43.1

45.0

–1.9

35.2

13(+)

51.1

40.9

8.0

New Orders

43.8

42.6

+1.2

36.1

13(+)

53.3

37.2

9.5

Growth Rate of Orders

34.4

43.2

–8.8

26.9

13(+)

43.8

46.7

9.4

Unfilled Orders

6.8

10.2

–3.4

4.0

12(+)

21.5

63.8

14.7

Shipments

40.3

44.4

–4.1

36.9

13(+)

49.7

40.9

9.4

Delivery Time

7.3

4.0

+3.3

–1.4

4(+)

20.8

65.7

13.5

Finished Goods Inventories

17.7

24.0

–6.3

0.0

7(+)

28.1

61.5

10.4

Prices Paid for Raw Materials

62.1

54.1

+8.0

33.8

14(+)

68.4

25.3

6.3

Prices Received for Finished Goods

48.4

40.2

+8.2

19.6

13(+)

52.6

43.2

4.2

Wages and Benefits

56.4

49.9

+6.5

37.9

13(+)

56.6

43.2

0.2

Employment

47.6

48.2

–0.6

22.2

12(+)

51.4

44.8

3.8

Hours Worked

5.7

15.9

–10.2

9.3

13(+)

15.9

73.9

10.2

Capital Expenditures

29.9

28.4

+1.5

19.7

12(+)

33.5

62.9

3.6

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

Company Outlook

29.1

36.6

–7.5

20.7

12(+)

39.7

49.7

10.6

General Business Activity

31.4

36.6

–5.2

14.5

12(+)

44.0

43.3

12.6

*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.

June 1, 2021

Production Index

Downloadable chart

June 1, 2021

Comments from Survey Respondents

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

Chemical Manufacturing

  • Current production volumes and sales are at a very high level due to impacts from the freeze event that we recovered from much faster than our competitors.
  • We continue to see the effects of component shortages.
  • Decreasing COVID-19 restrictions will increase demand. The variability of raw materials for our business and other raw materials for our customers continues to drive variability in demand.

Nonmetallic Mineral Product Manufacturing

  • Our order backlog is at a historical high due to demand. We have 25 employment positions open. But hiring is very difficult.

Primary Metal Manufacturing

  • We are competing with government subsidies for factory workers.
  • We cannot find enough workers. We have raised pay and still cannot find people who want to work. This policy of paying people not to work has to stop.
  • Rain will destroy our May shipments/billings. Late fourth quarter and next year look much better for us.

Fabricated Metal Manufacturing

  • We are seeing the very first signs of slowing quote activity. We believe that the price of steel is starting to have a dampening effect on demand.
  • Lack of availability of materials is becoming more acute. The supply chain is broken, and the replenishment time has increased considerably. Prices of materials, especially metals and paper products, are skyrocketing.
  • I have little confidence in the business outlook. There is some continued talk of re-shoring some production, but nothing happens. Ultimately, orders are still placed overseas due to pricing. It is hard to compete when our prices for labor and raw materials are increasing.
  • We are having difficulty with our bank in funding current operations and capital expenditures. We have a renewal coming up July 30, and the terms discussed are unacceptable and prohibit future growth.

Plastics and Rubber Products Manufacturing

  • We have a few very large orders. The breadth/depth of new business is foreboding.

Machinery Manufacturing

  • We have stopped looking for new employees because the quality of people applying is horrible. The Biden administration’s bribery to stay home is in full force, and why not take the government money—it’s free. In the meantime, we’ve had a record-profitable quarter because we stopped buying everything since we have inventory to consume and aren’t investing in anything since it’s become too expensive to purchase. We fortunately can wait this price spike out, but if we have to buy anything, the customer pays the higher price.
  • Business is slowly returning; April was a low point for our plant.
  • Our COVID-related products are starting to wind down due to vaccinations, and we had to drastically cut down our workforce.
  • I previously outlined the coming inflation possibility. It's no longer a possibility—it has arrived with a vengeance. We raised pricing approximately 7.5 percent across the board but are seeing approximately 20 percent increases [in costs]. I'm old enough to remember the 1970s, and here we are again. There is no worse of an environment to be in than this.

Computer and Electronic Product Manufacturing

  • We are investing to try to stay ahead of growth. Lead times are starting to stretch, and inventories continue to deplete. I know customers will over-order and build inventory at some point, likely creating a severe correction. I don’t know how far off that will be, but expect it.
  • We are seeing longer lead times for items.
  • We are still expecting an economic uplift in the second half of 2021. This has been our expectation for six months now.

Transportation Equipment Manufacturing

  • When we asked a recruiter with our staffing agency why they were not able to get us more candidates, she replied, “Stimulus and unemployment; the rate is around $17.75 per hour that people in Texas are making to stay home. They tell us that when we call them—why work when they can make more money doing nothing. I have done this a long time and never seen anything like this in my life!”
  • The supply chain is severely disrupted—shortages and delays abound. We are seeing daily price increases from suppliers. We have a limited ability to pass increased costs on to dealers/customers. The labor shortage is in part due to politicization of COVID-19 and supplemental unemployment compensation. I am nervous about runaway inflation.

Furniture and Related Product Manufacturing

  • The primary threat to our business is the number of open positions—and availability of skilled crafts people or, for that matter, just people interested in the millwork business who want to learn the craft. Our workforce is getting closer and closer to the most skilled folks retiring, and we have no bench strength.

Wood Product Manufacturing

  • With the dramatic increase in lumber prices, it’s just so hard to predict anything. It’s great right now, though. Our volume is up even if prices were flat. Actually, we are having to turn down business. We can’t get enough product, nor do we have the time and equipment to deliver it. Also, with the prices increasing, it’s putting pressure on our line of credit both at the bank and with our vendors.

Paper Manufacturing

  • May has slowed down compared with April. We are optimistic that June will return to an upward trend.
  • We have two major challenges facing us right now. The first and most important problem is the scarcity of people wanting to do manual and unskilled labor. We have no one coming to our front door to apply for employment. We have mainly used temporary-staffing agencies to fill those positions, and then after a predetermined period we can hire their workers to permanent full-time positions. However, they are having the same problems we are: finding people that want to work. The constant issue seems to be that people are satisfied staying home and are making more through government-subsidized unemployment benefits. How can our leaders not know this?

Printing and Related Support Activities

  • We are very busy right now with a flurry of seasonal work, and we believe there could be some nice jobs lining up for the summer. It is still spotty out there with many of our customers, though, and we can’t do anything until they have a need for our services.

Food Manufacturing

  • We have been fortunate to not experience any material fluctuations in our ingredient pricing—other than short-term spikes in rice prices due to demand brought on by COVID-impact food-relief purchases.
  • We are experiencing a severe shortage of candidates to fill open positions. I have never seen the labor market like it is now. We are experiencing sharp increases in labor compensation to be able to attract and retain talent.

Textile Product Mills

  • The volume of orders in the luxury sector continues to increase. Consumers seem very interested in personal care and luxury sleep products.

Miscellaneous Manufacturing

  • Government spending and tax increases are the biggest negatives to our outlook and growth.
  • We continue to experience delays in receiving raw materials—all metals (brass, steel, stainless steel and aluminum).
  • Fear of tax increases and rising costs are major concerns.

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 Christopher Slijk at Christopher.Slijk@dal.frb.org.

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