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Texas Manufacturing Outlook Survey

June 28, 2021

Expansion in Texas Manufacturing Picks Up, Costs Soar

What’s New This Month

For this month’s survey, Texas business executives were asked supplemental questions on supply-chain disruptions and difficulties in hiring or recalling workers. 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 faster pace in June, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, rose 14 points to 29.4, a reading indicative of strong output growth. Other measures of manufacturing activity also pointed to accelerated growth this month.

The new orders index came in at 26.7, up from 20.8 in May and quadruple the series average of 6.4. Similarly, the growth rate of orders index reached 23.4, up from 19.5. The capacity utilization index rose seven points to 30.6, and the shipments index shot up 14 points to 31.8.

Perceptions of broader business conditions improved markedly in June. The general business activity index came in at 31.1, down slightly from its May reading but notably higher than its series average of 2.8 and indicative of greater activity. The company outlook index moved up six points to 27.5, a reading also well above the series average. The outlook uncertainty index inched up to 17.6, indicating a further rise in uncertainty.

Labor market measures indicate robust growth in employment and work hours. The employment index held steady at a highly elevated 22.9. Thirty-two percent of firms noted net hiring, while 9 percent noted net layoffs. The hours worked index also held fairly steady at 23.8.

Price and wage pressures accelerated further in June. The raw materials prices index inched up to 80.8, an all-time high. The finished goods prices index also pushed to new heights, coming in at 42.8. Similarly, the wages and benefits index set another record high of 48.1, up nine points from its May reading.

Expectations regarding future manufacturing activity pushed higher in June. The future production index rose nine points to 56.6, and the future general business activity index rose six points to 37.3. Other measures of future manufacturing activity also pushed further into positive territory.

Next release: Monday, July 26

Data were collected June 15–23, and 104 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 28, 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)
IndicatorJun IndexMay IndexChangeSeries
Average
Trend*% Reporting Increase% Reporting No Change% Reporting Decrease

Production

29.4

15.7

+13.7

10.5

13(+)

42.2

45.0

12.8

Capacity Utilization

30.6

23.2

+7.4

8.3

13(+)

40.5

49.5

9.9

New Orders

26.7

20.8

+5.9

6.4

13(+)

43.3

40.2

16.6

Growth Rate of Orders

23.4

19.5

+3.9

0.3

12(+)

37.0

49.5

13.6

Unfilled Orders

21.3

19.8

+1.5

–2.2

12(+)

32.4

56.5

11.1

Shipments

31.8

18.3

+13.5

9.2

13(+)

44.5

42.9

12.7

Delivery Time

26.9

30.1

–3.2

0.3

12(+)

36.4

54.1

9.5

Finished Goods Inventories

–4.9

0.0

–4.9

–3.4

1(–)

16.7

61.8

21.6

Prices Paid for Raw Materials

80.8

79.9

+0.9

25.4

14(+)

81.5

17.8

0.7

Prices Received for Finished Goods

42.8

38.4

+4.4

6.7

11(+)

44.6

53.6

1.8

Wages and Benefits

48.1

39.0

+9.1

18.7

14(+)

49.0

50.1

0.9

Employment

22.9

22.7

+0.2

6.7

12(+)

31.8

59.3

8.9

Hours Worked

23.8

22.7

+1.1

2.9

12(+)

32.0

59.8

8.2

Capital Expenditures

16.9

23.2

–6.3

6.5

11(+)

27.5

61.9

10.6

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

Company Outlook

27.5

22.0

+5.5

6.9

13(+)

39.3

48.9

11.8

General Business Activity

31.1

34.9

–3.8

2.8

11(+)

43.1

44.9

12.0

IndicatorJun IndexMay IndexChangeSeries
Average
Trend*% Reporting Increase% Reporting No Change% Reporting Decrease

Outlook Uncertainty†

17.6

14.7

+2.9

12.7

2(+)

29.4

58.8

11.8

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

Production

56.6

47.6

+9.0

38.5

14(+)

63.4

29.8

6.8

Capacity Utilization

56.9

43.1

+13.8

35.3

14(+)

63.7

29.5

6.8

New Orders

51.1

43.8

+7.3

36.2

14(+)

59.2

32.7

8.1

Growth Rate of Orders

40.6

34.4

+6.2

26.9

14(+)

49.2

42.1

8.6

Unfilled Orders

12.7

6.8

+5.9

4.0

13(+)

25.4

61.9

12.7

Shipments

59.8

40.3

+19.5

37.0

14(+)

64.6

30.6

4.8

Delivery Time

0.9

7.3

–6.4

–1.4

5(+)

21.0

58.9

20.1

Finished Goods Inventories

24.5

17.7

+6.8

0.1

8(+)

29.6

65.3

5.1

Prices Paid for Raw Materials

53.6

62.1

–8.5

33.9

15(+)

62.9

27.8

9.3

Prices Received for Finished Goods

53.6

48.4

+5.2

19.8

14(+)

58.8

36.1

5.2

Wages and Benefits

59.2

56.4

+2.8

38.0

14(+)

60.4

38.4

1.2

Employment

48.2

47.6

+0.6

22.4

13(+)

53.9

40.4

5.7

Hours Worked

20.4

5.7

+14.7

9.4

14(+)

28.1

64.2

7.7

Capital Expenditures

31.4

29.9

+1.5

19.8

13(+)

40.3

50.8

8.9

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

Company Outlook

38.4

29.1

+9.3

20.7

13(+)

44.4

49.6

6.0

General Business Activity

37.3

31.4

+5.9

14.6

13(+)

46.3

44.6

9.0

*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 28, 2021

Production Index

Downloadable chart

June 28, 2021

Comments from Survey Respondents

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

Chemical Manufacturing

  • Petroleum-based raw materials pricing and availability continue to affect the industry. The outlook on raw material availability is improving as the economy continues to open, and demand for petroleum products continues to increase. Product demand remains variable; while consumer demand continues to increase, availability of other raw materials remains a concern for our customers and affects our sales. A strong inventory and production position has allowed for capturing opportunities created by COVID-19 and raw material constraints in international and domestic markets.

Nonmetallic Mineral Product Manufacturing

  • Our sales would climb significantly if we could find workers. Our backlog is now six weeks; in January it was five days. Starting pay for untrained workers is up to $15 per hour with a signing bonus of $500. But we cannot even get applicants. It’s impossible to hire when our competitor for workers is the federal government. In 21 states and the District of Columbia, households can receive the wage equivalent of $25 an hour in benefits with no one working. In 19 states, benefits are the equivalent of $100,000 a year in salary for a family of four with two unemployed parents. How can a manufacturer compete with this?

Primary Metal Manufacturing

  • Business is good—very good. Inflation is real and here now. We have raised all wages twice this year. Starting wages rose in March and June, each time by a dollar. We have raised prices twice, once in spring and once now. We have received very little pushback from customers as they and our competitors are all experiencing the same problem. Why are government statistics so far behind?
  • We should be at 1,200 employees but have 140 openings. We expect that number to drop to 100 openings within the next week to 10 days as more folks are applying to go back to work. We know the decrease in unemployment/stimulus dollars is impacting our success in hiring. Also, we increased our wages trying to retain existing workers and attract new workers.

Fabricated Metal Manufacturing

  • The shortage of semiconductors is affecting our customers; therefore, they are postponing orders to us.
  • Logistical delays from ocean freight through flatbed trucking are creating issues throughout our supply chain. We are still having difficulty filling employee positions, particularly at entry-to-mid level. Activity is leveling off, but with the significant backlog, we will have a high activity level for the next several months.
  • Since April 1, we have finally been seeing some new business and increases in existing business. However, the scarcity and price of raw materials (steel and aluminum) are affecting our ability to recover from the last 15 months. We are hearing the word “allocation” when it comes to raw materials, and this will cause inflation and limit our ability to grow.
  • Raw material pricing, primarily steel, is causing multiple disruptions to our business. As we attempt to pass along raw material increases, customers are slow to react and slow to approve, which causes delays to their orders. Also, the supply of raw material is getting scarce, causing us to go outside our normal supply chains to procure, which causes more delay and higher prices. Our gross margin is taking huge hits because we just can’t keep up the price increases fast enough with our customers.
  • Inflation and shortages of material and workers are affecting us.
  • Inflation and disrupted raw materials and supply availability are adversely impacting customer demand.
  • We need 30 more employees, and there are none to be found. Steel prices have tripled, and other supplies are hard to find. We have raised prices and nobody is complaining.
  • We do not have any favorable indication from our pending bank loan renewal on July 30, 2021. We will be severely impacted with any reductions or unfavorable compliance additions.

Machinery Manufacturing

  • Hiring remains a considerable problem. However, we’ve managed through the problems so far. Buying new vehicles is also an issue. We ordered new trucks earlier in January of 2021 only to just get them in now. However, we traded in our 2018 and 2019 trucks and to our surprise received more in trade than what we actually paid for them new. Now we plan to wait for the 2022 models to come out before purchasing any new vehicles. This is an inconvenience, but several of our people are still working from home, which negates their need for a vehicle currently and saves the company money for the time being.
  • We are now operating at prepandemic levels, and our focus for growth has shifted away from the medical industry and back to the electronics industry. You have to be agile in the current business environment.
  • The pattern continues. One, two or three survivable months, then the bottom falls out again. Raw material costs are off the chain.
  • Material costs, primarily for metals, are a big concern. Delivery dates from multiple suppliers are harder to pin down, particularly for imports.

Computer and Electronic Product Manufacturing

  • Orders each week result in an additional three weeks of backlog, and this has continued for some time. Shipments are already above output as inventory continues to drain. Input prices continue to rise slightly.
  • We are seeing a lot of price and lead-time increases. It leaves us unable to fill orders.
  • Supply-chain issues and delays remain on nearly every front. Wages are increasing rapidly, and material costs are going up, which is forcing price increases on existing orders both to our customers and from our vendors. Lead times are extending, forcing rescheduling to products that can be built with the materials available rather than building what has been ordered. Those changes decrease efficiency on top of paying more for labor and materials. It appears that it could be several more months before the supply chain can stabilize.
  • Raising corporate and personal taxes is not the way to bring confidence to small businesses to invest, give raises and offer better benefits.

Transportation Equipment Manufacturing

  • We expect supply-chain disruption to rectify itself and raw material prices to stabilize over the next six months. If that doesn’t happen, our growth plans will be impacted.

Furniture and Related Product Manufacturing

  • The largest issue to our viability is finding skilled craftspeople who will actually come to work. Labor availability and rates, and cost of materials getting out of alignment to pricing, are issues.

Paper Manufacturing

  • Raw material prices and wages are increasing. Some costs are passed on the customers, but margins are compressed. We need to hire employees but can’t find prospects. Our current employees are being poached by other industries that appear to pay anything to lure them away. Either this is unsustainable or inflation in our products will have to rise to 8-10 percent per year. Demand-pull and cost-push inflation is very strong in the packaging industry at this time.
  • We are continuing to have the same issues as prior months. The supply chain is really messed up right now, so finding raw materials and getting them shipped in is an extreme challenge. The other main problem is being able to hire unskilled hourly workers.

Printing and Related Support Activities

  • We were very busy in May and are steady busy in June. We also have some nice large orders coming in that will keep us busy for a good part of the summer. A huge unknown is what will happen as our customers eat through the federal monies that have allowed them to stay current on their payables to us, as well as create activity for the economy. Also, I am quite worried about the effect of inflationary pressures, including wages paid out.

Food Manufacturing

  • We have had no volatility in raw materials, nor in the supply chain, overall. Domestic freight rates have increased somewhat, and ocean freight rates have dramatically increased. All our orders are FOB [free on board]. Someone else is struggling with that. We are hearing of price increases, in some cases dramatically, for electric motors and pumps. We fear inflation, coupled with the narcissisms of the current administration. There is an inverse form of economic gravity in play, you might say: What gets blindly printed without accountability goes down in value.

Textile Product Mills

  • The supply chain is taking longer; shipments are always delayed.

Miscellaneous Manufacturing

  • We cannot find qualified employees. Wage demand and pay are going through the roof. We are losing employees to higher-paying employers. There is a lot of poaching going on.

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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