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Texas Manufacturing Outlook Survey

August 30, 2021

Expansion Continues in Texas Manufacturing, Though Uncertainty Rises

What’s New This Month

For this month’s survey, Texas business executives were asked supplemental questions on the labor market, revenue restraints, and the resurgence of the pandemic. 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 continued to increase in August, albeit at a slower pace, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, slipped 10 points to 20.8. The reading was well above average and indicative of robust output growth. Other measures of manufacturing activity also pointed to slower but above-average growth this month.

The new orders index came in at 15.6, down from 26.8 but more than double the series average of 6.5. The growth rate of orders index fell 15 points to 10.7. The capacity utilization and shipments indexes came in at 21.7 and 15.2, respectively, down from July levels but still elevated.

Perceptions of broader business conditions continued to improve in August, though the indexes came in markedly lower than in recent months. The general business activity index fell 18 points to 9.0, its lowest reading since January. The company outlook index fell 11 points to 11.5. The outlook uncertainty index pushed up from 14.6 to 21.1, posting its highest reading since May 2020.

Labor market measures indicate continued growth. The employment index remained highly elevated at 21.9, down a couple points from the July reading. Twenty-nine percent of firms noted net hiring, while 7 percent noted net layoffs. The hours worked index held steady at 24.3.

Prices and wages continued to increase strongly in August. The price indexes were largely unchanged at high levels, with the raw materials prices index at 74.9 and the finished goods prices index at 38.1. The wages and benefits index ticked down to 43.4 from 46.0 in July.

Expectations regarding future manufacturing activity remained optimistic in August, though the future general business activity index was less positive, falling from 37.1 to 15.1. The survey’s more tangible measures of future factory activity held up better but also slipped slightly. The future production index ticked down four points to 44.3, and most other measures of future manufacturing activity also declined slightly but remained solidly in positive territory.

Next release: Monday, September 27

Data were collected Aug. 17–25, and 96 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.

August 30, 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)
IndicatorAug IndexJul IndexChangeSeries
Average
Trend*% Reporting Increase% Reporting No Change% Reporting Decrease

Production

20.8

31.0

–10.2

10.6

15(+)

34.8

51.2

14.0

Capacity Utilization

21.7

29.9

–8.2

8.4

15(+)

32.3

57.1

10.6

New Orders

15.6

26.8

–11.2

6.5

15(+)

35.7

44.2

20.1

Growth Rate of Orders

10.7

25.8

–15.1

0.4

14(+)

26.7

57.3

16.0

Unfilled Orders

22.6

20.2

+2.4

–2.0

14(+)

32.9

56.8

10.3

Shipments

15.2

31.6

–16.4

9.4

15(+)

33.4

48.4

18.2

Delivery Time

19.5

19.7

–0.2

0.5

14(+)

32.0

55.5

12.5

Finished Goods Inventories

4.2

–8.7

+12.9

–3.4

1(+)

25.3

53.7

21.1

Prices Paid for Raw Materials

74.9

73.5

+1.4

25.9

16(+)

78.4

18.1

3.5

Prices Received for Finished Goods

38.1

40.9

–2.8

7.0

13(+)

41.5

55.1

3.4

Wages and Benefits

43.4

46.0

–2.6

19.0

16(+)

43.8

55.8

0.4

Employment

21.9

23.7

–1.8

6.8

14(+)

28.8

64.3

6.9

Hours Worked

24.3

24.2

+0.1

3.1

14(+)

30.7

62.9

6.4

Capital Expenditures

12.4

15.4

–3.0

6.6

13(+)

24.7

63.0

12.3

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

Company Outlook

11.5

22.2

–10.7

7.0

15(+)

27.3

56.9

15.8

General Business Activity

9.0

27.3

–18.3

2.9

13(+)

22.5

64.0

13.5

IndicatorAug IndexJul IndexChangeSeries
Average
Trend*% Reporting Increase% Reporting No Change% Reporting Decrease

Outlook Uncertainty†

21.1

14.6

+6.5

12.9

4(+)

29.5

62.1

8.4

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

Production

44.3

48.4

–4.1

38.5

16(+)

53.6

37.1

9.3

Capacity Utilization

38.1

39.4

–1.3

35.4

16(+)

46.1

45.9

8.0

New Orders

40.7

43.3

–2.6

36.2

16(+)

50.1

40.5

9.4

Growth Rate of Orders

29.0

31.5

–2.5

27.0

16(+)

41.1

46.7

12.1

Unfilled Orders

–6.0

4.2

–10.2

4.0

1(–)

14.4

65.1

20.4

Shipments

42.0

47.4

–5.4

37.1

16(+)

52.3

37.4

10.3

Delivery Time

0.3

5.1

–4.8

–1.4

7(+)

18.3

63.7

18.0

Finished Goods Inventories

11.4

12.7

–1.3

0.2

10(+)

23.9

63.6

12.5

Prices Paid for Raw Materials

55.7

43.8

+11.9

34.0

17(+)

65.9

23.9

10.2

Prices Received for Finished Goods

39.8

38.6

+1.2

20.0

16(+)

48.9

42.0

9.1

Wages and Benefits

60.6

52.6

+8.0

38.1

16(+)

60.7

39.2

0.1

Employment

44.5

43.5

+1.0

22.6

15(+)

44.9

54.7

0.4

Hours Worked

13.9

14.1

–0.2

9.4

16(+)

24.2

65.5

10.3

Capital Expenditures

21.6

26.0

–4.4

19.8

15(+)

34.6

52.4

13.0

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

Company Outlook

17.6

35.5

–17.9

20.8

15(+)

31.0

55.6

13.4

General Business Activity

15.1

37.1

–22.0

14.7

15(+)

28.6

57.9

13.5

*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.

August 30, 2021

Production Index

Downloadable chart

August 30, 2021

Comments from Survey Respondents

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

Chemical Manufacturing

  • We are having increased difficulty in procurement of raw materials and logistical costs.

Nonmetallic Mineral Product Manufacturing

  • We have had unprecedented increases in steel raw materials and are unable to secure long-term commitments for volume or price.

Primary Metal Manufacturing

  • Business is still good. Our problems are not orders—we have plenty—but we don’t have enough people or raw materials to fill all orders.
  • We have the largest backlog in the history of our company. Our raw material prices are rising, and on Jan. 1, we will have the largest one-time increase in our industry. So far, orders are still at record levels, but the general consensus is that inflation has to kick in soon and orders will slow down.

Fabricated Metal Manufacturing

  • We were able to refinance our bank debt on favorable terms. We still have a large volume of outstanding quotes where the owner/contractor is reluctant to start the applicable construction.
  • In terms of our pipeline of contract opportunities, demand at market level is decreasing for new construction, but maintenance deferred from last year’s COVID interruption is filling the void for now.
  • Shortages and pricing of American iron and steel products are delaying projects and availability of our emergency fittings. Some domestic stainless steel material pricing is now 14–28 times the price of imported material and not available for 12–16 weeks. For products going into the water market, these increases are being paid for by cities and utilities and ultimately the taxpayer. This limits the amount of funds available to improve our crumbling infrastructure.
  • Labor shortages, raw material price increases and shortages, and power outage issues are all having a negative impact.

Machinery Manufacturing

  • This is the worst market I have seen since 1975.
  • We are quoting more projects, but we believe that this is due to our competition declining rapidly. While they have pulled back their operations, we have maintained or expanded many parts of our business to meet our customers’ needs. We’ve maintained a large inventory that allows us to ship anything either the same day or next day. Therefore, our supply chain for our customers is very important and responsive where others have fallen short.
  • We see variations in sales from month to month that are hard to explain. Sales are up one month and then down the next. We would prefer a steady flow of business so that we can plan accordingly. Strange times we live in!

Computer and Electronic Product Manufacturing

  • World supply issues as well as the political movement against small businesses are affecting us.
  • Demand continues to outstrip supply across the board. We will bring on incremental capacity each quarter, limited by lead time of equipment and factory space, until the second half of 2022 or early 2023, if needed.
  • We are having issues getting parts in to make and complete orders on hand.

Transportation Equipment Manufacturing

  • Labor costs continue to rise, and supply-chain disruptions with major material components continue to drive production delays, increased costs and uncertainty.
  • The Delta COVID-19 variant adds a level of uncertainty regarding the impact on our customers’ business, primarily emergency medical services and tourism.
  • Today, the business demand is encouraging, but there are too many future uncertainties—i.e., inflation, available employees and the economic outlook—including continued supply-chain problems and the fact that COVID won’t go away. Add a dysfunctional government and runaway fiscal spending and it’s hard to be optimistic. We are proceeding cautiously.

Furniture and Related Product Manufacturing

  • We continue to have unfilled employee positions, and the labor rate is increasing at faster pace than our product pricing. Skilled construction trades jobs continue to experience lots of market disruption from e-commerce and lack of job skills training in the education system.

Paper Manufacturing

  • We are seeing a mild seasonal uptick at this time.
  • It is impossible to find employees. We are having to work the ones we have way too hard.

Printing and Related Support Activities

  • We are worried about how rampant inflation is for our materials and services and feel the economy is in for a jolt soon on this front. Because of this, we are worried about six months out, although we are busy now and appear to be busy for a while to come.
  • Team members out with COVID is causing disruptions.

Food Manufacturing

  • The lack of domestic tranquility simmers underneath the surface. This growing instability in the world—the disregard of civility and law—may not directly go to business activity, but it impacts morale and efforts at optimism for the future. The shutting in of domestic oil production while encouraging increases in foreign production/purchases and increasing foreign dependence in an ever-unstable world only adds to the fractured nature of things.

 

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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