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Texas Manufacturing Outlook Survey

September 27, 2021

Solid Expansion Continues in Texas Manufacturing, Though Outlooks Soften

What’s New This Month

For this month’s survey, Texas business executives were asked supplemental questions on supply-chain disruptions. 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 September, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, rose three points to 24.2. The reading was well above average and indicative of solid output growth.

Movement was mixed for other measures of manufacturing activity. While the shipments and capacity utilization indexes edged up to 18.7 and 24.5, respectively, the survey’s demand indexes slipped. The new orders index came in at 9.5, down from 15.6 but still slightly above the series average of 6.5. The growth rate of orders index fell eight points to 2.5.

Perceptions of broader business conditions were mixed in September. While both the company outlook and general business activity indexes moved down from their August readings, the company outlook index slipped into negative territory at -2.8, signaling a slight worsening of outlooks this month. The general business activity index, however, remained positive at 4.6. The outlook uncertainty index edged up to 23.3.

Labor market measures indicated faster employment growth and longer workweeks. The employment index pushed up further to 26.3. Thirty-six percent of firms noted net hiring, while 9 percent noted net layoffs. The hours worked index edged down but remained highly elevated at 20.4.

Prices and wages continued to increase strongly in September. The price indexes climbed further, with the raw materials prices index at 80.4 and the finished goods prices index at 44.0, an all-time high. The wages and benefits index held steady at a highly elevated reading of 42.7.

Expectations regarding future manufacturing activity were slightly less positive in September. The future production index edged down to 41.8 but remained elevated, while the future general business activity index slipped four points to 11.5, a reading slightly below average. Other measures of future manufacturing activity showed mixed movements but remained solidly in positive territory.

Next release: Monday, October 25

Data were collected Sept-. 14–22, and 92 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.

September 27, 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)
IndicatorSep IndexAug IndexChangeSeries
Average
Trend*% Reporting Increase% Reporting No Change% Reporting Decrease

Production

24.2

20.8

+3.4

10.7

16(+)

41.9

40.4

17.7

Capacity Utilization

24.5

21.7

+2.8

8.5

16(+)

38.5

47.6

14.0

New Orders

9.5

15.6

–6.1

6.5

16(+)

31.3

46.9

21.8

Growth Rate of Orders

2.5

10.7

–8.2

0.5

15(+)

24.3

53.9

21.8

Unfilled Orders

14.9

22.6

–7.7

–1.9

15(+)

26.3

62.3

11.4

Shipments

18.7

15.2

+3.5

9.4

16(+)

36.9

44.9

18.2

Delivery Time

21.4

19.5

+1.9

0.6

15(+)

31.2

59.0

9.8

Finished Goods Inventories

1.1

4.2

–3.1

–3.4

2(+)

14.4

72.2

13.3

Prices Paid for Raw Materials

80.4

74.9

+5.5

26.2

17(+)

82.1

16.2

1.7

Prices Received for Finished Goods

44.0

38.1

+5.9

7.2

14(+)

46.7

50.6

2.7

Wages and Benefits

42.7

43.4

–0.7

19.1

17(+)

42.9

56.9

0.2

Employment

26.3

21.9

+4.4

6.9

15(+)

35.5

55.3

9.2

Hours Worked

20.4

24.3

–3.9

3.2

15(+)

28.1

64.2

7.7

Capital Expenditures

11.0

12.4

–1.4

6.6

14(+)

21.2

68.6

10.2

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

Company Outlook

–2.8

11.5

–14.3

6.9

1(–)

17.8

61.6

20.6

General Business Activity

4.6

9.0

–4.4

2.9

14(+)

21.1

62.4

16.5

IndicatorSep IndexAug IndexChangeSeries
Average
Trend*% Reporting Increase% Reporting No Change% Reporting Decrease

Outlook Uncertainty†

23.3

21.1

+2.2

13.1

5(+)

32.2

58.9

8.9

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

Production

41.8

44.3

–2.5

38.5

17(+)

52.7

36.4

10.9

Capacity Utilization

31.9

38.1

–6.2

35.4

17(+)

44.4

43.1

12.5

New Orders

33.4

40.7

–7.3

36.2

17(+)

46.7

40.1

13.3

Growth Rate of Orders

25.9

29.0

–3.1

27.0

17(+)

38.5

48.9

12.6

Unfilled Orders

–2.9

–6.0

+3.1

3.9

2(–)

13.9

69.3

16.8

Shipments

32.9

42.0

–9.1

37.0

17(+)

49.5

34.0

16.6

Delivery Time

10.2

0.3

+9.9

–1.3

8(+)

21.0

68.2

10.8

Finished Goods Inventories

9.4

11.4

–2.0

0.3

11(+)

18.8

71.8

9.4

Prices Paid for Raw Materials

55.3

55.7

–0.4

34.1

18(+)

61.2

32.9

5.9

Prices Received for Finished Goods

44.6

39.8

+4.8

20.1

17(+)

53.0

38.6

8.4

Wages and Benefits

50.4

60.6

–10.2

38.2

17(+)

50.4

49.6

0.0

Employment

49.8

44.5

+5.3

22.7

16(+)

54.0

41.8

4.2

Hours Worked

18.7

13.9

+4.8

9.5

17(+)

26.5

65.7

7.8

Capital Expenditures

30.0

21.6

+8.4

19.9

16(+)

37.8

54.4

7.8

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

Company Outlook

12.7

17.6

–4.9

20.8

16(+)

30.7

51.3

18.0

General Business Activity

11.5

15.1

–3.6

14.7

16(+)

29.2

53.1

17.7

*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.

September 27, 2021

Production Index

Downloadable chart

September 27, 2021

Comments from Survey Respondents

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

Chemical Manufacturing

  • Negative U.S. national and global economic indicators continue to add to uncertainty in the six-month window. Policy decisions in the U.S. coupled with China’s financial situation are driving negative sentiments around the overall business outlook.

Nonmetallic Mineral Product Manufacturing

  • We still cannot hire or find enough employees to be able to meet increasing demand. We would hire 20 today if we could. Demand just keeps increasing. Prices and lead times for shipments are at company historical highs.
  • The tax increases contemplated in Congress create uncertainties for our business. The supply-chain bottlenecks continue to be problematic, and inflation in raw materials is putting pressure on profit margins.

Primary Metal Manufacturing

  • Inflation is here to stay.

Fabricated Metal Manufacturing

  • Labor shortages and raw material price increases and shortages continue to be major problems.
  • It is really difficult to make an accurate assessment of the future.
  • American iron and steel requirements in the Clean Water Act and the recent Infrastructure Investment and Jobs Act are causing extreme shortages and price escalations of required steel for water and wastewater projects. Many projects are being delayed or canceled altogether. We expect this to escalate through 2022 if not addressed.
  • We are seeing a slowdown in capital projects starting, and our requests for quotes have also slowed.

Machinery Manufacturing

  • We are seeing signs that business is settling in at about pre-COVID levels. Unfortunately, most of our raw materials are more costly, thus requiring us to increase pricing.
  • I anticipate the economy to get even worse the next 18–20 months with taxes and inflation rising.
  • We are having problems with most all materials due to long delivery times.

Computer and Electronic Product Manufacturing

  • The COVID-19 impact is still real.
  • Demand continues to remain strong across almost all markets. There are clear signs that inventory is building while scarcity continues, with a few components limiting production broadly. I have no idea when an overbuild of inventory will happen but fully expect that it will.

Transportation Equipment Manufacturing

  • We are still cautious regarding the next six months; there are numerous threats that have not gone away.

Furniture and Related Product Manufacturing

  • Project delays have reduced our billable revenue. It is challenging to keep on manpower without projects being ready for installation of finished materials.

Wood Product Manufacturing

  • [We are having] supply-chain issues; it is hard to get materials on time.

Paper Manufacturing

  • We still see escalation in costs and selling prices.

Printing and Related Support Activities

  • We are much busier this month than last, and incoming orders at the moment are surprisingly robust. October should be better than September, but the concern is what will six months from now look like. We are about to spend some money on equipment, including a major rebuild of one of our key pieces of machinery, so hopefully business will stay strong!

Food Manufacturing

  • We are experiencing severe increases in some raw-material prices and are unable to fill out some vacant positions, even at higher wages. This is putting tremendous strain both financially and operationally on the company.
  • We are seeing price increases on ingredients. We are seeing domestic and international freight costs increase. We have joined ERCOT and fear unstable electrical supply/grid issues and are investing in backup generators with one or more alternative fuel sources. Generally, the catastrophic decisions and ongoing policy and legislative blunders by Biden et al., plus the looming tax increases, have virtually every businessperson I know deeply concerned about the near-term impact and the future of our country. The detached reality is incredible. The inadequate labor pool and nonwork incentives have compounded the problem.

Textile Product Mills

  • Raw material supply shortages at tier 2 and 3 supplier levels have forced sales down 25 percent in August and September. Suppliers are reporting shortages of raw-material components and chemicals used in the production of our raw materials [as] a tier 1-level supplier to OEM [original equipment manufacturers]. In addition, they are citing high turnover of the workforce and consistent absenteeism as the root cause in 70 percent of the cases affecting us—a direct result of government-handout subsidies. The high employee turnover is also negatively affecting the quality of raw materials due to the learning curve of those low- or moderately skilled jobs. We have demand from our OEM customers but a lack of raw-material supply.

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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