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Texas Manufacturing Outlook Survey

November 29, 2021

Texas Manufacturing Expansion Strengthens Further Even as Costs Continue to Climb

What’s New This Month

For this month’s survey, Texas business executives were asked supplemental questions on supply chains, hiring and wages. 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 increased at a faster pace in November, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, rose nine points to 27.4, a reading well above average and indicative of robust output growth.

Other measures of manufacturing activity also indicated a further pickup in growth. The new orders index came in at 19.6, up five points from October and far above the series average of 6.6. The growth rate of orders index pushed up three points to 16.8. The shipments index shot up 11 points to 24.3, its highest reading since July, and the capacity utilization index moved up from 20.1 to 26.4.

Perceptions of broader business conditions were mixed in November. The general business activity index remained positive, indicating an improvement in activity from October, though it eased three points to 11.8. The company outlook index came in at 1.3, with the near-zero reading indicating little change in outlooks from October. Uncertainty continued to rise, with the outlook uncertainty index holding fairly steady at a highly elevated reading of 27.7.

Labor market measures indicated robust employment growth and longer workweeks. The employment index inched up to 28.5, a seven-month high. Thirty-three percent of firms noted net hiring, while 5 percent noted net layoffs. The hours worked index also remained elevated and was largely steady at 19.6.

Prices and wages continued to increase strongly in November. Amid widespread supply-chain disruptions, the raw materials prices index pushed up six points to 82.1, hitting a new series high. The finished goods prices index eased off its high last month, falling eight points to 42.2 but still far exceeding its historical average of 7.6. The wages and benefits index came in near its own series high, edging up from 44.1 to 47.6.

Expectations regarding future manufacturing activity were generally more positive in November. The future production index moved up five points to 51.7, and the future general business activity index jumped 14 points to 28.6. Other measures of future manufacturing activity showed mixed movements but remained solidly in positive territory.

Next release: Monday, December 27

Data were collected Nov. 15–23, and 95 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.

November 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)
IndicatorNov IndexOct IndexChangeSeries
Average
Trend*% Reporting Increase% Reporting No Change% Reporting Decrease

Production

27.4

18.3

+9.1

10.8

18(+)

38.2

51.0

10.8

Capacity Utilization

26.4

20.1

+6.3

8.6

18(+)

37.5

51.4

11.1

New Orders

19.6

14.9

+4.7

6.6

18(+)

32.7

54.2

13.1

Growth Rate of Orders

16.8

13.6

+3.2

0.6

17(+)

23.8

69.2

7.0

Unfilled Orders

17.4

20.9

–3.5

–1.7

17(+)

26.8

63.8

9.4

Shipments

24.3

13.8

+10.5

9.5

18(+)

35.8

52.7

11.5

Delivery Time

21.7

25.9

–4.2

0.8

17(+)

29.1

63.5

7.4

Finished Goods Inventories

3.2

–11.1

+14.3

–3.4

1(+)

18.1

67.0

14.9

Prices Paid for Raw Materials

82.1

76.3

+5.8

26.7

19(+)

83.6

14.9

1.5

Prices Received for Finished Goods

42.2

49.8

–7.6

7.6

16(+)

45.3

51.6

3.1

Wages and Benefits

47.6

44.1

+3.5

19.3

19(+)

47.7

52.2

0.1

Employment

28.5

28.3

+0.2

7.1

17(+)

33.0

62.5

4.5

Hours Worked

19.6

18.5

+1.1

3.4

17(+)

20.6

78.4

1.0

Capital Expenditures

10.5

15.6

–5.1

6.6

16(+)

21.2

68.1

10.7

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

Company Outlook

1.3

2.4

–1.1

6.9

2(+)

19.6

62.1

18.3

General Business Activity

11.8

14.6

–2.8

3.0

16(+)

22.2

67.4

10.4

IndicatorNov IndexOct IndexChangeSeries
Average
Trend*% Reporting Increase% Reporting No Change% Reporting Decrease

Outlook Uncertainty†

27.7

29.0

–1.3

13.8

7(+)

36.2

55.3

8.5

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

Production

51.7

46.8

+4.9

38.7

19(+)

56.9

37.9

5.2

Capacity Utilization

42.7

48.6

–5.9

35.5

19(+)

43.5

55.7

0.8

New Orders

41.4

39.3

+2.1

36.3

19(+)

45.8

49.9

4.4

Growth Rate of Orders

29.2

29.3

–0.1

27.0

19(+)

33.4

62.4

4.2

Unfilled Orders

–1.5

–0.1

–1.4

3.9

4(–)

14.0

70.5

15.5

Shipments

42.3

48.5

–6.2

37.1

19(+)

47.4

47.6

5.1

Delivery Time

1.8

5.8

–4.0

–1.3

10(+)

18.0

65.8

16.2

Finished Goods Inventories

8.2

6.7

+1.5

0.3

13(+)

19.8

68.6

11.6

Prices Paid for Raw Materials

56.4

48.9

+7.5

34.3

20(+)

62.1

32.2

5.7

Prices Received for Finished Goods

49.5

40.6

+8.9

20.4

19(+)

55.2

39.1

5.7

Wages and Benefits

62.8

60.3

+2.5

38.4

19(+)

63.0

36.8

0.2

Employment

36.6

35.1

+1.5

22.8

18(+)

40.6

55.4

4.0

Hours Worked

13.9

7.1

+6.8

9.5

19(+)

17.3

79.3

3.4

Capital Expenditures

31.8

24.9

+6.9

19.9

18(+)

36.3

59.2

4.5

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

Company Outlook

17.3

14.1

+3.2

20.7

18(+)

33.1

51.1

15.8

General Business Activity

28.6

15.0

+13.6

14.8

18(+)

38.6

51.4

10.0

*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.

November 29, 2021

Production Index

Downloadable chart

November 29, 2021

Comments from Survey Respondents

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

Chemical Manufacturing

  • Higher-than-historical raw materials costs, continued supply-chain shortages, and the continued war on talent with limited labor availability have impacted near-term to 12-month business forecasts negatively.
  • Based on current data and information from suppliers, we have started to plan for much higher materials and logistics costs in the upcoming months.

Nonmetallic Mineral Product Manufacturing

  • Supply-chain issues and price increases for all materials continue to be a serious problem. We are not able to pass on pricing increases because our contracts are fixed-price.
  • Importing continues to be a nightmare. Lead times from overseas are at a historical high due to slow shipping. Import freight costs are at a historical high. Container fees due to the storage of full containers are at a historical high. The cost of prepaid inbound inventory is at a historical high (which hurts cash flow and increases costs due to higher interest payments). But evidently no one in the administration cares to do anything. Drop the Chinese tariff. Suspend the California port requirements for trucks and truckers. Allow truckers to drive 14 hours a day. Do something!

Primary Metal Manufacturing

  • The main problem remains labor. We have over 70 openings with an employee head count at 1,150.
  • We continue to face hurdles on three main fronts that are truly hampering the ability to fully operate and recover from post-COVID shutdowns. The lack of both skilled and unskilled labor is a major issue. Workers are simply not reentering the workforce, and new labor pools are not interested in heavy manufacturing despite significant pay rate increases. Supply-chain interruptions and material shortages continue to cause adverse impacts on all operations. These factors are also causing significant material input cost increases. Some materials have increased as much as 70 percent over the past 10 months. Finally, the continued uncertainty with tax policy, agency rulemaking, and weak provisions for domestic-made products are causing pause for capital improvements and expansions.

Fabricated Metal Manufacturing

  • Business is good but it’s continuing to be taxing to our energy and ability to chip away at our backlog. Prices and availability of materials continue to be an issue.
  • Labor shortages continue to be a problem.

Machinery Manufacturing

  • The vaccine mandate makes our employee outlook grim. We have many employees who are not willing (or not able) to be vaccinated and do not want to drive 30 minutes out of town for a weekly test. We are already having a difficult time finding people who want to work; now it is that much more difficult.
  • Democrats are in control, so our buying power is declining. Spend, spend, spend, spend, spend is all they know, and what they spend it on hurts the working-class American. I hope we can survive.
  • COVID-19 wiped out my competition. Another guy tried to compete with my company, and he just went bankrupt. Between the government rules and the oil companies demanding more insurance and driving up costs, barriers to entry are such that we are the only supplier left in my business with inventory and an ability to take care of the customer. Therefore, we’ve raised prices and increased our response time to service our customers’ needs.
  • We are implementing price increases across the board, and we have not had much pushback from customers as they are apparently expecting them to increase.

Computer and Electronic Product Manufacturing

  • We are adjusting to the new realities of increased costs and increased delivery times and potential shortages. In our industry, there are several new entrants and new partnerships that are changing our industry.
  • We have continually had to push out lead times due to longer lead times of parts used.

Transportation Equipment Manufacturing

  • Managing cash flow is becoming more challenging as we experience a recovery of our business while seeing significant increases in raw materials, tooling and outside processes. Compounding this challenge are customers extending payment terms. As an SME [small- to medium-sized enterprise], we have been unsuccessful countering the large customers' extension in payments. The rate and scale of increasing costs and the delay of cash receipts have created a major risk for our company. For the first time in 40 years, our company is in jeopardy.
  • I do get a feeling from my suppliers that the supply chain is slowly getting better. In no way is it good, but I can at least get an approximate time frame of deliveries, which they would not give us earlier this year. They are always late, but at least they have a plan.
  • Inflation, the supply chain, the COVID-19 vaccine mandate and its impact on personnel, and energy prices are issues affecting our business.

Food Manufacturing

  • Ingredient costs are increasing—in some cases doubling. Pallet costs have nearly doubled. Lead times for scheduled deliveries are more uncertain. Ocean freight has quadrupled in price. Add in the fragility and lack of integrity and general distrust this administration has created, it is an unstable environment.

Miscellaneous Manufacturing

  • Continued disrupted raw material availability, increasing raw material costs (our raw materials are copper, brass, steel, stainless steel and aluminum), metal mills changing terms and continuous fabrication price increases, lack of available human resources, and cost increases across the board for literally all supplies/services have caused major disruption to our ability to manufacture product timely. In first quarter 2022, we will charge customers the price in effect at time of production (PIE) for the first time in our 40-year history. We are forced to do this because of instability in metals markets, both material availability and price.

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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