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Texas Economy

Texas Manufacturing Outlook Survey

Texas Manufacturing Outlook Survey
January 31, 2022
Texas Manufacturing Outlook Survey

Growth in Texas Manufacturing Activity Moderates, but Outlooks Remain Optimistic

What’s New This Month

For this month’s survey, Texas business executives were asked supplemental questions on the impact of COVID-19 and labor market conditions. 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.

This month’s data release also includes annual seasonal factor revisions. Once per year, the Federal Reserve Bank of Dallas revises the historical data for the Texas Manufacturing Outlook Survey after calculating new seasonal adjustment factors. Annual seasonal revisions result in slight changes in the seasonally adjusted series. Read more information on seasonal adjustment.

Texas factory activity continued to increase but at a slower pace in January, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, came in at 16.6, an eight-month low but a reading still indicative of above-average output growth.

Other measures of manufacturing activity also indicated continued growth. The new orders and growth rate of orders indexes held steady at 20.0 and 12.6, respectively, suggesting a continuation of elevated demand growth. The capacity utilization index fell 13 points to 12.0, and the shipments index fell 12 points to 8.6. While still suggestive of growth, these lower readings indicate a deceleration from December.

Perceptions of broader business conditions improved slightly in January. The general business activity index remained positive but eased six points to 2.0. Similarly, the company outlook index moved down six points to 2.2. Uncertainty regarding outlooks escalated further, with the index pushing up 12 points to 30.8, its highest reading since April 2020 after the initial onset of the pandemic.

Labor market measures indicated robust employment growth and longer workweeks. The employment index inched down to 27.7 but remained highly elevated. Thirty-four percent of firms noted net hiring, while 6 percent noted net layoffs. The hours worked index was largely steady at 21.3.

Prices and wages continued to increase strongly in January, though price pressures eased slightly. The raw materials prices index remained highly elevated but dropped five points to 62.1. The finished goods prices index also fell five points, coming in at 37.1, but still far exceeded its historical average of 7.9. The wages and benefits index pushed up from 46.5 to 49.6, reaching a series high.

Expectations regarding future manufacturing activity remained highly positive. The future production index receded slightly to 38.0, and the future general business activity index was largely unchanged at 16.5. Other measures of future manufacturing activity such as capital expenditures and employment showed mixed movements but remained solidly in positive territory.

Next release: Monday, February 28

Data were collected Jan. 18–26, 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.

January 31, 2022

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)
IndicatorJan IndexDec IndexChangeSeries
Average
Trend*% Reporting Increase% Reporting No Change% Reporting Decrease

Production

16.6

26.0

–9.4

10.9

20(+)

34.0

48.7

17.4

Capacity Utilization

12.0

25.4

–13.4

8.7

20(+)

26.5

59.0

14.5

New Orders

20.0

19.8

+0.2

6.9

20(+)

34.2

51.6

14.2

Growth Rate of Orders

12.6

13.4

–0.8

0.7

19(+)

25.3

62.0

12.7

Unfilled Orders

13.8

10.5

+3.3

–1.6

19(+)

26.6

60.6

12.8

Shipments

8.6

20.5

–11.9

9.6

20(+)

27.7

53.2

19.1

Delivery Time

17.9

25.9

–8.0

1.0

19(+)

32.5

53.0

14.6

Finished Goods Inventories

–7.5

–3.3

–4.2

–3.4

2(–)

18.3

55.9

25.8

Prices Paid for Raw Materials

62.1

67.4

–5.3

27.1

21(+)

66.9

28.3

4.8

Prices Received for Finished Goods

37.1

42.2

–5.1

7.9

18(+)

39.5

58.1

2.4

Wages and Benefits

49.6

46.5

+3.1

19.7

21(+)

49.6

50.4

0.0

Employment

27.7

31.1

–3.4

7.4

19(+)

33.7

60.3

6.0

Hours Worked

21.3

19.6

+1.7

3.5

19(+)

27.1

67.2

5.8

Capital Expenditures

11.3

19.3

–8.0

6.7

18(+)

20.0

71.2

8.7

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

Company Outlook

2.2

7.8

–5.6

6.9

4(+)

18.9

64.4

16.7

General Business Activity

2.0

7.8

–5.8

3.1

18(+)

20.8

60.3

18.8

IndicatorJan IndexDec IndexChangeSeries
Average
Trend*% Reporting Increase% Reporting No Change% Reporting Decrease

Outlook Uncertainty†

30.8

19.2

+11.6

14.3

9(+)

35.1

60.6

4.3

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

Production

38.0

41.0

–3.0

38.7

21(+)

49.4

39.3

11.4

Capacity Utilization

37.8

38.0

–0.2

35.4

21(+)

48.1

41.6

10.3

New Orders

31.5

38.5

–7.0

36.3

21(+)

42.0

47.5

10.5

Growth Rate of Orders

18.3

32.4

–14.1

27.0

21(+)

31.1

56.1

12.8

Unfilled Orders

–2.5

–0.6

–1.9

3.8

6(–)

18.1

61.3

20.6

Shipments

34.7

29.7

+5.0

37.1

21(+)

44.9

44.8

10.2

Delivery Time

5.8

8.9

–3.1

–1.2

5(+)

23.8

58.2

18.0

Finished Goods Inventories

2.3

11.6

–9.3

0.4

15(+)

19.3

63.6

17.0

Prices Paid for Raw Materials

59.6

45.5

+14.1

34.5

22(+)

66.3

27.0

6.7

Prices Received for Finished Goods

50.6

44.9

+5.7

20.6

21(+)

57.5

35.6

6.9

Wages and Benefits

54.4

62.2

–7.8

38.6

21(+)

55.4

43.6

1.0

Employment

52.2

44.2

+8.0

23.1

20(+)

59.9

32.4

7.7

Hours Worked

12.5

6.5

+6.0

9.4

21(+)

23.5

65.5

11.0

Capital Expenditures

19.4

20.9

–1.5

20.0

20(+)

29.0

61.4

9.6

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

Company Outlook

19.4

10.1

+9.3

20.7

20(+)

30.7

58.0

11.3

General Business Activity

16.5

14.6

+1.9

14.8

20(+)

27.7

61.2

11.2

*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.

January 31, 2022

Production Index

Production Chart

Downloadable chart

January 31, 2022

Comments from Survey Respondents

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

Chemical Manufacturing
  • The cost of raw materials/parts/outside labor continues to increase. It is a tight labor market (a challenge finding talent) to backfill or provide relief to current staff. There is volatility in customer demand (sentiment is still very unknown for some in 2022, as is our ability to ramp up or down with demand swing). COVID-19 is impacting employee availability.
  • The omicron surge and its impact on the workforce and consumer spending have remained a concern. Additionally, policy around employer mandates related to COVID-19 has been a concern, with recent relief from the Supreme Court. Many workers were hinting at leaving the workforce over the legal mandates that employers were facing to impose on employees.
Nonmetallic Mineral Product Manufacturing
  • Inflation and supply-chain problems continue to erode margins.
  • COVID is really hurting our shipments/output/future revenues. Thirty percent of employees are out sick.
Primary Metal Manufacturing
  • It is still difficult to fill entry-level positions in our company.
  • The last two weeks of December and the first two weeks of January were sluggish from a production/shipping perspective. Things really picked up the middle of January; we’re back to normal and very busy.
Fabricated Metal Product Manufacturing
  • Labor shortages and supply-chain interruptions continue be a concern.
  • We are having supply-chain issues, material cost increases and manpower availability issues.
  • We are seeing an increase in our backlog and requests for quotations directly related to the increase in new or previously deferred energy and petrochemical projects. With the current administration’s emphasis on anything anti-fossil-products it can enact, future uncertainty remains hard to predict.
Machinery Manufacturing
  • We are ramping up again for a COVID-related product that is currently driving our rapid growth.
  • Future business looks better if we can find more workers.
  • Supply-chain issues continue to be a challenge. It is getting easier to recruit good employees.
  • We are seeing raw material increases of 10 to 20 percent per month.
Computer and Electronic Product Manufacturing
  • Uncertainty is hitting the industrial industry. The antibusiness policies are not helping.
  • We remain in the same state that we have been for the past year. There is some pandemic uncertainty, but we are now used to it. Our industry is still in a state of flux as new competitors have entered our space.
Transportation Equipment Manufacturing
  • COVID infections are still impacting production.
  • Fundamentals of our markets look good, but the overall economic outlook (inflation) and government policies, including the Federal Reserve’s, are significant threats to our markets. The Federal Reserve badly missed the inflation buildup that they should have seen.
  • Short-term workforce shortages caused by the omicron COVID spike, coupled with critical component delays related to supply-chain issues, forced us to reduce production output in first quarter 2022, resulting in increased lead times and longer order backlogs for customers. In addition to the resulting first-quarter revenue shortfalls, margin compression from rising material and labor costs is also contributing to reduced profits near term.
Food Manufacturing
  • We are very active. The supply chain—primarily due to driver shortages, limited over-the-road equipment and raw ingredient price increases—make every day a planning challenge.
Beverage and Tobacco Product Manufacturing
  • Losing the Employee Retention Credit (ERC) for the fourth quarter after the fact was a blow to operating funds. I need a lot of growth to stay viable. I was already in the position to need growth before the increases in the cost of trucks, shipping, health insurance and labor. Add to those cost increases a need to carry more days of inventory due to inbound shipping uncertainty, and it seems like every cost is up. With all my costs up, losing the ERC early is painful.
Paper Manufacturing
  • Inflation and Fed tightening will slow the economy down in next three to six months. We can’t find new hires to produce orders we currently have, so a slowdown will align demand with the current available workforce. It may be permanent as many workers seem to have left the workforce [with no plans] to come back.
Printing and Related Product Manufacturing
  • This manufacturing business is in a state of chaos. Orders are very strong, reflecting panic buying as customers are afraid they won’t be able to get their orders on a timely basis. We can’t hire enough people to staff our equipment. People are leaving for more money or threatening to leave, which requires us to respond with significant wage increases. Absenteeism is high due to COVID or presumed COVID or because they don’t want to work and they know they won’t be fired and can probably make up lost wages with overtime. It is virtual chaos.
  • We continue to be tracking ahead of the prior year-to-date on incoming orders, so we are hopeful that this fiscal year 2022 will be better and possibly much better than the prior year.
Miscellaneous Manufacturing
  • Government spending is out of control. The amount of currency in the economy is driving up costs and making markets less efficient by irrational exuberance. Too many resources are being allocated to underperforming (nonperforming) programs and projects. The international political climate is way worse than the public is aware of, and companies need to prepare for more potential interruption to trade. More pressure on supply chains is increasingly likely. It is a difficult climate to do long-term planning and investments.
  • Demand is increasing. Lead times are pushed out for raw materials. There are a lot of rescheduling requests. We are still facing transportation delays and hiring limitations.
  • Democratic leadership, Ukraine, Taiwan and inflation are real problems.

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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