Texas Manufacturing Outlook Survey
Growth in Texas Manufacturing Activity Continues, Outlooks Improve
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 but at a slightly slower pace in February, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, came in at 14.5, down two points from January but still indicative of above-average output growth.
Other measures of manufacturing activity also indicated continued growth. The new orders index pushed up three points to 23.1, while the growth rate of orders index held steady at 12.6. Both readings are significantly above average. The capacity utilization index was unchanged at 11.5, and the shipments index rebounded 15 points to 23.5 after its January drop.
Perceptions of broader business conditions improved in February. The general business activity index shot up 12 points to 14.0. The company outlook index rose to a lesser extent, moving up four points to 6.4. The uncertainty index was elevated at 17.0 but down 14 points from last month’s reading.
Labor market measures indicated robust employment growth and longer workweeks, though some moderation was seen in February. The employment index came in at 18.4, down nine points from January but still highly elevated. Twenty-seven percent of firms noted net hiring, while 9 percent noted net layoffs. The hours worked index edged down to 19.0.
Prices and wages continued to increase strongly in February, with the indexes near historical highs. The raw materials prices index pushed up 11 points to 73.4, and the finished goods prices index rose eight points to 44.6. The wages and benefits index moved down from 49.6 to 44.0, still more than double its average reading of 19.8.
Expectations regarding future manufacturing activity pushed higher in February. The future production index rose from 38.0 to 42.1, and the future general business activity index came in at 20.6, up four points from January. Other measures of future manufacturing activity such as capital expenditures and employment showed mixed movements but remained solidly in positive territory.
Next release: Monday, March 28
Data were collected Feb. 15–23, 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.
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) | ||||||||
| Indicator | Feb Index | Jan Index | Change | Series Average | Trend* | % Reporting Increase | % Reporting No Change | % Reporting Decrease |
Production | 14.5 | 16.6 | –2.1 | 10.9 | 21(+) | 30.4 | 53.7 | 15.9 |
Capacity Utilization | 11.5 | 12.0 | –0.5 | 8.7 | 21(+) | 27.8 | 55.9 | 16.3 |
New Orders | 23.1 | 20.0 | +3.1 | 6.9 | 21(+) | 34.5 | 54.1 | 11.4 |
Growth Rate of Orders | 12.6 | 12.6 | 0.0 | 0.8 | 20(+) | 25.7 | 61.2 | 13.1 |
Unfilled Orders | 7.7 | 13.8 | –6.1 | –1.6 | 20(+) | 20.7 | 66.3 | 13.0 |
Shipments | 23.5 | 8.6 | +14.9 | 9.7 | 21(+) | 36.0 | 51.5 | 12.5 |
Delivery Time | 21.4 | 17.9 | +3.5 | 1.1 | 20(+) | 34.5 | 52.4 | 13.1 |
Finished Goods Inventories | –5.2 | –7.5 | +2.3 | –3.4 | 3(–) | 17.7 | 59.4 | 22.9 |
Prices Paid for Raw Materials | 73.4 | 62.1 | +11.3 | 27.3 | 22(+) | 77.3 | 18.8 | 3.9 |
Prices Received for Finished Goods | 44.6 | 37.1 | +7.5 | 8.1 | 19(+) | 50.2 | 44.2 | 5.6 |
Wages and Benefits | 44.0 | 49.6 | –5.6 | 19.8 | 22(+) | 44.0 | 56.0 | 0.0 |
Employment | 18.4 | 27.7 | –9.3 | 7.4 | 20(+) | 27.0 | 64.4 | 8.6 |
Hours Worked | 19.0 | 21.3 | –2.3 | 3.6 | 20(+) | 26.2 | 66.6 | 7.2 |
Capital Expenditures | 16.1 | 11.3 | +4.8 | 6.8 | 19(+) | 23.9 | 68.3 | 7.8 |
| General Business Conditions Current (versus previous month) | ||||||||
| Indicator | Feb Index | Jan Index | Change | Series Average | Trend** | % Reporting Improved | % Reporting No Change | % Reporting Worsened |
Company Outlook | 6.4 | 2.2 | +4.2 | 6.9 | 5(+) | 22.8 | 60.8 | 16.4 |
General Business Activity | 14.0 | 2.0 | +12.0 | 3.1 | 19(+) | 22.3 | 69.3 | 8.3 |
| Indicator | Feb Index | Jan Index | Change | Series Average | Trend* | % Reporting Increase | % Reporting No Change | % Reporting Decrease |
Outlook Uncertainty† | 17.0 | 30.8 | –13.8 | 14.3 | 10(+) | 28.7 | 59.6 | 11.7 |
| Business Indicators Relating to Facilities and Products in Texas Future (six months ahead) | ||||||||
| Indicator | Feb Index | Jan Index | Change | Series Average | Trend* | % Reporting Increase | % Reporting No Change | % Reporting Decrease |
Production | 42.1 | 38.0 | +4.1 | 38.7 | 22(+) | 49.2 | 43.7 | 7.1 |
Capacity Utilization | 41.8 | 37.8 | +4.0 | 35.5 | 22(+) | 50.2 | 41.4 | 8.4 |
New Orders | 39.1 | 31.5 | +7.6 | 36.3 | 22(+) | 46.1 | 46.9 | 7.0 |
Growth Rate of Orders | 27.1 | 18.3 | +8.8 | 27.0 | 22(+) | 35.3 | 56.5 | 8.2 |
Unfilled Orders | –0.1 | –2.5 | +2.4 | 3.8 | 7(–) | 14.5 | 70.9 | 14.6 |
Shipments | 39.2 | 34.7 | +4.5 | 37.1 | 22(+) | 46.2 | 46.8 | 7.0 |
Delivery Time | 3.6 | 5.8 | –2.2 | –1.2 | 6(+) | 20.3 | 63.0 | 16.7 |
Finished Goods Inventories | 12.7 | 2.3 | +10.4 | 0.5 | 16(+) | 25.3 | 62.1 | 12.6 |
Prices Paid for Raw Materials | 51.1 | 59.6 | –8.5 | 34.6 | 23(+) | 61.6 | 27.9 | 10.5 |
Prices Received for Finished Goods | 45.4 | 50.6 | –5.2 | 20.7 | 22(+) | 54.7 | 36.0 | 9.3 |
Wages and Benefits | 74.3 | 54.4 | +19.9 | 38.8 | 22(+) | 74.4 | 25.5 | 0.1 |
Employment | 45.2 | 52.2 | –7.0 | 23.2 | 21(+) | 47.5 | 50.2 | 2.3 |
Hours Worked | 10.4 | 12.5 | –2.1 | 9.4 | 22(+) | 18.5 | 73.4 | 8.1 |
Capital Expenditures | 29.9 | 19.4 | +10.5 | 20.0 | 21(+) | 39.0 | 51.9 | 9.1 |
| General Business Conditions Future (six months ahead) | ||||||||
| Indicator | Feb Index | Jan Index | Change | Series Average | Trend** | % Reporting Increase | % Reporting No Change | % Reporting Worsened |
Company Outlook | 18.1 | 19.4 | –1.3 | 20.7 | 21(+) | 28.2 | 61.7 | 10.1 |
General Business Activity | 20.6 | 16.5 | +4.1 | 14.8 | 21(+) | 30.3 | 60.0 | 9.7 |
*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.
Production Index
Comments from Survey Respondents
These comments are from respondents’ completed surveys and have been edited for publication.
- Concerns remain as supply-chain issues continue to increase on delivery of materials associated with maintenance and capital construction. Delivery dates are extending, or not even being committed to. The continued increase in inflationary pressures as well as the price of oil is significantly impacting the cost of doing business and forcing pricing increases to our customers.
- Demand remains strong and most customers expect it to maintain at least through the end of the year. I attended the International Home Builders Show last week in Orlando and everyone was optimistic regarding home building the balance of this year and possibly beyond.
- We are still being asked for RFQs [requests for quotations], but the level of acceptance has fallen off.
- Material prices continue to escalate with little compassion from the other side. More competitors are trying to hold the price and end up failing while screwing it up for the rest. And gas, groceries—everything is running so wild due to inflation. Who can keep up?
- We are continuing to have supply-chain difficulties. American Iron and Steel (AIS) requirements for State Revolving Fund projects are causing extreme cost increases and delays. Stainless steel fasteners are not readily available that meet AIS requirements, causing delays or nonbids on many items used in the water and wastewater industries.
- Manufacturing is the first to see cost increases and the last to be able to pass those increases on. Since September of 2021, we have seen the cost of production rise 40 percent. Prices have been adjusted accordingly and business activity has decreased, presumably from the shock of price increases to the buyers. Please quit printing money; quantitative easing since 2008 has destroyed our dollar.
- Prices for raw materials keep increasing, and cash flow has remained at 2021 levels. Something has got to give. When can we have Donald Trump back?
- We have been hit with many increases in raw material prices; however, we have been able to pass this to our customers with price increases. I have never seen it easier to raise prices, as customers almost expect it now.
- We are seeing oil companies being demonized for no good reason. Oil is going to be needed for a very long time, and what people don’t understand is that electric cars are a real inconvenience when you take a long trip. I believe that my business will be affected for a very long time, both up and down, based on the unintended consequences of the electric grid undercapacity and the reality that electric cars are not a perfect solution to gasoline engines.
- Supply-chain issues for materials and weather both constrained February output significantly. Although the labor market remains tight, finding people remains easier than finding materials.
- We see a positive future with the transportation bill. Because of the turbulence in the last couple of years, we are seeing our local banks refuse us lines of credit, which could cause problems with being able to bring inventory in.
- Capacity is completely booked for 2022. Many customers are asking for 40–50 percent increases in shipments, and we can bring on 10–15 percent with perfect execution.
- Supply-chain constraints do not seem to be letting up, causing us to further restrict production output and cut back on hiring and overtime hours.
- The decrease in COVID cases brings more confidence.
- While we have plans to increase our production, the outlook makes us very cautious. Do we want a recession due to inflation or rising interest rates? The Fed has been negligent by their recent actions and nonactions.
- Raw material price increases are occurring so rapidly, and our company is having trouble adjusting our pricing to customers quickly enough to reflect the internal increases.
- Rising costs for business operations, including materials, labor, professional services and transportation, continue to increase and apply pressure to profitability margins. Small companies are impacted by suppliers favoring larger contractual clients versus ordering as needed. In construction, general contractors and owners are still applying price pressures, and many subcontractors adjust pricing to stay alive.
- Our lead times for raw materials are stretching out. Labor availability is an issue. We don’t have a “pool.” We have a labor “puddle.”
- Retroactive cancellation of the Employee Retention Credit for fourth quarter 2021 and the months of lag time to get the credit refund threaten my business’ ability to continue.
- Lumber prices are spiking again. There is still a huge backlog of orders and supply issues.
- We are predicting a downturn. The effect of strong inflation and rising interest rates will have a negative bias to the economy in general.
- We continue to be quite a bit busier at this time of our fiscal year than we were last year at this time. We are four months into our fiscal year and tracking almost 50 percent above incoming orders, with some very large projects lining up for the upcoming months. I can’t explain it but am very glad to have the work, other than dealing with monster supply-chain issues and ever-increasing costs for materials and shipping.
- The crisis in Eastern Europe, supply-chain issues and labor constraints, plus a potential unfavorable economic environment of high interest rates and higher taxes in 2023, are not providing much incentive for increased investments. We lack any long-term visibility, and it is starting to erode our confidence to deploy resources in the short term.
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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