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Texas Manufacturing Outlook Survey

July 26, 2021

Robust Expansion in Texas Manufacturing Carries On

What’s New This Month

For this month’s survey, Texas business executives were asked supplemental questions on revenue, the labor market, wages and prices. 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 its robust expansion in July, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, was largely unchanged at 31.0, a reading well above average and indicative of strong output growth. Other measures of manufacturing activity also pointed to continued growth this month.

The new orders index came in at 26.8, unchanged from June and quadruple the series average of 6.5. The growth rate of orders index edged up to 25.8. The capacity utilization and shipments indexes held steady at highly elevated levels of 29.9 and 31.6, respectively.

Perceptions of broader business conditions continued to improve in July; the indexes eased slightly from June levels but remained well above average. The general business activity index fell four points to 27.3, and the company outlook index fell five points to 22.2. The outlook uncertainty index inched down to 14.6.

Labor market measures indicate continued growth. The employment index held steady at a highly elevated 23.7. Thirty-one percent of firms noted net hiring, while 8 percent noted net layoffs. The hours worked index also held steady at 24.2.

Prices and wages continued to increase in July. Price indexes eased off the all-time highs reached last month but remained strongly elevated, with the raw materials prices index coming in at 73.5 and the finished goods prices index coming in at 40.9. Similarly, the wages and benefits index ticked down to 46.0 from its historical high of 48.1 in June.

Expectations regarding future manufacturing activity remained optimistic in July. The future production index slipped eight points to 48.4, and the future general business activity index was unchanged at 37.1. Most other measures of future manufacturing activity declined but remained solidly in positive territory.

Next release: Monday, August 30

Data were collected July 13–21, and 104 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.

July 26, 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)
IndicatorJul IndexJun IndexChangeSeries
Average
Trend*% Reporting Increase% Reporting No Change% Reporting Decrease

Production

31.0

29.4

+1.6

10.6

14(+)

43.9

43.1

12.9

Capacity Utilization

29.9

30.6

–0.7

8.4

14(+)

39.2

51.5

9.3

New Orders

26.8

26.7

+0.1

6.5

14(+)

39.9

47.0

13.1

Growth Rate of Orders

25.8

23.4

+2.4

0.4

13(+)

37.1

51.6

11.3

Unfilled Orders

20.2

21.3

–1.1

–2.1

13(+)

31.2

57.8

11.0

Shipments

31.6

31.8

–0.2

9.3

14(+)

41.4

48.7

9.8

Delivery Time

19.7

26.9

–7.2

0.4

13(+)

31.1

57.5

11.4

Finished Goods Inventories

–8.7

–4.9

–3.8

–3.5

2(–)

17.5

56.3

26.2

Prices Paid for Raw Materials

73.5

80.8

–7.3

25.7

15(+)

75.8

21.9

2.3

Prices Received for Finished Goods

40.9

42.8

–1.9

6.9

12(+)

43.8

53.3

2.9

Wages and Benefits

46.0

48.1

–2.1

18.9

15(+)

46.4

53.2

0.4

Employment

23.7

22.9

+0.8

6.8

13(+)

31.3

61.1

7.6

Hours Worked

24.2

23.8

+0.4

3.0

13(+)

32.2

59.8

8.0

Capital Expenditures

15.4

16.9

–1.5

6.5

12(+)

22.0

71.4

6.6

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

Company Outlook

22.2

27.5

–5.3

7.0

14(+)

34.6

53.0

12.4

General Business Activity

27.3

31.1

–3.8

2.9

12(+)

36.4

54.5

9.1

IndicatorJul IndexJun IndexChangeSeries
Average
Trend*% Reporting Increase% Reporting No Change% Reporting Decrease

Outlook Uncertainty†

14.6

17.6

–3.0

12.7

3(+)

23.3

68.0

8.7

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

Production

48.4

56.6

–8.2

38.5

15(+)

55.1

38.2

6.7

Capacity Utilization

39.4

56.9

–17.5

35.4

15(+)

48.2

43.0

8.8

New Orders

43.3

51.1

–7.8

36.2

15(+)

51.8

39.7

8.5

Growth Rate of Orders

31.5

40.6

–9.1

26.9

15(+)

42.2

47.0

10.7

Unfilled Orders

4.2

12.7

–8.5

4.0

14(+)

19.4

65.4

15.2

Shipments

47.4

59.8

–12.4

37.0

15(+)

54.1

39.2

6.7

Delivery Time

5.1

0.9

+4.2

–1.4

6(+)

19.8

65.6

14.7

Finished Goods Inventories

12.7

24.5

–11.8

0.2

9(+)

25.3

62.1

12.6

Prices Paid for Raw Materials

43.8

53.6

–9.8

33.9

16(+)

54.2

35.4

10.4

Prices Received for Finished Goods

38.6

53.6

–15.0

19.9

15(+)

49.0

40.6

10.4

Wages and Benefits

52.6

59.2

–6.6

38.0

15(+)

53.2

46.2

0.6

Employment

43.5

48.2

–4.7

22.5

14(+)

46.7

50.1

3.2

Hours Worked

14.1

20.4

–6.3

9.4

15(+)

21.9

70.3

7.8

Capital Expenditures

26.0

31.4

–5.4

19.8

14(+)

34.8

56.4

8.8

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

Company Outlook

35.5

38.4

–2.9

20.8

14(+)

42.4

50.7

6.9

General Business Activity

37.1

37.3

–0.2

14.7

14(+)

41.6

53.9

4.5

*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.

July 26, 2021

Production Index

Downloadable chart

July 26, 2021

Comments from Survey Respondents

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

Chemical Manufacturing

  • The uncertainty around the impact of demand related to the latest surge in the Delta variant of COVID-19 is cause for general business activity concern.

Primary Metal Manufacturing

  • Anyone who believes the wage increases are temporary does not understand business. Wages never go down.
  • We continue to have a significant number of openings in our manufacturing plant but have had some success hiring new employees this past month compared to the previous one. Raw material prices continue to rise to record levels when adjusted for inflation.

Fabricated Metal Manufacturing

  • Material pricing continues to increase except for lumber. Delivery times for materials like steel, windows, roof materials, etc., have been delayed significantly. This could affect our future business.
  • We still have a lot of open quotes where owners have not given the go-ahead to the project and/or the contractor.
  • We need employees.
  • The increase in uncertainty is based upon the perceived change in consumer spending patterns more in line with the prepandemic patterns.
  • We cannot source materials, and suppliers cannot fulfill orders or cannot fulfill in a timely manner. We are currently producing at about 60 percent capacity.
  • Uncertainty of tax increases and regulation changes are high on our list of concerns, as are shortages of materials. Exports are being hurt by COVID-19 interruption of sales events and the cost of U.S. materials.

Machinery Manufacturing

  • We are currently operating at a prepandemic level.
  • The changes that we are seeing are from our competition. They have receded from being competitive and have become the high-price supplier. They don’t have the old inventory to work from and, thus, their prices are much higher than ours. We built inventory early on and are benefiting from the higher prices, and we can be much more competitive when we need to be. Also, we have vertically integrated our manufacturing so that our costs are much lower. Overall, if you anticipated these price increases and bought before they happened, then your business will remain stronger than otherwise.

Computer and Electronic Product Manufacturing

  • The risk of higher corporate taxes and capital gains is reflecting in the industrial sector already. Inflation is not helping bottom-line figures. Higher costs have hindered our ability to keep some customers.
  • My biggest concern is lead times of products we use. Some have been 57 weeks. And with the order increase, we have to increase our inventory, but as we’re recovering from COVID-19, we don’t have the extra cash.

Transportation Equipment Manufacturing

  • We are expecting supply-line problems to improve in the next three months. If they don’t, our optimistic outlook will change.

Paper Manufacturing

  • Raw material prices are going up significantly and will be passed on to the customers (so far, an increase of 30 percent this year). Wages are going up to keep employees from being pulled away by SBA [Small Business Administration] stimulus money recipients who have a lot of cash right now. We feel inflation in a big way currently.

Printing and Related Support Activities

  • Manpower shortages are crippling our production effort. Absenteeism and turnover rates are escalating. Wage pressure is very significant. It is primarily being felt in skilled/semi-skilled labor jobs.

Food Manufacturing

  • We are very fortunate to have no volatility in ingredient costs. Our primary sourcing for ingredients comes from southeastern Texas for rice and mid-America for lentils.
  • We continue to see increased orders over our forecast. We are not completely sure of the reason behind the increased orders. Some ideas are “people are gathering more in light of increase vaccinations”; “people are having more backyard cookouts since they were not able to do that last summer” and “our marketing efforts are paying dividends.” At this point, we expect this momentum to continue into the next quarter and into next year.

Beverage and Tobacco Product Manufacturing

  • We are losing sales due to out-of-stocks resulting from supplier product shortages. Until we can keep a consistent, adequate inventory of finished product, it will be hard to maintain, much less grow, sales. Employees are hard to find despite the fact that we have greatly raised wages in the last year.

Miscellaneous Manufacturing

  • Raw materials shortages and delivery delays are areas of concern. It is difficult to hire—and expensive.

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 Christopher Slijk at christopher.slijk@dal.frb.org.

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