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Texas Manufacturing Outlook Survey

December 27, 2021

Texas Manufacturing Activity Continues to Increase Strongly

What’s New This Month

For this month’s survey, Texas business executives were asked supplemental questions on wages, prices and revenue restraints. 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 an above-average pace in December, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, held fairly steady at 26.7, a reading indicative of solid output growth.

Other measures of manufacturing activity also indicated continued growth. The new orders index dipped slightly from 19.6 to 18.1—still far above the series average of 6.7. The growth rate of orders index edged down but remained elevated at 13.4. The shipments index ticked down from 24.3 to 19.1, while the capacity utilization index inched up from 26.4 to 27.8.

Perceptions of broader business conditions showed some improvement in December. The general business activity index remained positive but eased nearly four points to 8.1. The company outlook index pushed up from 1.3 to 8.6, its highest reading since August. Uncertainty regarding outlooks continued to rise, though the index retreated to 19.2.

Labor market measures indicated robust employment growth and longer workweeks. The employment index inched up to 30.9, an eight-month high. Thirty-five percent of firms noted net hiring, while 4 percent noted net layoffs. The hours worked index also remained elevated and was largely steady at 19.7.

Prices and wages continued to increase strongly in December. The raw materials prices index remained highly elevated but dropped from its series high to 66.2. The finished goods prices index held steady at 42.3, far exceeding its historical average of 7.7. The wages and benefits index remained near its own series high, at 45.5.

Expectations regarding future manufacturing activity remained positive but less so in December than in November. The future production index fell to 40.6 from 51.7, and the future general business activity index dropped 15 points to 14.0. Other measures of future manufacturing activity such as capital expenditures and employment showed mixed movements but remained solidly in positive territory.

Next release: Monday, January 31

Data were collected Dec. 13–21, 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.

December 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)
Indicator Dec Index Nov Index Change Series
Average
Trend* % Reporting Increase % Reporting No Change % Reporting Decrease

Production

26.7

27.4

–0.7

10.9

19(+)

35.5

55.7

8.8

Capacity Utilization

27.8

26.4

+1.4

8.7

19(+)

33.9

60.0

6.1

New Orders

18.1

19.6

–1.5

6.7

19(+)

33.3

51.5

15.2

Growth Rate of Orders

13.4

16.8

–3.4

0.7

18(+)

23.0

67.4

9.6

Unfilled Orders

11.9

17.4

–5.5

–1.7

18(+)

23.3

65.3

11.4

Shipments

19.1

24.3

–5.2

9.5

19(+)

31.2

56.7

12.1

Delivery Time

25.8

21.7

+4.1

0.9

18(+)

33.3

59.2

7.5

Finished Goods Inventories

–3.3

3.2

–6.5

–3.4

1(–)

16.5

63.7

19.8

Prices Paid for Raw Materials

66.2

82.1

–15.9

26.9

20(+)

72.8

20.6

6.6

Prices Received for Finished Goods

42.3

42.2

+0.1

7.7

17(+)

46.7

48.9

4.4

Wages and Benefits

45.5

47.6

–2.1

19.5

20(+)

45.6

54.3

0.1

Employment

30.9

28.5

+2.4

7.3

18(+)

34.5

61.9

3.6

Hours Worked

19.7

19.6

+0.1

3.4

18(+)

27.5

64.7

7.8

Capital Expenditures

19.2

10.5

+8.7

6.7

17(+)

23.1

73.0

3.9

General Business Conditions
Current (versus previous month)
Indicator Dec Index Nov Index Change Series
Average
Trend** % Reporting Improved % Reporting No Change % Reporting Worsened

Company Outlook

8.6

1.3

+7.3

6.9

3(+)

23.4

61.8

14.8

General Business Activity

8.1

11.8

–3.7

3.1

17(+)

23.2

61.7

15.1


Indicator Dec Index Nov Index Change Series
Average
Trend* % Reporting Increase % Reporting No Change % Reporting Decrease

Outlook Uncertainty†

19.2

27.7

–8.5

13.9

8(+)

26.6

66.0

7.4

Business Indicators Relating to Facilities and Products in Texas
Future (six months ahead)
Indicator Dec Index Nov Index Change Series
Average
Trend* % Reporting Increase % Reporting No Change % Reporting Decrease

Production

40.6

51.7

–11.1

38.7

20(+)

51.2

38.2

10.6

Capacity Utilization

39.3

42.7

–3.4

35.5

20(+)

48.2

42.8

8.9

New Orders

38.6

41.4

–2.8

36.3

20(+)

51.8

35.0

13.2

Growth Rate of Orders

32.0

29.2

+2.8

27.0

20(+)

43.5

45.1

11.5

Unfilled Orders

0.0

–1.5

+1.5

3.9

1()

17.4

65.2

17.4

Shipments

29.8

42.3

–12.5

37.1

20(+)

44.0

41.8

14.2

Delivery Time

8.8

1.8

+7.0

–1.2

11(+)

21.5

65.8

12.7

Finished Goods Inventories

11.6

8.2

+3.4

0.4

14(+)

25.6

60.5

14.0

Prices Paid for Raw Materials

45.5

56.4

–10.9

34.4

21(+)

58.0

29.5

12.5

Prices Received for Finished Goods

44.9

49.5

–4.6

20.5

20(+)

55.2

34.5

10.3

Wages and Benefits

61.9

62.8

–0.9

38.5

20(+)

63.1

35.7

1.2

Employment

44.3

36.6

+7.7

22.9

19(+)

50.4

43.5

6.1

Hours Worked

6.9

13.9

–7.0

9.5

20(+)

19.7

67.5

12.8

Capital Expenditures

20.6

31.8

–11.2

19.9

19(+)

31.9

56.8

11.3

General Business Conditions
Future (six months ahead)
Indicator Dec Index Nov Index Change Series
Average
Trend** % Reporting Increase % Reporting No Change % Reporting Worsened

Company Outlook

10.3

17.3

–7.0

20.7

19(+)

27.2

55.9

16.9

General Business Activity

14.0

28.6

–14.6

14.8

19(+)

27.7

58.6

13.7

*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.

December 27, 2021

Production Index

Downloadable chart

December 27, 2021

Comments from Survey Respondents

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

Chemical Manufacturing

  • We are experiencing far more uncertainty regarding our vendors’ ability to ship raw materials. Due to these problems, we see business activity decreasing over the next two quarters.
  • The greatest uncertainty seems to be the potential longer-term impact of omicron [variant of COVID-19].

Nonmetallic Mineral Product Manufacturing

  • Inflation! [Prices of] all raw materials are skyrocketing. We actually received a price increase of 35 percent from a major supplier effective Jan 1. The reports from the government of 6 percent inflation are significantly understated for building materials. All of this does not point to a rosy 2022. We are having to place raw material orders 6-7 months in advance. That is tough on cash flow and tough on planning. But wait, it’s just transitory. What a relief.
  • Inflation continues to be problematic for our raw materials, especially steel. We are finding it difficult to hire skilled craftsmen, and hourly wages continue to rise. Costs of new equipment are rising, and delivery times continue to drag out longer.

Fabricated Metal Manufacturing

  • Prices for raw material continue to increase. Availability of qualified applicants is almost nonexistent. We could increase our [number of] shop-experienced fitters and helpers significantly if available.
  • Inflation is adversely impacting construction starts and demand. Hospitality capital spending is at a minimum.
  • Prices to customers are up, but wages and other costs are up just as much. Health care costs are out of control. We are unable to accept some orders due to labor shortages.

Machinery Manufacturing

  • The supply chain requires constant attention to achieve expected results.
  • Supply-chain issues are having a huge impact. We’re waiting months for materials, and because of issues in 2020 (due to COVID), we’re having to prepay for a lot of the materials. So we have a lot of money tied up in materials that we won’t get until sometime next year.
  • Our prospects are much better because our competition has all but disappeared. They did not anticipate the inflation that we saw coming and consequently did not purchase materials at the [previously] much lower costs, as we did. Now we are raising our prices to reflect replacement costs and improving the margins on all of our products also.
  • We are starting to see demand return for oil and gas facilities equipment. Activity, orders and requests for proposals are all up from prior months. 2022 is shaping up to be a solid year.
  • We are receiving large orders in December that should drive strong growth through at least mid-2022.   

Computer and Electronic Product Manufacturing

  • We are seeing longer lead times from vendors we use; in turn, this has caused us to have to move our order times as well.
  • Strength continues across almost all markets and regions. There are clear signs that customers are building inventories as they move to protect themselves from growing lead times and industry shortages.

Transportation Equipment Manufacturing

  • The fundamentals for the outlook seem to remain positive, but economic signals are troubling and will cause us to behave cautiously.

Food Manufacturing

  • Ingredient costs have increased, in some cases dramatically. The specter of inflation, regardless of degree, has created upward pressure on employee compensation and retention. In some areas, there is a labor “puddle” instead of a pool to draw from.
  • We are still experiencing never-before-seen disruption in all aspects of our upstream and downstream supply chain. We are also seeing inflation across most areas of our raw material bases as well as transportation.

Wood Product Manufacturing

  • I have selected no change because we are doing all we can do. Busy, busy, busy.

Printing and Related Product Manufacturing

  • We can see things starting to slow down some, although many of our print customers are very busy, which should be good for us in the coming months. Our incoming orders have slowed way down, but that may be from a combination of the holidays and concerns with inflation. We just gave pretty much wholesale pay raises across the board, which will put pressure on profits even though we raised our labor prices in early November in advance of raising wages.

Miscellaneous Manufacturing

  • The area of concern for all of 2022 is the continued lack of availability of raw materials; raw material orders shipped late, and price increases continue, with no guarantee of raw material prices with purchase orders. All pricing now is price in effect at time of shipping. It’s a very difficult environment for us and for our customers.

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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