Texas plant business expands solidly but supply chain issues worsen

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Overall activity at factories in Lone Star State continued to grow at a steady pace in September, although there was a slowdown in some specific manufacturing metrics as well as an increase in reports of chain issues. supply, according to a Dallas Fed survey.

Texas business executives who responded to the Dallas Texas Fed’s Monthly Manufacturing Outlook Survey, released Sept. 27, highlighted growth in shipments, employment and utilization of capabilities to help increase the overall production index, a key measure of manufacturing conditions in Texas. The production index reached 24.2 in September, up 3.4 percentage points from 20.8 in August.

“The reading was well above average and indicative of solid output growth,” the Dallas Fed said in a statement, which noted mixed movement for other measures of manufacturing activity.

The deliveries index edged up 3.5 points to 18.7 in September, the employment index rose 4.4 points to 26.3 and the capacity utilization index rose by 2.8 points, according to the survey.

Demand indices retreated during the month, however. The new orders index stood at 9.5 in September, down from 15.6 in August, but slightly above the series average of 6.5. The growth rate of the orders index fell eight points to 2.5 in September.

“We’re a lot busier this month than last year, and incoming orders right now are surprisingly strong,” said an executive from the printing and related support activities, according to the report. investigation.

Perceptions of a broader economic environment were mixed in September, with the general business activity index falling 4.4 points in September, although it remained in positive territory at 4.6%. Readings above zero indicate expansion, while readings below this number indicate contraction. The business outlook index fell 14.3 points to a negative 2.8 in September.

“We are seeing a slowdown in the start-up of investment projects, and our requests for quotes have also slowed,” said a metalworking industry executive.

“The tax increases being considered in Congress create uncertainty for our business,” said another in the non-metallic mineral product manufacturing industry.

The six-month manufacturing situation deteriorated from August to September, with the production forecast index falling 2.5 points to a still positive level of 41.8.

“I predict the economy will get even worse over the next 18 to 20 months with rising taxes and inflation,” said an executive in the machinery manufacturing sector.

The future outlook for general activity fell 3.6 points to 11.5 in September and the outlook for businesses fell 4.9 points to 12.7.

“We remain cautious over the next six months; there are many threats that have not gone away, ”said an executive in the transportation equipment manufacturing industry.

“Inflation is here to stay,” said an executive in the primary metals industry.

The September survey included an additional section on supply chain disruptions.

When asked if they are currently experiencing supply chain disruptions or delays, 64.5% of executives surveyed said yes, up from 61% in June and 35.5% in February.

“We have problems with most of the materials due to the long lead times,” said a machine manufacturing manager.

“We are experiencing sharp increases in the price of some raw materials and are unable to fill some vacancies, even at higher wages. This puts enormous pressure both financially and operationally on the company, ”said a food manufacturing manager.

While six-month expectations of prices paid for commodities edged down 0.4 points to a still high level of 55.3, the index of expected prices received climbed 4.8 points to 44 , 6. The expectation for companies to raise their selling prices in six months suggests greater upward pressure on the rate of consumer price inflation.

By Tom Ozimek

Tom Ozimek has extensive experience in journalism, deposit insurance, marketing and communications, and adult education. The best writing advice he’s ever heard is from Roy Peter Clark: “Hit your target” and “leave the best for last”.

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