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Uncertainty decreases, Texas manufacturing activity forward-looking

Posted at 3:27 PM, Jul 26, 2021
and last updated 2021-07-26 16:46:03-04

Texas manufacturing activity and production index rates from this month indicate strong and continual growth, according to the Texas Manufacturing Outlook Survey.

The production index is used to measure the state's manufacturing conditions, this month's 31.0 is above average and suggests strong output growth.

The 368 business executives responding to the survey indicated that labor market measures are showing growth in employment, with the employment index at 23.7.

"For the first time since the onset of the pandemic, less than half of Texas businesses report lower-than-typical revenues," said Emily Kerr, Dallas Fed senior business economist. "The current share is 46 percent, down from 81 percent in May 2020. Nearly 70 percent of businesses are currently trying to hire, and the top impediments are lack of applicants and workers looking for more pay than offered."

31 percent of firms reporting net hiring while only 8 percent cited net layoffs. Prices and wages reached historical highs last month, and they continue to remain high through the month of July.

"Expectations for price and wage growth in 2021 have steadily increased as the year has progressed, with respondents now expecting wages and input prices to increase 5.1 percent and 6.7 percent, respectively, on average, and to raise selling prices 5.3 percent," said Kerr. "Looking further ahead to 2022, contacts expect prices and wages to rise between 4.4-4.7 percent, on average."

The general business activity index, 27.3, fell from last month by four points. The new orders index is 26.8, which showcases no change from last month's numbers, the growth rate of orders increased to now 25.8.

The future production index fell eight points from June to 48.4, and the future general business activity index stayed at 37.1.

With some measures declining slightly, overall the survey's results show numbers that remain productive and forward-looking. Expectations are optimistic with the outlook uncertainty index moving down from 17.6 to now 14.6.

"Robust expansion in the Texas manufacturing sector continued this month, with survey readings across the board staying highly elevated relative to historical norms," said Emily Kerr, Dallas Fed senior business economist. "Price and wage indexes eased off the all-time highs reached last month but continue to indicate notable increases month to month. Outlooks remained optimistic, though uncertainty is rising."