US Dallas Fed Mfg Gen Bus Activity Nov: 11.8 (est 15.0; prev 14.6) - Dallas Fed Manufacturing Biz Conditions Slip But Components Remain Solid - Neil's Summary
US Dallas Fed Mfg Activity Nov: 11.8 (est 15.0; prev 14.6)
Texas Manufacturing Outlook Survey - Dallasfed.org
After bouncing back in October from big drops in August and September the Dallas Fed Texas Manufacturing Survey headline general activity index slipped back in November by -2.8 points to 11.8 from 14.6 in October (but up from 4.6 in September). As a reminder that "headline" number is the regional number which I think is less relevant than the firm specific number, which also slipped to just above 0 at 1.3 from 2.4 in October. That said, the individual components continue to look very solid with increases in new orders, shipments, wages, and employment (all of which are well into the double digits). Production, which is what the Dallas Fed focuses on (that's what's in the chart above) increased by a 9.1 points to 27.4. Prices paid also increased though to back over 80 (to a record high). Backlogs (17.4) and capital expenditures (10.5) fell, but both also remained solidly above the 0 dividing line between growth and contraction. Delivery times (21.7) and prices received (42.2) also both decreased but again remained elevated. All components were positive as inventories moved up to 3.2 from -11.1. Full tables at the end.
Future indicators continue to remain solid with the future general business component (region) improving to 17.3 from 14.1, and the firm specific to 28.6 from 15.0. Future backlogs were the only future component in negative territory at -1.5.
The special questions were about supply chains, hiring and wages. Two-thirds of firms were having supply chin issues (highest of the four times this question was asked this year), and most expect it will be at least 4-12 months for supply chains to normalize (although 25% said more than a year). On employment, nearly two-thirds said it is "very difficult" to fill low-skill positions, slightly over half said that for mid-skill, and slightly under half said that for high-skill positions. Over half of firms raised wages for all skill levels by 4% or more.
Here was the commentary from the report:
Texas factory activity increased at a faster pace in November, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, rose nine points to 27.4, a reading well above average and indicative of robust output growth.
Other measures of manufacturing activity also indicated a further pickup in growth. The new orders index came in at 19.6, up five points from October and far above the series average of 6.6. The growth rate of orders index pushed up three points to 16.8. The shipments index shot up 11 points to 24.3, its highest reading since July, and the capacity utilization index moved up from 20.1 to 26.4.
Perceptions of broader business conditions were mixed in November. The general business activity index remained positive, indicating an improvement in activity from October, though it eased three points to 11.8. The company outlook index came in at 1.3, with the near-zero reading indicating little change in outlooks from October. Uncertainty continued to rise, with the outlook uncertainty index holding fairly steady at a highly elevated reading of 27.7.
Labor market measures indicated robust employment growth and longer workweeks. The employment index inched up to 28.5, a seven-month high. Thirty-three percent of firms noted net hiring, while 5 percent noted net layoffs. The hours worked index also remained elevated and was largely steady at 19.6.
Prices and wages continued to increase strongly in November. Amid widespread supply-chain disruptions, the raw materials prices index pushed up six points to 82.1, hitting a new series high. The finished goods prices index eased off its high last month, falling eight points to 42.2 but still far exceeding its historical average of 7.6. The wages and benefits index came in near its own series high, edging up from 44.1 to 47.6.
Expectations regarding future manufacturing activity were generally more positive in November. The future production index moved up five points to 51.7, and the future general business activity index jumped 14 points to 28.6. Other measures of future manufacturing activity showed mixed movements but remained solidly in positive territory.
Here were the comments. Like last month, a lot of negativity. About the only thing that isn't a problem again is demand, but at least comments on the general economic environment were more positive. A lot of concern though on the impact of high prices and labor shortages on firms. A lot of comments on price hikes:
Chemical Manufacturing
- Higher-than-historical raw materials costs, continued supply-chain shortages, and the continued war on talent with limited labor availability have impacted near-term to 12-month business forecasts negatively.
- Based on current data and information from suppliers, we have started to plan for much higher materials and logistics costs in the upcoming months.
Nonmetallic Mineral Product Manufacturing
- Supply-chain issues and price increases for all materials continue to be a serious problem. We are not able to pass on pricing increases because our contracts are fixed-price.
- Importing continues to be a nightmare. Lead times from overseas are at a historical high due to slow shipping. Import freight costs are at a historical high. Container fees due to the storage of full containers are at a historical high. The cost of prepaid inbound inventory is at a historical high (which hurts cash flow and increases costs due to higher interest payments). But evidently no one in the administration cares to do anything. Drop the Chinese tariff. Suspend the California port requirements for trucks and truckers. Allow truckers to drive 14 hours a day. Do something!
Primary Metal Manufacturing
- The main problem remains labor. We have over 70 openings with an employee head count at 1,150.
- We continue to face hurdles on three main fronts that are truly hampering the ability to fully operate and recover from post-COVID shutdowns. The lack of both skilled and unskilled labor is a major issue. Workers are simply not reentering the workforce, and new labor pools are not interested in heavy manufacturing despite significant pay rate increases. Supply-chain interruptions and material shortages continue to cause adverse impacts on all operations. These factors are also causing significant material input cost increases. Some materials have increased as much as 70 percent over the past 10 months. Finally, the continued uncertainty with tax policy, agency rulemaking, and weak provisions for domestic-made products are causing pause for capital improvements and expansions.
Fabricated Metal Manufacturing
- Business is good but it’s continuing to be taxing to our energy and ability to chip away at our backlog. Prices and availability of materials continue to be an issue.
- Labor shortages continue to be a problem.
Machinery Manufacturing
- The vaccine mandate makes our employee outlook grim. We have many employees who are not willing (or not able) to be vaccinated and do not want to drive 30 minutes out of town for a weekly test. We are already having a difficult time finding people who want to work; now it is that much more difficult.
- Democrats are in control, so our buying power is declining. Spend, spend, spend, spend, spend is all they know, and what they spend it on hurts the working-class American. I hope we can survive.
- COVID-19 wiped out my competition. Another guy tried to compete with my company, and he just went bankrupt. Between the government rules and the oil companies demanding more insurance and driving up costs, barriers to entry are such that we are the only supplier left in my business with inventory and an ability to take care of the customer. Therefore, we’ve raised prices and increased our response time to service our customers’ needs.
- We are implementing price increases across the board, and we have not had much pushback from customers as they are apparently expecting them to increase.
Computer and Electronic Product Manufacturing
- We are adjusting to the new realities of increased costs and increased delivery times and potential shortages. In our industry, there are several new entrants and new partnerships that are changing our industry.
- We have continually had to push out lead times due to longer lead times of parts used.
Transportation Equipment Manufacturing
- Managing cash flow is becoming more challenging as we experience a recovery of our business while seeing significant increases in raw materials, tooling and outside processes. Compounding this challenge are customers extending payment terms. As an SME [small- to medium-sized enterprise], we have been unsuccessful countering the large customers' extension in payments. The rate and scale of increasing costs and the delay of cash receipts have created a major risk for our company. For the first time in 40 years, our company is in jeopardy.
- I do get a feeling from my suppliers that the supply chain is slowly getting better. In no way is it good, but I can at least get an approximate time frame of deliveries, which they would not give us earlier this year. They are always late, but at least they have a plan.
- Inflation, the supply chain, the COVID-19 vaccine mandate and its impact on personnel, and energy prices are issues affecting our business.
Food Manufacturing
- Ingredient costs are increasing—in some cases doubling. Pallet costs have nearly doubled. Lead times for scheduled deliveries are more uncertain. Ocean freight has quadrupled in price. Add in the fragility and lack of integrity and general distrust this administration has created, it is an unstable environment.
Miscellaneous Manufacturing
- Continued disrupted raw material availability, increasing raw material costs (our raw materials are copper, brass, steel, stainless steel and aluminum), metal mills changing terms and continuous fabrication price increases, lack of available human resources, and cost increases across the board for literally all supplies/services have caused major disruption to our ability to manufacture product timely. In first quarter 2022, we will charge customers the price in effect at time of production (PIE) for the first time in our 40-year history. We are forced to do this because of instability in metals markets, both material availability and price.
Comments
Post a Comment