The Dallas Fed manufacturing survey manufacturing activity index, a key measure of state manufacturing conditions came in at negative -14.4 in November vs -19.4 prior. The shift indicating output continues to slide but at a lesser pace than from October. The new orders index plummeted to -20.9., the lowest since May 2020 and the sixth month in a row it was negative territory. The capacity utilization index turned negative, falling from 9.1 to -3.4. Texas saw slower employment growth with stable hours worked. The employment index slipped 11 points to 5.9, its lowest reading since mid-2020.
Notable was comments on the Federal Reserve such as “The outlook is troubling and unsettling. Caution is the strategy. The Federal Reserve is too aggressive. Let what’s been done materialize in the economy before piling on.”
Dallas Fed November Manufacturing Index
- Output -0.8 vs +6.0 last month
- Employment 5.9 vs 17.1 last month
- Hours worked -1.0 from -0.1 last month
- New orders -20.9 from -8.8 last month
- Production 0.8 vs 6.0 last month
- Raw material price paid 22.6 vs 32.0 last month
- Prices received 13.9vs 22.2 last month month
- Shipments -7.6 vs -1.6 last month
- Growth rate of new orders -19.9 vs -13.2 last month
- Finished goods inventories 2.2 vs -12.6 last month
- Wages and benefits 36.5 vs 36.7 last month
- Capital expenditures 9.3 vs 7.1 last month
- Data were collected Nov. 14–22, and 95 Texas manufacturers responded to the survey.
Expectations regarding future manufacturing activity were mixed in November. The future production index remained positive, pushing up six points to 8.9. The future general business activity index remained negative, though it ticked up to -17.5. Most other measures of future manufacturing activity were positive and saw increases in index values this month.
Comments from Survey Respondents
These comments are from respondents’ completed surveys and have been edited for publication.
- Supply-chain problems have decreased.
Primary Metal Manufacturing
- A downturn in residential building and construction, coupled with an increase in imports from Mexico, Malaysia, Vietnam, Ecuador, Colombia, Turkey and the Dominican Republic, is critically hurting the U.S. aluminum extrusion industry. Manufacturing jobs are being lost in our industry as a result. In a similar cycle a few years ago, with an onslaught of subsidized imports from China, 50 aluminum extrusion manufacturing plants—over 10 percent of our industry—closed.
- Recession is coming! We are just waiting for the backlog to evaporate. Then layoffs start.
Fabricated Metal Product Manufacturing
- Supply-chain disruptions and delayed project schedules are negatively impacting our output and utilization. Inflation is decreasing demand.
- While we do see a softening in economic activity, we do not think it is a significant downturn at this time. Profitability will come under strain as steel prices decline, while labor and overhead costs remain elevated due to inflation.
- We are very concerned about the volume of future business activity. We see our customers pulling back their plans for expansion but still planning for the future. This has put us in a position to be very competitive to win every order possible to ensure our cash flow and ability to pay our employees and bills.
- We are still running strong; however, we believe that it is inevitable that the economy will contract within the next six months.
- Our shipments are delayed by supply delays.
Computer and Electronic Product Manufacturing
- Inflation pressure continues to increase our cost of goods sold. Staffing is still tight in Dallas–Fort Worth, but we are seeing more stability. The cost of capital is unbearable for small businesses and will delay or reduce expenditures or hiring unless business drives change.
- Opportunities have been a little slower over the past two months, but it’s nothing dramatic.
- Business is generally sluggish, and some European customers have put off new orders because of uncertainty in their market.
- We are seeing weakness that began in personal electronics broaden into most markets except automotive.
- [The Federal Reserve] is going too crazy—that is really affecting the industrial equipment industry and stalling infrastructure spending as I have never seen before. Millions of jobs are at risk in manufacturing.
- We are seeing some stabilization in raw material prices, but stock availability of some items (plumbing parts, metal sheets) is still lower than normal. Market-wide labor costs are still increasing; we anticipate increasing pay faster than inflation again in December, as we have the two previous years. The good news is that we think that labor availability is slightly better than it was six to 12 months ago. We are starting to see resistance from customers to price increases that went unquestioned six to 12 months ago. This, combined with labor cost increases, will reduce our operating profit margin. The strong dollar is definitely impacting our pricing power. Our primary competitor prices in GBP [British pounds], so they have been cutting their U.S.-dollar wholesale price by 20 percent, forcing us to match them. In export markets, we are forced to offer a similar discount to be competitive.
Transportation Equipment Manufacturing
- The outlook is troubling and unsettling. Caution is the strategy. The Federal Reserve is too aggressive. Let what’s been done materialize in the economy before piling on
- We’re seeing order volume slow down as we approach the end of the year. Customers are pushing purchase orders out until the new year.
- Customers are illiquid. Demand is there; there is just no cash to buy food. There is increased tension in terms of demand for skilled workers and retaining them.
- Our order backlog is growing because we cannot buy electronic components at any price. Quoted delivery is six to 12 months.s].
- Business is slow and slowing. Our outlook for January is hopeful.
Printing and Related Product Manufacturing
- This is a manufacturing business making packaging. I believe we are a very good indicator of economic trends. Having said that, order volumes are down versus prior quarters. There is less panic buying going on. Inventories are beginning to go down. Lead times we are able to give to our customers are beginning to decrease as input of new orders slows. The slowdown is consistent with normal seasonal factors but way below last year’s very high fourth-quarter order level. We are beginning to see the end of the dislocations caused by the pandemic.
- We seem to be as busy this month as last month and are still having to work overtime in certain departments every week.
Next release: Monday, August 29, 2022
Next release: Monday, September 25