Texas Factory Production Crashed in August

Texas manufacturing activity unexpectedly slowed significantly in August, data from the Federal Reserve Bank of Dallas showed Monday.

The production index of the Dallas Fed’s Texas Manufacturing Outlook Survey plummeted to 20.8 in August from 31.0 in July. The index of general business conditions fell to 9 from 27.3 The company outlook gauge dropped to 11.5 from 22.2. The new order measure sank to 15.6 from 26.8.

Despite the decline, each remains above average and indicates robust growth in the manufacturing sector.

“Texas factory activity continued to increase in August, albeit at a slower pace,” the Texas Fed said.

Inflationary pressures continue at extremely high levels. The prices paid gauge ticked up and the prices received ticked down but remain near historic highs. Perhaps more troublingly, inflation expectations moved up. The gauge of expectations for prices paid six months from now jumped from 43.8 to 55.7 and the prices received gauge climbed to 38.9 from 38.6, both reversing declines in expected inflations in recent months.

Many businesses reported shortages of raw materials and workers.

HOUSTON, TEXAS - FEBRUARY 21: The U.S. and Texas flags fly in front of high voltage transmission towers on February 21, 2021 in Houston, Texas. Millions of Texans lost power when winter storm Uri hit the state and knocked out coal, natural gas and nuclear plants that were unprepared for the freezing temperatures brought on by the storm. Wind turbines that provide an estimated 24 percent of energy to the state became inoperable when they froze. (Photo by Justin Sullivan/Getty Images)

HOUSTON, TEXAS – (Photo by Justin Sullivan/Getty Images)

“Business is still good. Our problems are not orders—we have plenty—but we don’t have enough people or raw materials to fill all orders,” a primary metals manufacturer said.

“Demand continues to outstrip supply across the board. We will bring on incremental capacity each quarter, limited by lead time of equipment and factory space, until the second half of 2022 or early 2023, if needed,” an executive in computers and electronics manufacturing said.

“Expectations regarding future manufacturing activity remained optimistic in August, though the future general business activity index was less positive, falling from 37.1 to 15.1. The survey’s more tangible measures of future factory activity held up better but also slipped slightly. The future production index ticked down four points to 44.3, and most other measures of future manufacturing activity also declined slightly but remained solidly in positive territory,” the Dallas Fed said.

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