Temperatures are cool right now in Dallas but inflation is running red hot.
Higher prices for raw materials were reported by 81.5 percent of manufacturers surveyed by the Federal Reserve Bank of Dallas in June. No change in prices was reported by 17.8 percent. Just 0.7 percent said they paid less for raw materials.
That brought the Dallas Fed’s index for raw materials up from 79.9 in May to 80.8, the highest reading in records that go back to 2004. Prior to the most recent report, May was the highest reading on record since October 2004. The average score is 25.4.
“Inflation is real and here now,” an executive in metal manufacturing told the Dalls Fed. “We have raised all wages twice this year. Starting wages rose in March and June, each time by a dollar. We have raised prices twice, once in spring and once now.”
Higher prices for finished goods were reported by 44.6 percent of manufacturers. Lower prices were reported by 1.8 percent and 53.6 percent reported no change.
The finished goods index rose to 42.8 percent, up from 38.4 percent in May. That is also a record high in a series that averages 6.7. This was the third straight month of record highs. Prior to April, the record high was 35.5 in November 2005.
“Raw material pricing has more than doubled from 2020, if you can get materials,” a machinery manufacturing executive said.
The wage index rose to 48.1 percent, up 9.1 points from May. This is the third consecutive record high for wages. Prior to April the record was 36.7 in January of 2007.
The forward-looking component of the survey, which asks manufacturers about business conditions six months from now, also showed very high prices and wage pressures. The index for raw materials prices six months from now fell 8.,5 points to 53.6. The index for finished goods prices rose 5.2 points to 53.6, the highest since July 2008 record of 57.8. The wages and benefits index climbed 2.8 points to 59.2, the highest since the June 2004 record high of 60.1.
The share of Texas businesses saying they are experiencing supply chain disruptions jumped to 61.0 percent, up to 35.5 percent in February. Of those experiencing supply chain disruptions, forty-one percent said supply chain problems had grown somewhat worse in the last month and 18.8 percent said they had become significantly worse.
“I would have thought the supply-chain issue would have corrected by now or at least shown improvement, but that does not seem to be the case. I think [it’s] due to labor shortages and the lack of availability of containers,” a wholesale merchant of durable goods told the Dallas Fed.
Businesses are also having trouble hiring enough workers. The share saying they are attempting to hire hit 60.3 percent in June. A lack of applicants was cited by 70.4 of those hiring, with 47.3 blaming high unemployment benefits, 42.5 percent saying competitors had bid away workers with higher pay, and 37.2 percent saying they couldn’t find workers with the right technical skills.
“Unemployment is more than we usually offer as pay. So why work?” one retailer commented.
“Politicians created this employment shortage under the disguise of COVID relief payments; they should have ended six months ago!” a business owner in rental services said.
“Until the general workforce is forced to work to make a living, my company and all others are going to have problems. We continually hear that it is much easier to stay home and draw generous unemployment benefits than it is to work. This is very discouraging for employers and conflicts with what I think is the true ‘American way,'” a paper company executive said.