Inflation Still Rages Across Texas Even as Business Index Disappoints

President Joe Biden boards Air Force One at Cincinnati/Northern Kentucky International Airport in Hebron, Ky., Wednesday, July 21, 2021, to travel back to Washington after speaking at a CNN town hall in Cincinnati. (AP Photo/Andrew Harnik)
AP Photo/Andrew Harnik

Inflationary pressures remain extremely high in Texas and business conditions were weaker than expected, a survey of manufacturers indicated Monday.

Nearly 76 percent of manufacturers survey by the Federal Reserve Bank of Dallas said they were paying higher prices for raw materials in July, and just 2.3 percent said prices fell. That brought the inflation index down to 73.5 from the all-time higher of 80.8 in June and 79.9 in May.

Nearly 44 percent said they had raised prices on their finished goods, with 2.9 percent lowering prices. That lowered the index to 40.9 from the all-time high of 42.8 in June. May’s index was 38.4.

The index of wages and benefits costs fell 2.1 points from June’s historical high to 46.0, still well above the May index of 39.

“Raw material prices are going up significantly and will be passed on to the customers (so far, an increase of 30 percent this year). Wages are going up to keep employees from being pulled away by SBA [Small Business Administration] stimulus money recipients who have a lot of cash right now. We feel inflation in a big way currently,” a paper manufacturer said.

Inflation expectations also remain very high. The index for prices paid for materials six months from now fell to 43.8, with 54.2 percent of manufacturers expecting higher prices. That’s down from June’s record 53.6, with 62.9 percent expected higher prices.

The index of six-month expectations for prices of finished goods fell to 38.6 percent from the extreme June reading of 53.6 percent. Forty-nine percent said they expect to be able to raise their prices, down from 58.8 percent in June.

The index for expectations of wages and benefits came in at 52.6, a decline from 59.2 in June.

“Anyone who believes the wage increases are temporary does not understand business. Wages never go down,” an executive in primary metals manufacturing said.

The production index of the Texas Manufacturing Outlook Survey rose to 31.0 in July from 29.4 in June. The score suggests strong output growth, the Dallas Fed said.

The index for general business activity fell to 27.3 in July from 31.1 in June. That missed forecasts for a reading of 32. At least one business cited the surge in covid cases as a potential concern.

“The uncertainty around the impact of demand related to the latest surge in the Delta variant of COVID-19 is cause for general business activity concern,” an executive in chemicals manufacturing said.

The survey is conducted monthly by the Dallas Fed. It asks manufacturing executives to assess economic conditions and expectations on a variety of metrics.

The new orders index was basically unchanged and the growth of new orders picked up, both measures suggesting that demand remains strong.  The indexes for capacity utilization and shipments remain high.

 

 

There was a sharp decline in the delivery time index from high levels in June and May, which may indicate that some of the supply chain challenges are being overcome.

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