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Texas manufacturing sector closes out 2021 with solid growth

An aerial view of the Shell Deer Park Manufacturing Complex is seen in Deer Park, Texas.
Adrees Latif
An aerial view of the Shell Deer Park Manufacturing Complex is seen in Deer Park, Texas.

The Texas manufacturing sector is finishing out the year strong, according to the Federal Reserve Bank of Dallas’ monthly survey published Monday. Factory activity in December continued expanding at an above-average pace, albeit a little slower than November. The Dallas Fed’s production index, a key measure of manufacturing conditions, held fairly steady at 26.7. Any sum above zero signals expansion.

“Despite continued supply-chain and labor challenges, expansion in the Texas manufacturing sector continued at an impressive clip this month,” said the Dallas Fed’s senior business economist Emily Kerr in a news release.

Among other positive indicators, the survey of nearly 100 company executives showed growth remained solid this month for new orders and shipments. Prices for raw materials in December fell from an all-time high set last month, but remained exceptionally elevated at 66.2.

Three-quarters of the manufacturers who answered supplemental questions about wages, prices and revenue blamed supply-chain issues for holding back revenue growth. More than half of the respondents also said staffing shortages were driving up costs and limiting revenue gains.

Year-over-year, selling prices and worker wages grew significantly faster than the four prior years. On average, Texas manufacturers increased selling prices by more than 10% between December 2020 and this month. Employee pay also increased by nearly 7%.

“A majority of firms say they are able to pass at least some of those cost increases on to customers, though only about 11 percent are able to fully pass them on,” said Kerr.

Kerr added the trend is expected to continue into 2022, with firms expecting both wages and selling prices to go up another 6.4%.

Joseph Leahy anchors morning newscasts for NPR's statewide public radio collaborative, The Texas Newsroom. He began his career in broadcast journalism as a reporter for St. Louis Public Radio in 2011. The following year, he helped launch Delaware's first NPR station, WDDE, as an afternoon newscaster and host. Leahy returned to St. Louis in 2013 to anchor local newscasts during All Things Considered and produce news on local and regional issues. In 2016, he took on a similar role as the local Morning Edition newscaster at KUT in Austin, before moving over to the Texas Newsroom.