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Texas’ manufacturing industry grew for the sixth consecutive month in November, but the sharp, new spike in COVID-19 cases in the U.S. is taking a toll, according to a monthly survey by the Federal Reserve Bank of Dallas.
“We’re still seeing a recovery and forward progress, but the pace has slowed in light of the headwinds we’re seeing in November with rising COVID cases,” said Emily Kerr, a senior business economist at the Dallas Fed.
Metrics gauging manufacturers’ business activity and new orders tumbled in November compared with October. The Fed’s production index, an indicator of the industry’s health, fell to 7.2 in November from 25.5 the month before.
Some manufacturers are optimistic in light of the coming distribution of a COVID vaccine. But firms surveyed by the Dallas Fed varied widely in how quickly they expect business to fully recover.
Among manufacturers whose revenue has taken a hit, just over 30 percent expect sales to return to pre-COVID levels within six months or sooner.
Another 30 percent expect revenue to fully rebound within seven to 12 months, and 32 percent of companies said they expect to see reduced revenue for more than a year.
“It’s almost split a third between the three groups, so that points to quite a bit of uncertainty trying to pinpoint exactly when (business recovers),” Kerr said.
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Manufacturers reported that the cost of raw materials has risen significantly, while prices for finished goods fell in November.
“Major raw material prices have seen a 12 percent increase,” an executive at a paper manufacturer told the Dallas Fed. “It is hard to pass along to customers at this time.”
A fabricated metal company executive said it’s been an uneven downturn, with some of the firm’s customers doing much worse than others.
“Steel pricing is way up over the last 30 days,” the executive said. “We envision a broad challenge in the first half of 2021 for our supply chain if the economy grows as planned.”
Nearly half of all manufacturers surveyed said they have fewer employees now than in February, just before the pandemic.
Still, employment in manufacturing statewide has recovered faster this year than in other industries. There were 42,000 fewer workers employed in Texas’ manufacturing industry in October compared with January — a 4.6 percent decline, according to Dallas Fed data.
By comparison, total employment in Texas was down by 5.7 percent in October compared with the beginning of the year. About 746,000 fewer Texans were employed last month than in January.
Employment among San Antonio’s manufacturers has largely recovered to where it was before the pandemic. As of October, there were 51,000 people employed in manufacturing locally, down about one percent compared with January, according to the Dallas Fed.
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Toyota was forced to shut down its South Side manufacturing plant, which employs about 3,000 people, for seven weeks from late March through mid-May.
Another 4,000 workers are employed by Toyota’s nearby parts suppliers, some of whom had to temporarily lay workers off earlier in the year.
Since reopening in May, the automaker has been operating overtime to meet demand.
A quarter of manufacturing firms surveyed by the Dallas Fed said they added employees in November. Thirteen percent said they had fewer employees last month.
“It could just be several firms adding one or two people to make sure they’re well-positioned to capitalize as demand comes back on,” Kerr said of the slight uptick in hiring.
Manufacturing executives largely expect the industry to be in better shape six months from now. Nearly 54 percent of firms expect to increase their production and see more new orders within the next six months.
Just 13 percent of firms expect to have fewer employees or see a decrease in shipments over that time.
“Most firms were thinking (the pandemic) would be much more short-term,” Kerr said. “Now we’re finally seeming to turn the corner, and getting a little bit more concrete vision of when we’re going to start to move past this.”
diego.mendoza-moyers@express-news.net
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December 01, 2020 at 05:00PM
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