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Fort Worth manufacturers remain optimistic despite challenges and economist predictions of industry slowdown
Key quote: “Production, along with new orders for products, which is an indicator for demand in the industry, has been in the negatives for several months.”
From the Fort Worth Report
Fort Worth manufacturers remain optimistic despite challenges and economist predictions of industry slowdown
by Seth Bodine
The past three years have been a wild ride for Doug Renfro, president of Renfro Foods Inc.
When the COVID-19 pandemic started in 2020, people were hoarding his business’s salsa, Mrs. Renfro’s, along with toilet paper. Sales skyrocketed.
Then, sales dropped off when people returned to work. And, last year, rising prices threw the company for a loop. Renfro’s had to hike the prices for their salsas by 25% because of higher costs for ingredients and supplies like tomatoes and metal lids.
Renfro Foods is hardly alone among Texas manufacturers’ experience.
After seeing a strong rebound following the pandemic, the manufacturing sector in Texas is now seeing little to no growth this year, economists say. And more slowing may be on the horizon. Production, along with new orders for products, which is an indicator for demand in the industry, has been in the negatives for several months, according to the Dallas Federal Reserve Bank’s Texas Manufacturing Outlook Survey.
The effect of rising prices impacted sales, Renfro said. Many companies in his industry increased prices up to three times in a year. Normally, it happens once every three years, he said.
“And because the prices kept going up and people started to be tighter with money, sales went down in units,” Renfro said. “And it’s kind of leveled off there.”
Now, Renfro said, sales have stopped dropping, but they aren’t as high as the pandemic peak.
Laila Assanie, senior business economist at the Federal Reserve Bank of Dallas, said the manufacturing sector had a lot of backlogs in 2021 and 2022 because they weren’t able to acquire the materials they needed for their orders. But now, the survey indicates a decline in demand for products manufacturers make.
“That just tells us that we probably will see continued weakness in the manufacturing sector in coming months,” Assanie said.
One manufacturing executive told Dallas Federal Reserve economists customer inventories were high from overstocking last year, according to the Beige Book report in May.
But decreasing production and orders might not result in layoffs. That’s because the labor market is still tight, Assanie said, which makes employers hesitant about making any changes to their payroll.
“Many of them are still looking to fill open positions that they haven’t been able to fill for a while now, because of the labor shortages,” Assanie said. “Our thinking is that many of them are probably reluctant to let people go, because it was really hard for them to recruit them … in the first place. And some of them still are understaffed.”
Business has increased for aircraft wiring company Interconnect Wiring, company president John Ashour said. Interconnect contracts with defense and aerospace companies such as Boeing, Lockheed Martin and Bell Textron Inc.
The aviation companies contract with Interconnect Wiring for electrical wire harnesses and electrical panels. Interconnect hired more than 50 employees this year, but finding more employees has been tough.
“We used to be able to hire fairly (easily), but now it takes (a) much longer time,” Ashour said. “We have employees that we have come in for interviews, they don’t show. We have employees who we made offers to, they’re supposed to report on a certain day, they don’t show either. So that’s very common.”
Airline seat manufacturer Recaro Aircraft Seating Americas is still recovering from the COVID-19 pandemic slowdown in travel. The company contracts with various airlines and companies such as Boeing or Airbus.
General manager Sunitha Vegerla said Recaro saw the company’s orders drop in a span of months in 2020. Because of travel restrictions in place, airlines weren’t using their entire fleet of planes. The company laid off about 30% of its employees and reduced its production lines from eight to two, Vegerla said.
Since then, business has picked up. The company, located at Hillwood in Fort Worth, has increased to five production lines. Now that planes are back in service and travel has increased in the U.S., there’s a steep demand for spare parts and chair modifications, she said.
Hiring is still a challenge, Vegerla said. The company currently has about 470 employees at the location in Fort Worth. One way Recaro has tried to lure new employees is a new work model: The company adopted a four-day work week for production workers and a hybrid and remote options for other departments.
Recaro still isn’t completely back to pre-pandemic levels of production or revenue, Vegerla said. But she is optimistic.
Business is steadily growing, and the company expects to increase to six production lines by next year.
“I think we have taken the biggest hit that we could during the pandemic so we see it really picking up,” Vegerla said. “And it’s also the same thing that I see within the Dallas-Fort Worth metroplex, with a lot of companies coming in, as well. So we see … manufacturing is really on the rise at this point.”
While some companies report positive outlooks, economists like Assanie predict this year will be one of modest growth for the area’s economy because of economic uncertainty.
“Whenever there is economic uncertainty, firms are more hesitant to make any large or any significant decisions,” Assanie said. “They would rather wait and see how things pan out before making a move, whether that means a large capital expenditure plan that they might have, or that might be hiring more people.”
Seth Bodine is a business and economic development reporter for the Fort Worth Report. Contact him at seth.bodine@fortworthreport.org and follow on Twitter at @sbodine120.
