Headlines will crow of the seasonally-adjusted 'beat' of expectations for the Dallas Fed survey (-13.6 vs -25.8 exp) but this is the 15th month in contraction (below 0) – something only seen in recession. Scratching below the surface we see employees, workweek, and capex all in contraction and forward expectations for new orders and employment tumbled. Perhaps that reality is what drove one respondent to rage, "anyone who says the economy is not in recession is peddling fiction."
The Respondents…
The instability of the domestic oil and gas exploration and production activity continues to wreak havoc on demand for our products.
Uncertainty is the main issue regarding oil pricing and refining cash flows.
The positive March versus February comparison (as well as the six-months-ahead view) is due entirely to an extremely poor February. Volume remains well below monthly volume in the fourth quarter. Headcount was reduced in February, allowing remaining staff to return to a 40-hour workweek.
We are expanding due to longer-term strategy. While we are spread among a plethora of general manufacturing nationwide, we are experiencing a major falloff of inquiries and orders in Texas directly related to the restricted price of oil.
As a long-lead-time capital equipment manufacturer, we are working off backlog. Anyone who says the economy is not in recession is peddling fiction.
It appears the oil and gas business won't be back for 12–18 months. We are actively pursuing other industries, with varying degrees of success depending on the industry. We may very well survive.
We are looking into new markets as the deepwater drilling is pretty slow.
We are generally just bumping along in a weak macro environment.
Again, the dollar is too high affecting several of our customers, therefore creating a significant impact on our business. The uncertainty in business is huge, and everyone is holding cash including ourselves. We are not making investments on growth or capital expenditures at this time. Oil prices are also creating a major problem in the oil and gas industry, with consolidations and layoffs happening very frequently.
We expect the weakening in the energy sector to ripple through to our primary end users in Texas. So far activity statewide has maintained some strength, but we are cautious that it will start to have a broader impact later in the year and into 2017. The degree to which the Texas economy holds up to the trouble in energy will be a testament to the alleged diversification in the state. We are preparing for the worst and hoping for better.
Our export business continues to be our biggest challenge. The strong dollar will be an obstacle to growth for the foreseeable future. We are simply growing less competitive to our European challengers.
One of our customers has changed its terms, which has caused us to lose coolers at the front of the store. The coolers are really the only place in the store where our gross margin exceeds our cost of service. Couple this giant hit with a general 1–3 percent long-term decline in soft drink sales, and the next year looks bleak.
We have been told that companies are cutting their advertising budgets that affect printing. We are getting more phone calls from press and bindery operators looking for work. I am hoping this slowdown is short lived and that the economy improves in the next few months.
Our turnover in the past year has been triple of the previous nine years: competitors poaching employees, retirements, people we put a ton of training into for two or three years moving out of state for family reasons, and other reasons. We're trying to build staff for new customers coming on board but can’t seem to hold our gains. It is very frustrating. I'm more optimistic about the year than I was in January.
We have picked up in March but only because February was so dismal. We were super slow with many 3.5 to four-day workweeks in the plant. Activity is trying to pick up, and it appears we will be busier in the coming months than we have been.
But apart from that, everything is awesome.
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