Beige Book Report: Dallas
February 21, 1978
According to this month's survey of Directors and businessmen, the underlying economic conditions in the Eleventh District continue to improve. However, winter weather briefly disrupted some businesses in the northern tier of the District and contributed to a slight weakening of retail sales. Most nondurable goods manufacturers expect production to show modest gains this year, but petroleum refiners report that excess inventories of some refined products may hold down gains in output. Construction of office buildings continues to strengthen, and S&L's report mortgage rates are climbing as net savings inflows slow and mortgage demand remains strong. Rural land values are expected to be fairly stable this year according to District agribankers. The farm strike movement continues to attract only small crowds it its meetings and rallies in the District.
Occasional bouts of unseasonably bad weather have forced department store sales to fall below the expectations of some store executives. Sales are, nevertheless, running 10 percent above year-earlier levels, and inventories are at manageable levels. Although store executives concede that the sales growth recorded in 1977 will be difficult to beat, they point to rising income levels, growing employment rolls, and the proposed tax cut as reasons for expecting another strong sales performance this year.
Auto dealers report few changes in new car sales from last month. Sales continue to run slightly above year-earlier levels, but below earlier predictions by most dealers. Respondents see no major difficulties in selling cars and expect sales to strengthen by spring. Inventories are at "satisfactory" levels.
of disintermediation." With mortgage demand remaining strong, the rate on conventional mortgages has been raised over 50 basis points since November to 9 1/2 percent at many S&Ls. That is only 1/2 percentage point below the state's usury rate. S&Ls are increasingly more selective in the type of properties they will finance. Many S&Ls that had previously stayed out of the secondary market report that they will now enter it to secure funds, and those that were already in it report that market is tightening.
The rise in land values in the District is easing adjustment problems for banks on some real estate loans. Renewal of speculative interest in "raw" land is also reported. Agribankers, responding to our latest quarterly survey, indicate that rural land values could remain fairly stable in the months ahead following the modest 5- to 6-percent increases recorded in 1977. Much of the appreciation of land values is due to inquiries and purchases from nonagricultural investors. Activity in the Red River areas of Texas and Louisiana is particularly strong. However, in many areas of Texas, reduced cash flows and incomes from lower crop prices and higher production costs have slowed the expansion of farm operations, causing land prices to advance more slowly. In fact, the rise of costs associated with fueling irrigation pumps has forced the average value of irrigated cropland on the Texas High Plains to decline in each of the past four quarters.