Beige Book Report: Dallas
June 30, 1981
The expansion of the Eleventh District economy continues at a moderate pace. Mining, equipment manufacturing, and commercial construction are spearheading the District's growth. Some manufacturing firms have laid off employees, but overall employment is up. The growth in department store sales is down slightly from pre-Easter levels, and auto sales are weak. Housing starts are declining. Total loans and deposits at commercial banks show little growth. S&Ls report lower deposit outflows, but they are making few loans. Heavy rains have reduced some crop yields in the District.
Total employment in Texas has increased steadily throughout the year and is up 6 percent from year-ago levels, despite layoffs in electronics, commercial aircraft, and residential construction. The unemployment rate increased 1.1 percentage points from April to 5.3 percent, comparable to the May 1980 level. Much of the growth in manufacturing employment is associated with the increase in production of oil field equipment.
Manufacturing output is rising. Makers of oil field equipment report increasing sales and are operating at full capacity. Delivery schedules continue to lengthen—especially for high-technology items. Respondents expect current conditions to continue at least through 1982. The high level of steel production is stable, and sales in the apparel and furniture industries are increasing. Weak sales in consumer electronics have led to layoffs by a few large electronics manufacturers. Texas Instruments reduced the work force in its consumer products division by 2,800 in May. Most manufacturers reported a moderation in the increase of materials prices.
The number of drilling rigs operating in the District is at a record high. Additions to the fleet of rigs in Texas have exceeded a rate of one per day since the end of April. Shortages of well casings, drill pipe, and experienced drilling crews persist.
Construction in the District remains active due to the number of large office projects under construction. Residential construction is falling, and the pace of highway, municipal, and utility construction is unchanged.
Total loans and deposits at commercial banks show little increase since April, but business loans and large certificates of deposit at large District banks are significantly higher. Mining is the fastest growing C&I loan category. Bankers report a rise in the number of small firms on their "concern" list. The volume of the consumer loans dropped sharply after the Texas usury ceiling rose to 24 percent. Consumer loan rates are currently 18 to 19 percent. The decline in demand deposits is offsetting the growth in time deposits (NOW accounts and large CDs). Large certificates of deposit are the major source of funds at commercial banks at this time.
S&Ls report their deposits outflows slowed in early June, and they are maintaining their restrictive lending policies. The decline in outflows is attributed to the narrowing in the difference between yields of money market funds and money market CDs and a savings buildup following tax refunds. The number of NOW accounts are described as increasing steadily. S&Ls are investing in money market instruments and in commercial projects. Liquidity levels are down from the first quarter.
The growth of department store sales in nominal dollars has slowed since April, and the level of sales is 11 percent over a year ago. Strong sales were reported in the week before Father's Day, and retailers expect sales to increase through the fall and Christmas seasons. Apparel continues to sell well, and furniture sales are recovering from their low levels earlier in the year. Inventories are slightly over plan, but are not a source of concern. Price discounts are greater than originally planned, but promotional activity is otherwise normal for this season. Retailers have not altered their credit card policies following the change in the state usury ceiling, but they anticipate changes within a year. The proportion of sales purchased on credit is stable and below last year's percentage in the months before the credit constraint program was put into effect.
Automobile sales are up slightly from April but remain below seasonal levels. Dealers attribute some of the current weakness to advanced purchases made during the rebate programs and a rise in new car loan rates to 18 to 19 percent. Traffic is described as good at dealerships, and sales are expected to improve. Domestic models are selling slightly better than imports. Used cars are selling extremely well even though loan rates on used cars are about 21 percent. Dealers are building inventory for sales through fall.
Heavy rains have reduced wheat yields by as much as 10 percent across much of the District. However, total wheat output will still be relatively large because more acres were devoted to wheat this year. The increase in soil moisture has improved the outlook for most spring-planted crops. Southern New Mexico is the only major area of the District that remains abnormally dry. The added moisture has not improved the financial condition of farmers and ranchers, however. The ability of many to repay their loans remains a source of concern.