Beige Book Report: Dallas
December 15, 1982
The District economy shows some signs of reviving despite continuing weakness in the durable goods sector. Residential construction is unusually active for this time of year. A surge in smaller commercial projects has lately slowed declines in nonresidential construction. Unemployment seems to have stabilized. Auto sales are up sharply. Drilling activity continues to accelerate, but steel and other oil related industries remain sluggish.
Residential construction continues to gain momentum. New home sales and starts during November were roughly even with October's strong sales and starts. Home construction usually falls this time of year, but falling mortgage rates have abrogated the traditional seasonal patterns. The first signs of increasing costs are appearing as lumber prices are beginning to escalate. Apartment and condominium construction is also proceeding swiftly, although condominium sales in the Border region are depressed.
Commercial construction rebounded somewhat from the large declines recorded in September. Although the pace of office building and warehouse construction continues to slow, retail, industrial, and government construction are picking up some of the slack. The result has been a sharp increase in the number of nonresidential projects accompanied by a more moderate increase in the total project value. For the year to date the value of construction is well behind last year's record.
At worst, unemployment figures indicate that the job market is not weakening. Texas' seasonally adjusted unemployment rate dropped from 8.3 percent in October to 7.6 percent in November. This change is not statistically significant. Total nonagricultural employment was virtually unchanged from September to October. Gains in government employment largely offset declines in durable goods manufacturing and mining.
November sales of new autos surged in response to the discount financing made available by GMAC, Ford Motor Credit Co., and Chrysler Credit Corporation. Sales suffered among import dealers due to their lack of special financing programs. Used car sales also declined. The surge in auto purchases reduced dealer inventories, increased new orders for '83 models, and pushed up overall profits. Nevertheless, dealers have had to sacrifice some or all of their profits from financing in order to obtain the lower rates for their customers.
Real department store sales for the District for the year to date are about even with last year. While sales remain slow in Houston and Border stores, sales in other areas of Texas are picking up. The effects of the peso devaluations are still felt along the Border and in Houston. Houston is also affected by the slowdown in durable goods manufacturing. Respondents in areas that report sales gains are quick to point out that earlier than usual holiday promotions account for the increases.
Drilling continued to pick up throughout November and early December, more so than seasonal patterns would dictate. Six consecutive weekly increases have pushed the Texas rotary rig count to its highest level since May 24, 1982. Analysts point to higher domestic crude prices at refineries and lower labor costs as the reasons for the increase beyond seasonal norms. The outlook for drilling depends on the outcome of the December 19th meeting of the OPEC oil ministers.
Larger future beef supplies were signaled by the number of cattle and calves on feed, which are at the highest level yet for 1982. Unfortunately, much of this increase reflects unfavorable economic conditions for livestock producers, as heifers are being placed on feed rather than being added to breeding herds. Livestock prices have remained steady while crop prices have moved slightly higher. The cost of farm inputs stayed constant. Planting of winter grains is mostly complete.
Manufacturing production is mixed. Steel markets continue to erode as the demand for concrete reinforcing products is slipping and oil related product demand remains depressed. Home computer and defense sales are maintaining electronics production and refinery output is stable. Lumber and wood product suppliers report that business is picking up as a result of increased housing construction.
Deposits at District member banks grew a modest 0.8 percent from September to November as time deposit growth more than offset declining demand deposits. Loans by member banks grew 2.0 percent during this period, while real estate, business, and consumer loans at large weekly reporting banks grew by 5.3, 2.3 and 1.5 percent.
Total deposits at federally insured S&L's increased 0.9 percent in October to a level which was 9.2 percent greater than the same time a year ago. The increase was due to large gains in jumbo CD's and accounts earning the passbook rate or less. Although total mortgage loans outstanding increased a mere 0.6 percent during October, outstanding loans for construction jumped 3.6 percent. The latter usually falls this time of year and is, in fact, 76.5 percent greater than a year ago.