Beige Book Report: Dallas
February 2, 1983
Overall, the Eleventh District has shown little change since the last Redbook, but some movements have occurred. Growth in residential construction, auto sales, defense contracting, and electronics equipment manufacture has continued, as have declines in office building, and total manufacturing. Oil and gas drilling resumed its decline after rising in November and December. Texas' unemployment rate remains high for Texas, but well below that of the nation.
In residential construction, builders are increasing inventories in anticipation of strong Spring demand. More permits for single family homes were let in the fourth quarter of 1982 than in any comparable period since the late 1970's. But builders fear an increase in interest rates later this year. Apartment construction is climbing in some areas but is slow in others.
Domestic auto dealers report that December's healthy sales pace is holding and they expect it to continue into the second quarter. Inventories stand at desired levels and traffic is good for new domestic autos. Sales of imports and used cars remain low.
Retailers are cautious for Spring, budgeting to meet or fall below last year's unspectacular sales volumes. Inventories remain on plan, but profits are below expectations because of forced increases in promotions and discounts. Sales of consumer durables are flat but expected to rise in the wake of housing market growth. Credit sales as a proportion of total sales are above a year earlier.
S&L's attribute their increases in total deposits to the Money Market Deposit Account (MMDA). Some of these deposits are clearly temporary, though, attracted by high introductory rates. S&L rates on MMDA and Super NOW accounts are 1.5 to 2.0 percentage points above comparable commercial bank rates. S&L's plan to invest heavily in residential and commercial real estate, chiefly in Texas. Demand remains strong for residential mortgage loans and interim construction financing for residential developments.
All deposit categories at commercial banks showed strong increases in December, but most of the growth was only seasonal. Seasonally adjusted demand deposits and large time deposits actually declined, but their fall was more than offset by a whopping increase in savings deposits. Total loans grew slightly thanks, largely, to a big jump in real estate loans. Loans to business fell.
The Texas drilling rig count showed a normal seasonal decline in January, following increases in the fourth quarter. An anticipated February decline won't be merely seasonal, though, but will reflect the slow pace of economic recovery and the uncertain outlook for oil prices.
Manufacturing production continues to decline, but there are some signs of recovery. A General Motors assembly plant recalled 600 workers. Sales of some defense and some consumer electronics are doing well, although demand for industrial electronics remains depressed. Production of defense electronics should increase on schedule as manufacturers here expect to remain unaffected by defense cuts. Capacity utilization at steel mills is low and output levels unprofitable. Sales of construction steel are level and respondents expect declines later this year. Suppliers to the drilling industry report a slight uptick in drill bit sales in January, but sales of other drilling-related products remain low and inventories are excessive. Export sales are a source of strength because drilling has declined less abroad than in the United States.
The Texas labor market changed little in December. At 8 percent, the state's unemployment rate hovered in an area where it has remained for several months. Nonagricultural employment did increase slightly and retail trade, oil and gas extraction, and lumber and wood products were among the stronger gainers.
According to a survey of Eleventh District agricultural bankers, about twice the number of farmers who normally go out of business in the second half of a year went out of business in the second half of 1982. This departure rate is expected to increase still more in the next three months, as farm loans mature.