Beige Book Report: Dallas
October 23, 1984
The Eleventh District's recovery continues at the slow pace that has characterized it since mid-summer. This pace represents a reduction from the growth experienced in the District during much of 1983 and the early portions of 1984. Overall demand for District manufactured goods is rising very sluggishly. Oil and gas drilling currently shows no appreciable growth. Retail sales exhibit an irregular pattern of modest expansion across product lines. Nonresidential construction is declining slowly, but the level of activity remains strong. Residential construction continues to slide, due to large declines in multifamily building. Improved weather has boosted prospects for the District's agricultural sector.
District manufacturing sales growth is unchanged and slow. Demand for paper and allied products and electrical machinery is rising steadily. Stone, clay and glass firms report flat demand, with the decline in housing-related demand being offset by strong sales of cement for use in public works projects. Some lumber and wood products firms report increased sales. Primary metal manufacturers report weak demand and low prices. Sales of chemical and allied products remain unchanged, while there is evidence of weakness in the purchase of refined petroleum from District producers. Fabricated metal products and nonelectrical machinery manufacturers report that growth is slowing, with the increased demand coming primarily from energy firms that are replenishing depleted equipment inventories. Demand faced by District apparel manufacturers remains low primarily due to continued strong competition from imports.
The District's rate of oil and gas drilling remains unchanged. The number of active drilling rigs in Texas is declining, while the total for the three District states (including Louisiana and New Mexico) was virtually the same in September as in August. Britain's October oil price cut, together with attendant movements in spot prices, represents a significant contribution to the down-side risk faced by District drillers and may further discourage drilling in the District, even if OPEC countries do not also cut prices.
Retail sales growth continues at a moderate pace, owing chiefly to increased promotional activity by stores. Demand for consumer durables remains low, but sales of men's and women's apparel are strong. Major department stores are building inventories in anticipation of a good Christmas.
After a summer of brisk sales, a seasonal downturn has begun to affect automobile dealers. The strike has had no appreciable effect so far on product availability. The recent strike settlement has offered hope to dealers that supply problems will not occur for domestic autos, but import dealers report inventory shortages. Prices are expected to remain stable through the first of the year.
Nonresidential construction value is declining in Texas, although it remains high and is showing little evidence of abatement in the other District states. The number of nonresidential construction projects is increasing in all District states, including Texas. Rising office vacancy rates have discouraged new office construction in some District cities, but retail construction continues at a high rate.
Residential construction is slowing throughout the District, owing to a rapidly weakening multifamily activity. Declines in builders' inventories have lately reversed the fall in single-family building, but the recovery has not proven very strong. Builders speculate that home buyers are waiting to see if mortgage rates will fall further.
Growth in deposits at member banks has remained flat since the end of the second quarter. At large District banks, year-over-year rates of deposit growth are slowing markedly. Deposits at these banks fell absolutely on a month-over-month basis in August and September. Growth in loans and securities at large banks also is declining. The rate of increase in real estate loans is ebbing and respondents indicate that a significant portion of these loans is being used to finance development projects outside the District. Business loans outstanding have shown almost no change since mid-summer. While consumer loan volume at large banks is well above a year earlier, it has also remained flat since mid-summer.
September and October rains have significantly reduced drought problems for Texas farmers and ranchers. September cattle prices are generally higher than a year ago and third quarter sales are estimated at 40 percent above the third quarter of 1983. Large harvests, growing surpluses, and falling prices characterize the outlook for feed, food grain, and cotton producers.