Beige Book Report: Dallas
November 1, 1989
District economic expansion is slow. Manufacturing activity is expanding slightly, but rates of growth have declined. Although retail sales increases have very recently accelerated, auto sales are softening. The service industry continues to add to its workforce. Construction maintains a pattern of very mild improvement. Oil and gas drilling is showing gradual expansion. Prices paid to District farmers are unchanged from a year earlier.
District manufacturing activity is showing slight expansion overall. Oilfield equipment firms cite moderate growth and they say that recent expansions in Sales have been higher than expected. Orders to primary metals manufacturers are expanding slightly overall, with some firms noting marked increases and others mentioning marked declines. Essentially the same can be said for fabricated metals manufacturers. Lumber and wood firms say demand for their products is growing at rapid rates and that sales are far higher than a year earlier. Electronics and computer-related firms generally cite soft sales and declining prices for some products. They expect this softness to continue through the next two quarters. Most manufacturers of food products say that sales have changed little in recent months, after seasonal adjustment. Paper industry demand has softened, but mills continue to run at full capacity and prices of some products are accordingly declining. Sales patterns among apparel manufacturers vary widely but, on average, some growth is occurring. Chemical firms note some slippage in demand at the same time that new plants are coming on line. As a result, product prices are falling.
Petroleum refineries sales and production have changed little recently and firms note that oil product prices have changed little.
Retail sales growth has been uneven across the District, but it is generally strong and respondents are optimistic about continued expansion through Christmas. Warm weather is said to have discouraged consumer spending for fall items in some areas, but several national chains report that their sales in the District are expanding faster than in the nation.
Automobile sales patterns vary considerably among District cities, but the market has been softening very lately. Respondents say that sales of 1990 models have been slow. At the end of the 1989 model year, consumers are said to have purchased 1989 models in anticipation of higher prices for the 1990 models. Dealers expect sales for the rest of 1989 will be below year-earlier levels.
Growth in the service industry is widely perceived as an important factor in the District employment recovery. A significant contributor to this expansion has been business services. This expansion is due both to increasing sales to purchasers outside the District and to a shift in the practices of District nonservice firms toward the purchase of services that were formerly produced in-house. Contract labor services have shown marked expansion in the District, for example. Some respondents in the contract labor industry say that rising demand is motivating them to increase prices, even though their costs of operation are not going up.
District construction activity has been very erratic in recent mouths, but generally shows mild improvement—the result of gains in nonresidential building. Office vacancy rates remain high, but they are declining in most District cities, and industrial vacancy rates are also falling. Residential building has shown little change lately, but recent increases in permits for residential building suggest some growth in the months ahead. Nevertheless, builders of single-family homes are concerned over the increasing restrictiveness of financial institutions' policies on interim financing. This restrictiveness, some of which is said to be tied to new thrift industry regulations, has particularly affected smaller speculative homebuilders. Nonbuilding construction continues to decline. The District oil and gas extraction industry continues to expand gradually. The rig count has been increasing slowly but steadily in recent months—the result of growth in Texas. Most of the gains are said to be in natural gas. Rig counts are declining in Louisiana and New Mexico. Leading indicators of drilling, including well permits and the seismic crew count, suggest a turnaround in Louisiana and New Mexico and further growth in Texas. Respondents generally expect mild growth during the rest of the year, with some slippage in the first quarter of 1990.
Increased soil moisture levels in much of the District have improved conditions for agriculture, but portions of south and central Texas continue to face serious drought problems. In September, District agricultural product prices were down slightly from August, but unchanged from a year earlier. September crop prices were up 2 percent from August and 5 percent from a year earlier. Livestock prices slipped 2 percent from a year earlier and 4 percent from August.