Beige Book Report: Dallas
December 5, 1990
After adjustment for seasonal patterns, respondents indicate that output in the District has remained unchanged since the last survey. The manufacturing sector continues to decline while growth in the service sector has recently increased. Auto sales are expanding. Department store sales have increased mildly. Construction activity has declined slightly. Energy extraction has remained flat. State government revenues and expenditures continue to increase. In agriculture, prices and production have been increasing.
Manufacturing orders continue to be weak. Most respondents say that orders have not changed or have declined slightly. Respondents note continued uncertainty due to the Middle East crisis. Inventories are generally at desired levels. The weakest industries are those tied to the construction sector. Lumber producers note declining demand while orders for stone, clay and glass remain at very low levels. Orders for primary metals generally have continued strong. Fabricated metal producers cite flat sales, but respondents expect sales to decline in the coming months. Chemical orders have fallen in recent months after a surge that followed the Kuwait invasion. Chemical production has remained strong, however, because producers are replenishing depleted inventories. Petroleum refiners say that demand has generally been flat and that, while margins have improved slightly, they are well below preinvasion levels. According to apparel manufacturers, orders have declined because retailers are cautious about the holiday season. Sales continue to be weak across a wide range of electronic products. Strong foreign demand has stimulated sales growth in oil field machinery. Sales of food and kindred products have been growing moderately. Paper production has continued to show mild year-over-year gains.
Growth in the District service sector has increased during the past several months. Respondents note that increased economic uncertainty has boosted demand at temporary employment agencies, with demand particularly strong from the manufacturing sector. Computer-related business consulting has slowed somewhat while other types of business consulting have increased. Some respondents note that demand for accounting services has accelerated recently. Health services continue to grow at a moderate pace. Hotels and airlines note some recent declines in demand while respondents in the advertising sector say demand has improved modestly.
Growth in District retail sales has increased since the beginning of October, although real rates of growth are close to zero. Houston and West Texas are showing some improvement. Several retailers note that the District is outperforming the nation. Weak demand has held prices flat to down for many items. Some retailers say that they have shifted from foreign to domestic manufacturers due to the falling value of the dollar. Sales at discount stores continue to be stronger than sales at non-discount retailers.
Area auto sales rebounded in October after several months of weakness. On a year-over-year basis, sales increased 20 percent in Houston and 11 percent in Dallas/Ft. Worth. In the first 10 months of 1990, sales in Houston and Dallas/Ft. Worth were up about 4 percent from the same period in 1989.
District oil and gas extraction has shown little change. The price of West Texas Intermediate crude has increased 90 percent since Iraq's invasion of Kuwait last August. Nonetheless, natural gas prices have increased only seasonally and oil prices are expected to retreat once the crisis in the Persian Gulf has been resolved—leaving oil and gas producers cautious about expansion. Consequently, neither drilling nor employment in the oil and gas industry have increased significantly. Although the Texas rig count increased slightly during October, the District rig count has been declining since July.
District construction activity has slipped slightly in recent months. Median home prices in Texas dropped sharply in September and October. One respondent noted that while median home prices have decreased, this is due to a relative increase in the amount of lower priced homes being sold, The respondent noted that the price for any given home has generally been rising. District residential construction has increased due to continued strength in the Texas apartment market. Nonresidential construction has increased slightly but remains below that of a year ago. District nonbuilding construction has continued to decline.
State government respondents say that nominal tax revenues in the District continue to grow slowly. Demand for social services has increased in all three District states and employment and spending has continued to grow at moderate rates.
The District harvest is nearly complete. Production has been good despite extreme weather conditions earlier in the year. District agricultural net cash income should be up slightly from last year, even though incomes have been reduced by higher than expected fuel costs. Although livestock and livestock products prices were down from September, they reached a record October high. Crop prices were 7 percent below a year ago but up 1 percent from September.