Beige Book Report: Dallas
June 23, 1993
District economic activity is increasing slowly. Manufacturing activity has improved since the last beige book. Construction and real estate activity continues to be dominated by single family home-building although non-building activity has increased recently. Oil and gas drilling is increasing slowly but remains at very low levels. The service sector continues to expand slowly. Retail sales are increasing moderately and auto sales are about even with last year. Financial institutions report that loan demand continues to be slow. Agricultural producers report that drier fields have helped get planting back on schedule.
Manufacturing activity has improved since the last beige book. Contacts report that demand continues to be strong for electrical and electronic machinery, and prices have fallen for some products. Demand for primary and fabricated metals is reported to have increased slightly, and is particularly strong for construction- related products. Higher steel prices have increased costs for fabricated metal producers and, they report, their prices have risen. Respondents say that sales of brick, glass and rock have increased. Brick prices continue to increase although stone and glass producers report no price increases. Demand for lumber is reported to have slowed recently, and prices have declined. Respondents say that sales of corrugated boxes have declined slightly and prices have fallen, although sales are still stronger than this time last year. A slight increase in domestic drilling has led to a slight increase in demand for oil field equipment. Mexico continues to be a strong customer of rental oil field equipment. Chemical producers report slightly improved domestic markets but deteriorating exports. Chemical prices have declined. Overcapacity remains a problem for most bulk chemical products and margins are so weak that some producers are shutting lines that require high price feedstocks. Contacts report that sales of apparel, and food and kindred products have increased.
Single family residential construction and real estate markets remain strong and selling prices are well above last year's levels. The apartment market continues to improve slowly. Demand for apartments has increased but at a slower rate than expected. The office market is mixed. Dallas has the highest downtown office vacancy rate in the nation, while Austin has one of the tightest office markets in the country. The industrial market is improving very slowly. Highway construction has increased in most of the District's major cities. Contractors are optimistic about infrastructure construction for the near future.
District oil and gas drilling is increasing slowly but remains at very low levels. Oil prices have moved under $20 per barrel in recent weeks, but are still regarded as favorable. The rig count remains low but has been increasing slowly and is now just above last year's level. Natural gas drilling has not recovered from a big drop at year-end due to the expiration of tax breaks, despite prices that remain high and near $2.00 per thousand cubic feet. Sharply expanded gas drilling is expected in the second half of the year, and some signs of improved gas drilling are already apparent in gas- bearing areas along the Texas Gulf Coast and especially in the waters of the Gulf of Mexico. Refiners' margins improved seasonally in late April and early May, in anticipation of the summer driving season, but have since weakened as gasoline inventories built up.
The service sector continues to expand slowly. Many respondents believe that sales have been slow because of uncertainty surrounding federal tax and health proposals. Most contacts report no change in prices, or slight increases.
Retail sales are increasing moderately. Contacts report that they believe consumers are still spending cautiously because of uncertainty surrounding federal tax proposals. Heavy competition is reported to be keeping price increases small. Mexico's increased enforcement of a $50 limit on imports continues to dampen retail sales in Laredo although other parts of the border report that sales have returned. Auto sales are about even with last year although dealers report that sales have been erratic.
Financial institutions report that loan demand continues to be slow. Creditworthy customers are said to be cautious. Bankers report that often loan applicants are denied because they have insufficient owner-capital. Bankers remain optimistic although respondents do not expect any rapid loan growth. Some bankers are responding to forthcoming market-value accounting changes by shifting out of securities and into loans.
District agricultural conditions have improved. Overly wet fields have dried out and let farmers increase planting considerably since the last beige book. May prices were lower for most crops and higher for most livestock commodities. Higher prices were recorded for beef cattle, calves, hogs, sheep, hay and upland cotton. Prices were significantly lower for corn, grain sorghum. soybeans, potatoes and wheat.