Beige Book Report: Dallas
September 8, 1993
The District economy expanded at a moderate pace in July and August. Many respondents reported a pickup in sales and employment. Orders are strong in several manufacturing industries. Respondents in business service industries reported an increase in business activity. Retail sales continued to increase slowly. Homebuilding remained strong. Banking respondents said that loan demand picked up. The energy extraction industry showed continued improvement in response to strength in natural gas prices. Overall, crops in the District are expected to fare better than last year.
Most manufacturers reported a pickup in orders and an improved outlook. Several respondents noted an increase in employment. Producers of stone, clay, glass, lumber and fabricated metals reported strong gains in orders originating from the residential construction sector. Employment was reported to have increased in many of these construction-related industries. Orders for semiconductors and telecommunications devices were reported to be strong and employment levels have increased. Producers of food and kindred products said that sales and employment had increased. A steel industry respondent noted that orders continued to increase even though they recently implemented a price increase. Oil field equipment producers said that domestic orders have improved but that international drilling remains weak. Paper producers noted an increase in orders and employment. The petrochemical producers continue to report global overcapacity problems and weak exports. Refinery respondents reported that their margins improved slightly in August.
Most business service firms reported a pickup in activity and a positive outlook. Temporary employment agencies report an increase in demand, partly because their clients are resisting hiring full- time workers, but also because business activity is increasing. The demand for part-time workers was broad based, although particular strength was reported for the professional fields such as accounting and engineering. Several law firms reported increases in employment. Accounting contacts said that business activity has picked up over the past three months. The main source of growth for accounting firms was reported as consulting on methods to increase productivity. Advertising respondents said that activity has risen because of increased demand from the auto, retail and nondurable goods industries. Hotels in the Dallas, San Antonio and Austin areas reported high occupancy.
Retail sales continued to grow slowly. Retailers generally were optimistic that sales growth will pick up. Respondents report that strong competition within the industry has been restraining price increases. Inventories are reported to be back at desired levels. Some retailers had experienced an unintended buildup during the early summer. Sales along the Mexican border are still below last year's levels although there are scattered reports of improvement. District auto sales slowed in July but year-to-date sales remain above last year's level.
Residential construction remains strong in many areas of the District. Respondents report that new home sales slowed somewhat in July but picked up again in early August. Construction is particularly strong in San Antonio and Austin, and weak in Houston. Respondents report that home sales are likely to remain strong as long as mortgage rates remain low.
The District oil and gas drilling rig count continues to rise. Activity in the Gulf of Mexico remains very strong. Oil prices rose to about $18 per barrel in August after falling to $17 per barrel in July because of speculation that Iraq would reenter world oil markets, and discord within OPEC. Hot weather throughout the Southern tier of the United States pushed up natural gas prices in the last few weeks of August.
Most banking respondents reported that loan demand has picked up and is up over 1992. Mortgage originations and refinancings remain a bright spot. Respondents generally were optimistic about future loan demand. Respondents said that competition among banks for the best borrowers was beginning to intensify because the larger banks were becoming more aggressive.
Continued dry conditions in the District have had a negative impact on agricultural conditions in many areas. Overall crop production, however, is expected to fare better than last year. West Texas and areas north of Lubbock are expecting good cotton crops. Dry weather is having a negative impact on crop production in parts of central Texas. Many pastures have dried out forcing producers to move cattle to market. In general, however, cattle ranchers report favorable conditions. Higher prices for most livestock and livestock products pushed the Texas All Farm Products index slightly higher in July. Prices for most crops declined and the Texas All Crops Index was 10.7 percent below a year ago. Producers were receiving higher prices for hay, sorghum and soybeans but lower prices for other crops.