Beige Book Report: Dallas
March 9, 1994
The Eleventh District economy expanded moderately in January and February. Manufacturers reported continued steady growth in orders and a slight pick up in employment. Business service contacts said activity was growing slowly and retail sales increased moderately. Growth of construction and real estate activity remained steady. Frigid weather and snowstorms in the Northeast gave a short boost to the energy industry although oil prices and activity have returned to previously low levels. Bankers said that loan growth continued to improve. Dry weather continued to hamper agricultural production.
Freezing weather and the California earthquake caused shipping delays for several industries. A few contacts reported that delays had negatively affected sales. Passage of the NAFTA heightened talk of increased trade opportunities. Border contacts, however, noted that inadequate infrastructure was causing serious delays at border crossings, particularly going into Mexico. These delays impaired sales for some contacts.
District manufacturers reported continued steady growth in orders and a slight pick up in employment. Brick producers said they had another record sales month and prices had increased. Glass producers also reported strong demand and slightly higher prices. Demand fell slightly for primary and fabricated metal products. Homebuilding continued to boost demand of metal products, although cold weather in the Midwest and Northeast delayed some sales. Demand for energy- related metal products, however, was reported as still in a slump. Lumber sales and prices were higher, and contacts were optimistic that demand would remain strong. Increased construction in the District more than offset slower lumber sales to the Northeast. Paper contacts said that demand remained strong and prices were higher. An increase in advertising boosted demand for newsprint, while sales of corrugated containers were reported to be the strongest in the nation. Demand was higher for electrical and electronic machinery although prices remained unchanged or lower. Electrical contacts still anticipate a deceleration in sales because they believe demand has been growing at an unsustainable rate. Cold weather in the east increased demand for refined products. The demand spurt reduced inventories and improved prices and margins, but contacts said overcapacity will keep the industry outlook weak. Despite stronger demand for all chemicals, overcapacity keeps prices for many ethylene-based petrochemicals low. Producers of other chemical products report better prices, including polystyrene, benzene and some polymers. Despite a normal seasonal decline in the rig count, the demand for oil field machinery remains stable. Sales were slower for food and kindred products.
Demand for business services was still increasing slowly. Demand was growing slowly for accounting, advertising and transportation services. Legal contacts reported little or no growth in demand while temporary services continued to report the strongest activity.
Retail sales increased moderately. Prices were stable or lower for most products. Auto sales increased strongly in January but showed signs of slowing in February. Sales of domestic trucks, minivans and sports vehicles were particularly strong. Some dealers reported that their inventories fell below desired levels.
Construction and real estate activity remained steady. New home sales were above last year's levels for all major markets and contacts do not anticipate any slowing in demand for at least six months, Apartment occupancy rates and rents are rising. Apartment markets remained particularly tight in Austin and San Antonio. Demand for warehouse space was strong and some speculative warehouses were under construction. Other commercial markets were unchanged although contacts were more optimistic that activity would increase, in part because of NAFTA. Contacts said that there was a surplus of sales people and development managers but a shortage of specialized tradesmen.
Frigid weather and snowstorms in the Northeast caused a light flurry of activity in the energy industry and boosted futures prices for oil and natural gas. Oil prices quickly fell back to around $14 per barrel, but natural gas prices are not expected to fall until storage tanks are refilled in the spring and summer. Oil exploration fell sharply in January but was partially offset by more than expected drilling for natural gas.
Bankers said that loan growth continued to improve across the District. Growth in loan demand in south Texas and Houston was primarily for real estate. Other parts of the District had higher demand for all types of loans.
Dry conditions have hampered agricultural production. Texas wheat condition was rated at 55 percent of normal compared with 72 percent last year. Livestock conditions were reported to be fair to good. Ranges and pastures across much of the District remained short. Hay supplies continued to be tight and supplemental feeding remained steady. The January Texas All Crops Price Index was 19.3 percent above a year ago but the Livestock arid Livestock Products Price Index fell 6.8 percent.