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March 5, 2014 · Dallas Beige Book Reports

The Eleventh District Economy grew at a moderate pace over the past six weeks. Manufacturing activity increased overall, although there were a few reports of slowing demand. Retail and automobile sales were slightly weaker but contacts' outlooks were positive. Demand improved in most nonfinancial services industries with the exception of transportation services, which was negatively impacted by severe national weather. Sales of new single-family homes remained on an upward trend, and office and industrial real estate leasing activity remained strong. Loan demand held relatively steady. Energy activity remained solid, while agricultural conditions worsened. Price increases were noted in several industries, although most were modest. Outlooks were optimistic across most industries.


Most responding firms said prices were stable to up slightly over the reporting period. There were a few instances of accelerating prices. Fabricated metals producers noted continued increases in selling prices and expect more in the next six months. Food producers said that selling prices had moved up due to rising input costs, especially for dairy and beef. One airline reported a modest increase in ticket prices. Some transportation firms expected increases in shipping rates in coming months due to higher fuel costs. Retail prices were stable overall and auto selling prices were unchanged.

Natural gas prices rose marginally over the course of the last six weeks, peaking at $7.63 in early February and ending the reporting period at $5.35. This was driven by the exceptionally cold winter, which led to a drawdown of inventories to the bottom of its 5-year range. The price of WTI also rose over the last six weeks, trading as high as $100.35 at the end of the period. This price behavior was driven in part by heating oil demand, which has also been bolstered by the severe winter, and debottlenecking at Cushing, OK.

Labor Market

Employment levels held steady or increased slightly at most responding firms. Staffing firms said employment levels were up modestly and expected to hire additional workers. Accounting and legal firms reported a modest increase in employment levels. One transportation services firm expected to increase payrolls significantly this year while another one continued with an incentivized buyout to reduce employment. Fabricated metals and food manufacturing firms reported increased hiring due to stronger demand. A recreational vehicle producer noted employment was up moderately and expected to continue hiring. Labor shortages were reported for engineers, truck drivers, mechanics, machinists and construction workers.

There were some reports of upward wage pressure. High-tech respondents noted moderate wage pressure for high-skilled workers including electrical engineers. Primary metals contacts and food producers noted slight increases in wage pressures for skilled and technical workers. Airlines reported upward pressure on wages, and one airline had increased salaries modestly. In addition, a transportation services firm noted wages were up slightly, and accounting contacts reported marginal wage pressure. Single-family housing contacts continued to note rising wage pressures.


Reports from manufacturers were mostly positive and outlooks were optimistic. Construction-related manufacturers said that demand increased since the last report, despite bad weather locally. Fabricated metals producers reported strong demand, a result of robust commercial and residential construction. Contacts noted demand is well above last year's levels. Demand for primary metals softened seasonally since the last report, although most contacts said demand was somewhat better than this time last year. Energy-related manufacturing contacts and food producers noted steady demand at healthy levels. Paper manufacturers said demand was flat to up and running slightly ahead of expectations. Demand for transportation equipment was mixed, in part due to bad weather in the region, but it was still well above year-ago levels.

Contacts in high-tech manufacturing reported a slight improvement in orders since the last survey period. Responding firms said that demand for memory chips remained strong and demand for logic devices remained weak but stable. Inventories were reported as stable and employment levels were flat to slightly up. Most contacts expect stronger demand this year as they expect the world economy to pick up moderately and replacement rates of high tech devices to increase.

Refinery contacts noted that utilization rates fell slightly, in part due to weather effects. The production growth of major chemicals was mixed. Refinery and petrochemical margins remained healthy.

Retail Sales

Retail sales were a little weaker this reporting period due in part to bad weather nationally but year-over-year growth remained positive. According to three national retailers, demand in Texas slightly outperformed the nation since the last report. Contacts' outlooks for the rest of this quarter and the remainder of the year are positive.

Automobile sales softened slightly since the previous report. In north Texas, this was attributed to cold weather. Year-over-year demand ranged from down slightly to up slightly. Inventory levels varied by manufacturer, and generally were not a source of concern. Contacts' outlooks for the remainder of the quarter and the year were mostly optimistic.

Nonfinancial Services

Staffing firms said demand was up more than expected, and that they plan to increase hiring. One contact noted requests for IT professionals started rising again after maintaining an already high level over the past several months. Contacts were more optimistic than at the time of the last report. Accounting firms said demand continued to trend upward, although there was some softness in tax services. Outlooks were cautiously positive. Legal firms noted a slight increase in demand over the past six weeks and it was up notably from last year. Transportation service firms noted mixed demand. Railroad cargo volumes fell slightly below year-ago levels, with severe weather nationally largely to blame. Coal, grain and nonmetallic minerals saw good growth, and chemicals and petroleum shipments rose modestly. Weakness was seen in shipments of lumber and wood and motor vehicles. The outlook remained positive with strong growth expected in the first part of 2014. Small parcel shipping decelerated since the last report but was up from a year ago. Retail trade continued to be the largest driver of growth, and the outlook was optimistic. Air cargo volumes were up since the last report but down slightly from a year ago. Respondents in the maritime shipping industry said loaded container volume declined slightly, but that for 2013 as a whole container volumes rose moderately.

Airline demand was solid to slightly stronger according to contacts. Severe winter weather across the nation caused some temporary disruptions, but demand rebounded quickly. Demand was in line with or slightly above year ago levels. Outlooks were optimistic.

Construction and Real Estate

Single-family home sales remained on an upward trend over the past six weeks, although one contact noted a slight slowdown in the pace of new home sales in recent weeks. Inventories of new and existing homes remained at extremely low levels. One respondent noted the low inventory of developed lots could hamper single-family building activity later in the year. Apartment demand remained solid and construction activity continued at high levels. Rental rate growth was above the historical average in most major metros. One contact was concerned about possible overbuilding in urban areas.

Office and industrial leasing activity was strong. Sales activity remained at high levels and contacts expect it to increase this year, noting a more friendly lending environment. Outlooks were positive and commercial development is expected to continue to rise this year.

Financial Services

Financial sector performance remained relatively level over the past six weeks. Demand improved marginally for commercial real estate, middle-market, mergers and acquisitions, and consumer loans. Some softness was reported in residential real estate lending. Loan pricing remained relatively unchanged at competitive levels, and loan quality continued to strengthen. Deposit volumes increased slightly on net after fluctuations in the beginning of the year; rates remain low and static. Respondents' outlooks are hopeful for a better year, noting less client uncertainty and potentially growing interest in loans.


Eleventh District demand for oil field services remained healthy over the past six weeks. Contacts noted that activity in Texas is particularly strong, both inland and offshore, and they were moderately more optimistic for the first half of 2014 than in prior reporting periods.


After gradually easing throughout the fall, district drought conditions worsened slightly in January and early February. Wheat crop and pasture conditions deteriorated somewhat due to lack of sufficient rainfall. Cotton prices have rallied since December, which may lead more farmers to favor cotton over other row crops when making planting decisions this spring.

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