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July 16, 2014 · Dallas Beige Book Reports

The Eleventh District economy grew at a moderate pace over the past six weeks. Manufacturing activity continued to increase, although there were a few reports of weaker demand. Retail and automobile sales strengthened, and were above year-ago levels. Demand for nonfinancial services was stable or improved, while growth in loan demand slowed over the reporting period. Sales of single-family homes were flat to down slightly, but apartment, office and industrial leasing activity was strong. Demand for oilfield services remained robust, and agricultural conditions improved. Prices were unchanged or increased modestly at most responding firms, and employment held steady or rose slightly. Outlooks remained optimistic.


Most responding firms said prices held steady or increased slightly since the last report. 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 meat products. Retail prices rose slightly, while automobile selling prices were unchanged. A transportation service firm said rates were up slightly, partly due to rising fuel costs, and airlines said airfares and fees had moved up.

The price of West Texas Intermediate crude rose since the last report, while natural gas prices were flat. Gasoline prices moved up due to higher oil prices and the start of the summer driving season.

Labor Market

Employment levels held steady or increased modestly and some contacts noted continued difficulty in finding skilled workers. Reports of hiring came from airlines, auto dealers, law firms, and manufacturers of brick, fabricated metals, food, high tech and transportation equipment. Retail sector employment rose, and one contact noted that hiring was in line with increasing sales. Staffing firms noted a slight increase in headcount, and an accounting firm noted growing success in hiring out-of-state talent. Energy contacts continued to report a very tight labor market and respondents in food manufacturing and retail industries reported difficulty finding workers in oil-producing regions. Shortages of labor in the housing sector continued, although one contact noted slight easing.

Reports of upward wage pressures were roughly the same as in the last report. Wage pressures remained strongest for skilled workers in the energy and construction sectors, but there were reports of modest upward pressures in some other industries, including airlines, high tech, fabricated metals, primary metals and transportation equipment manufacturing.


Reports from manufacturers were mostly positive, although some firms noted weaker demand since the last period. Construction-related manufacturers said demand was stable or rose slightly. Lumber producers noted weaker-than-expected demand over the past six weeks, while a cement manufacturer saw strong demand in Houston and Dallas and two brick manufacturers noted increased demand in Austin and San Antonio. Fabricated metals manufacturers noted a broad-based increase in orders, and said that demand was up 10 percent from year-ago levels. Primary metals producers reported steady growth in demand.

Contacts in high tech manufacturing reported that sales were stable to slightly up since the last report, and inventories were at desired levels. Outlooks were positive, and forecasted demand for memory and logic devices for the remainder of the year was revised up from the last reporting period.

Transportation equipment manufacturers said demand was flat to down compared to the last report, but they expect sales this year to exceed last year's levels. Food producers said demand growth remained flat over the reporting period, but overall sales were slightly above year-ago levels. Refinery utilization rates eased over the reporting period. Chemical production strengthened with the end of the spring maintenance season. Outlooks of refiners and chemical producers remained positive.

Retail Sales

Retail sales strengthened over the past six weeks. Contacts noted slightly stronger growth than the previous reporting period, and demand was above year-ago levels. According to one national retailer, demand in Texas continued to outperform the national average. Outlooks for the remainder of the year were optimistic.

Automobile sales increased since the previous report partly due to pent-up demand and partly due to the start of the summer selling season. Demand was up slightly year-over-year, and one contact noted that sales were finally back to pre-recession levels. Inventories varied by manufacturer, and were at desired levels. Outlooks for the third quarter and the remainder of the year were positive.

Nonfinancial Services

Demand for staffing services held steady, although a few contacts noted increased demand for oil and gas workers. Outlooks were more optimistic than the previous report. Accounting firms reported a seasonal slowdown in demand, but activity remained at high levels. Outlooks were positive and contacts expect a pickup in demand for audit and advisory services in coming months. Demand for legal services increased slightly in the last six weeks. Real estate-related business continued to grow and corporate work edged up, but demand for litigation services was weaker than expected.

Transportation service firms said overall cargo volumes increased since the last report and outlooks continued to be positive. Intermodal cargo volumes increased over the past month but were even with year-ago levels. Growth in small parcel shipments picked up, with demand growth led by online and personal and health care retailers. Railroad contacts reported notable increases in grain, crushed stone and lumber and wood volumes, while shipments of petroleum, primary forest materials and nonmetallic minerals declined.

Airlines reported that passenger demand was flat to up since the last report. Demand for domestic travel remained solid, while demand for foreign travel, particularly to Europe and Asia was weak. Outlooks were unchanged, with one contact expecting this year to be stronger than 2013.

Construction and Real Estate

Single-family housing activity was flat to slightly down since the last report. Sales and buyer traffic held steady, but some contacts reported a seasonal slowdown in activity. Low inventories and higher construction costs continued to push up home prices. Contacts were optimistic that demand will remain strong this year. Robust apartment demand pushed up occupancy rates, and increases in rents were strong in several major metros. Construction activity remained brisk, and contacts are optimistic in their outlooks through year-end.

Office leasing activity remained solid and occupancy high during the reporting period. Rents continued to trend upwards, especially for Class A office space, and were above their pre-recession peaks in some markets. Office investment activity picked up in Dallas but slowed in Houston. Demand for industrial space was strong, with vacancy rates in Dallas and Houston near historic lows. Outlooks remained generally positive.

Financial Services

Loan demand grew at a slightly slower pace compared to the previous reporting period. Commercial and residential real estate lending continued to grow, especially in Dallas, Houston and Austin, but one contact noted that regulations were limiting land development loans. Mortgage lending continued to increase at a modest pace, however, auto loan growth showed signs of cooling off. Small to medium-sized business lending fell slightly but remained at robust levels. Loan quality continued to improve and interest rates on loans remained low due to strong competition for borrowers. Deposit volumes increased more than anticipated, while deposit rates remained low. Softer growth during the reporting period has somewhat tempered outlooks.


Demand for oilfield services remained robust in the Eleventh District. Growth in Texas drilling activity continued to be concentrated in the Permian Basin in West Texas, but southeast Texas saw an increase in drilling as well. Margins for oilfield service providers were up slightly in the Permian Basin and the Gulf of Mexico, but generally remained narrow. Geological service firms continued to see strong demand. Outlooks for the rest of the year were more positive than during the prior reporting period.


District drought conditions eased over the reporting period. Widespread rains greatly improved prospects for row crops, especially cotton, but came too late to aid the Texas wheat crop, which is expected to be down 20 percent this year. Most crop prices declined over the past six weeks due to expected stronger U.S. production. Pasture conditions improved and cattle prices continued to set new historical highs. Domestic demand for beef remained very strong despite record prices, while international demand for cotton remained low.

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