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Eleventh District Beige Book

November 27, 2019

Summary of Economic Activity

Moderate expansion continued in the Eleventh District economy. Growth held fairly steady in services and retail but decelerated slightly in manufacturing. Home sales remained on the rise while energy activity continued to decline. The agriculture picture was mixed, with continued drought conditions but rising prices and decent production prospects. Employment growth was solid and upward wage pressures continued. Selling prices were largely flat, as firms' ability to pass through increased costs remained limited. Outlooks generally improved, except in energy and financial services. Uncertainty generally remained elevated, driven by trade tensions, the political climate, and weaker global growth.

Employment and Wages

Employment continued to expand at a solid pace. Hiring accelerated slightly in the service sector and remained above average in manufacturing. Headcounts continued to fall in the oil and gas sector. Labor shortages remained pervasive, with multiple contacts specifically mentioning the drag this was having on business growth. Staffing services contacts reported a very tight labor market with most companies struggling to find qualified workers across skill levels.

Wages continued to increase, with pressures picking up slightly over the reporting period.


Input prices continued to rise at a moderate pace, except in the energy sector where they remained flat at low levels. Some contacts, particularly manufacturers and retailers, pointed to tariffs as a primary driver of increased costs. Selling prices were largely flat, although airline contacts noted a slight increase in ticket prices over the past six weeks. Some contacts said they are unable to sufficiently raise prices to cover their increasing costs.


Expansion in the manufacturing sector slowed to a more modest pace, and demand weakened slightly. Several contacts noted that slowing demand was due to energy sector weakness and a general pullback among customers due to heightened uncertainty. Production declines were noted in machinery and fabricated metals manufacturing—two segments with ties to the energy sector. Meanwhile, output of nondurable goods picked up pace over the reporting period. Refiners and chemical producers said softening global demand, tariffs, and ongoing trade policy uncertainty were squeezing margins.

Outlooks among manufacturers remained positive, and expectations for manufacturing activity six months ahead increased across a variety of measures. Trade tensions remained a concern, however, and some contacts noted that uncertainty was making planning difficult.

Retail Sales

Retail sales continued to grow at a moderate pace over the reporting period, although some weakness was seen in autos and among wholesalers. Retailers experiencing a pickup in sales pointed to lower interest rates, favorable weather, and increased internet sales as factors boosting growth. One retailer noted that sales at stores near the Mexican border continued to be challenging compared with previous years. Overall retail outlooks improved notably, although some contacts cited trade issues as a headwind, including instability in some countries where they do business.

Nonfinancial Services

Nonfinancial services activity continued to expand moderately over the reporting period, even picking up pace slightly. Growth in professional and technical services continued to lead the expansion, joined in the latest period by healthcare services. Weakness was seen in administrative and support services. Staffing services contacts reported mostly softer demand, though still at relatively high levels. Staffing contacts noted strength in healthcare and banking but weakness in energy. Activity in the transportation and warehousing sector remained mixed, with strong airline passenger demand and rising sea cargo volumes but some weakness in rail cargo.

Service-sector outlooks improved over the past six weeks, although uncertainty remained elevated. Global economic uncertainty and trade tensions continued to be the predominant factors hampering future planning. Domestic political uncertainty moving into the 2020 elections also came up as an area of concern for several contacts.

Construction and Real Estate

Home sales continued to rise, although a few contacts noted slight seasonal weakness. Sales were up year over year partly due to lower mortgage rates, and most builders were meeting or exceeding expectations. Builders have managed to sell off inventory, bringing the supply of finished vacant homes down to normal levels. Some builders were able to pass through select price increases, improving their margins, and outlooks were mostly optimistic. Recent tornadoes in Dallas-Fort Worth damaged homes, which spurred demand for rentals.

Apartment demand generally remained healthy, with occupancy tightest in Austin. Rents rose slightly. Investor appetite was solid, and apartment construction continued to be elevated. Leasing of office and industrial space remained active.

Financial Services

Growth in loan demand continued at a moderate pace over the reporting period, bolstered primarily by commercial and residential real estate loans. Commercial and industrial loan volumes held steady while consumer loan volumes again contracted slightly. Credit standards continued to tighten across the board. While business activity picked up since the last reporting period, the outlook for activity six months from now deteriorated slightly. Bankers cited concerns regarding the uncertain business climate and lower interest rates hampering pricing flexibility.


Drilling activity in the Eleventh District continued to erode, with firms cutting spending and orders for new equipment. Well completion activity has proved more resilient, particularly in the Permian Basin, slipping only slightly from recent highs. The oilfield services market remained depressed, with little optimism about better margins next year.

Firms were more pessimistic in their outlooks through the end of 2020 than during the prior reporting period due to a weaker economic outlook and tightening credit conditions. Contacts noted that some firms were pivoting to international markets for growth opportunities and where there is hope for higher margins.


Much of Texas remained abnormally dry or in drought. Even still, crop conditions were mostly fair to good, and were more favorable than this time last year. Texas crop production estimates for 2019 exceed 2018 for several crops, including corn, sorghum and cotton. Crop and livestock prices generally trended higher over the reporting period. Milk prices also rose, nearing a profitable level for dairies after a couple of difficult years, according to contacts. Contacts noted continued concern among agricultural producers over trade issues with China but noted there was increased optimism regarding trade talks and the possibility of some tariffs being removed.

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