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Reports on Regional Economic Activity

Eleventh District Beige Book

April 15, 2020

Summary of Economic Activity

There was sudden and broad-based weakening of the Eleventh District economy during the reporting period. Many firms reported a sharp reduction in activity, resulting from business disruptions and closures due to the COVID-19 pandemic. Activity in the energy, retail, and service sectors was the hardest hit. Overall factory output and new orders plunged, though production in food and printing-related manufacturing increased. Loan demand contracted broadly and credit quality eroded slightly, except in residential real estate lending. Housing demand held up through mid-March but has declined notably since then. Employment and hours worked plummeted, resulting in downward wage pressures. Input costs were flat to down, and selling prices dipped amid declining demand for many products and services. Outlooks worsened markedly and uncertainty surged, as the economic impact of the COVID-19 pandemic and related containment measures intensified.

Employment and Wages

Employment declines were steep, particularly in retail, transportation, administrative and waste management, and accommodation and food services, as stay-at-home orders led to widespread business disruptions and closures. A March Dallas Fed survey of 400 Texas businesses in the services and manufacturing sectors showed that one-third of respondents had either temporarily or permanently laid off workers, and 56 percent noted that additional layoffs were likely if the situation did not improve. Some firms noted needing financial assistance to maintain their payrolls, while others were adjusting hours and/or salaries. Airlines were also offering a voluntary leave option. Energy contacts said they expect industry employment to fall sharply in tandem with oilfield activity. By contrast, a few firms said they were taking this opportunity to hire due to increased demand or a desire to bring on more qualified employees.

There were generally downward pressure on wages outside of manufacturing and construction.


Plunging demand for products and services led to widespread declines in selling prices, including for used cars and energy. Airlines reported increasing the quota of lower-priced tickets. Rates on rail shipments of some commodities rose, but pricing for most others dipped. Input costs were flat in services and down in energy, manufacturing, and retail.


Factory activity deteriorated sharply in March, following a broad-based acceleration during the previous reporting period. Many firms noted a significant reduction in demand and/or a rise in order cancellations, resulting from business disruptions caused by shelter-in-place mandates. Some contacts also cited weak oil prices as a headwind for growth. In contrast, pandemic-related increased demand for food and protective equipment boosted output in food and printing-related manufacturing.

Refiners and chemical producers indicated softening global demand and downward pressure on margins due to the coronavirus pandemic. Firms noted delaying large construction projects and lowering utilization rates as demand for fuels dropped and inventories rose.

Overall outlooks turned negative, with many manufacturers expecting business activity to be adversely impacted because of COVID-19 for at least three to six months.

Retail Sales

Retail sales plummeted over the reporting period as a drop-off in consumer discretionary spending and widespread business closures—many mandated by local governments—precipitated steep declines in revenues. Auto sales plunged, while a few healthcare and general merchandise stores noted higher demand. Outlooks deteriorated notably as businesses re-evaluated plans in the face of rising uncertainties.

Nonfinancial Services

Activity in the service sector was negatively affected by the coronavirus outbreak, with firms overwhelmingly seeing or expecting to see lower demand as customers reduced spending and were forced to cut back or cancel previously planned purchases or events. The few who saw stronger demand were tied to the grocery or professional services industries which are largely able to continue operating. Accommodation and food services and arts and recreation industries were among the hardest hit. Airlines saw a dramatic decline in demand. Trip cancellations were outpacing new passenger bookings, and demand is expected to deteriorate further. Rail and air cargo volumes decreased. Most staffing firms saw a significant drop in orders, though there were reports of increased demand for workers in healthcare, nursing, and pharmaceuticals. Service sector outlooks were largely pessimistic due to uncertainty surrounding when things would return to normal.

Construction and Real Estate

Housing demand held up through mid-March, but sales and traffic have dropped off markedly since then, particularly in Houston. Builders reported a higher-than-normal cancellation rate, though some said they had managed to meet their March sales goal due to strong demand in the earlier half of the month. Showings dipped as many sellers took their homes off the market. Several new land and lot deals were on pause, and builders were renegotiating existing lot contracts. Outlooks weakened considerably, with sales and starts expected to slow because of the coronavirus outbreak.

Multifamily contacts said impacts from the spread of COVID-19 will become evident in the months ahead as interruptions in household incomes compel many tenants to seek relief on rent payments. Expectations are for the low and high end of the market to be the most impacted. Commercial leasing activity was beginning to be affected, with conditions in the retail sector deteriorating rapidly. The investment climate is uncertain, making it difficult to price deals. A number of land and commercial real estate transactions have been delayed or cancelled as investors take a wait-and-see approach.

Financial Services

Loan volumes contracted broadly, led by declines in commercial and industrial lending. The only exception was residential real estate loan demand, which increased during the reporting period. Loan pricing continued its marked decline, and credit standards tightened. Credit quality eroded across most loan types and most bankers expect further deterioration. About 25 percent of bankers reported increased use of existing lines of credit and 26 percent noted higher demand for new ones, and most said they have plans in place to meet the higher demand. Business activity tumbled, and expectations for activity in the next six months worsened notably.


Eleventh District drilling and completion activity fell sharply toward the end of the reporting period in response to a collapse in West Texas Intermediate crude oil prices. Many producers are evaluating which wells need to be shut-in, particularly as physical storage capacity for oil depletes rapidly. Firms said they are unable to access capital through credit markets, prompting concerns about a sharp increase in bankruptcies. U.S. crude production is projected to decline by year end, but there is wide disagreement on how far it will fall.


Recent rainfall remedied drought conditions across most of the district. Wheat demand and prices rose due to increased purchases of breads and pastas during the coronavirus pandemic. Contacts expect some farmers will switch away from cotton to wheat or other grains this year, as cotton prices have plummeted and could slip further as people pare back discretionary spending on clothing. On the livestock side, pasture conditions were favorable and prices for cattle ready for feedlots rose because of pandemic-related increased demand for beef. Meatpackers have seen higher revenues in recent weeks as grocery stores increased orders and beef and chicken prices have risen.

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