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Reports on Regional Economic Activity

Eleventh District Beige Book

April 19, 2023

Summary of Economic Activity

The Eleventh District economy continued to expand modestly. Manufacturing output rose slightly following a mild contraction in the previous period. Growth in the service sector continued at a modest pace, and retail sales and energy activity were flat. Loan demand weakened further, loan volumes fell, and credit conditions tightened. Agricultural conditions remained strained by drought in some areas. Home sales rose. Local nonprofits cited higher demand for assistance. Overall payrolls rose modestly, though hiring slowed sharply in the service sector. Wage growth remained elevated, while price pressures eased notably. Outlooks worsened, and uncertainty surged, partly due to heightened apprehension about the recent banking sector issues and high interest rates, and their spillover effects on the broader economy.

Labor Markets

Employment increased modestly during the reporting period. The pace of hiring picked up in manufacturing but slowed in energy and nearly stalled out in services. Difficulty hiring workers remained a top concern for many firms, though a few reported some improvement. Airlines cited capacity constraints due to pilot shortages, and a workforce development contact said some employers were taking a closer look at non-traditional talent pipelines to fill positions. In contrast, staffing firms noted clients were taking longer to make hiring decisions in part due to the increased economic uncertainty, and there were scattered reports of layoffs in construction-related manufacturing and upstream energy.

Wage pressures remained elevated, though they have stabilized or moderated in some industries. A food manufacturer noted having issues finding workers despite offering a starting salary that was more than twice the minimum wage, while construction contacts noted some easing in pricing for certain trades.


While input costs continued to rise, the pace of increases moderated in energy, construction, and manufacturing. Freight costs dipped. Some manufacturers noted continued price pressures from supply chain constraints, and a few firms said higher borrowing costs were slowing down expansion plans. Selling price pressures decelerated broadly, bringing price growth close to or below its historical average in manufacturing and services. Homebuilders continued to use incentives and discounts to close sales. Airlines said ticket prices remained elevated, while energy firms reported declining rental rates for drilling rigs and said they expect cost inflation to continue slowing. More than a third of firms responding to a March Dallas Fed survey of nearly 400 Texas business executives cited inflation as a primary outlook concern over the next six months.


Texas factory output expanded slightly in March after declining in February. New orders for manufactured goods continued to contract, however. Weakness in demand was most pronounced in primary metals and plastics, though construction-related and computer manufacturers cited declines in new orders as well. In contrast, demand for fabricated metals and machinery rose, and chemical and refinery utilization rates increased. Overall, outlooks weakened, with just under two-thirds of contacts noting waning demand and/or recession as a key concern. Other headwinds cited were elevated input costs, labor shortages, and higher labor costs.

Retail Sales

Overall retail sales held steady in March. Auto sales rose strongly, though one contact noted a pullback in demand due to high interest rates. Clothing and health and personal care retailers cited higher sales. In contrast, electronics and appliance store sales dipped, which some contacts attributed to slow activity in the housing market. Nonstore retailers reported sluggish activity in part due to more people traveling this spring break.

Nonfinancial Services

Modest expansion continued in the service sector. Revenue growth was the strongest in leisure and hospitality, and activity in professional and business services, education, and transportation services rose as well. Small parcel and air cargo shipments were flat to down, while sea cargo volumes remained robust and were up notably compared with year-ago levels. One contact noted that the recent train derailments had increased supply chain delays. Airlines saw continuing solid demand for leisure travel and some contacts expect business travel revenues to reach pre-pandemic levels this spring. Demand for staffing services was mixed, with firms making white-collar placements seeing continued strong activity while those filling blue-collar positions citing weakness. Health care and real estate rental and leasing firms noted declining revenues on net.

Construction and Real Estate

Single-family housing demand improved further during the reporting period partly due to lower mortgage rates. However, the level of activity remained well below year ago levels. Most contacts reported a solid spring market, with sales, particularly in popular locations at or above plan. Buyer traffic held up, and contract cancellations dipped. Housing starts remained subdued. Outlooks improved but uncertainty remained elevated particularly considering the recent banking challenges. Apartment leasing picked up slightly. Rents were flat and occupancy continued to dip as supply outpaced demand.

Demand for office space was lackluster, and heightened levels of sublease space remained an impediment to market recovery. Activity in the industrial market stayed solid, but vacancy edged up due to the arrival of new properties. The higher cost of capital, tighter lending standards, and financial uncertainty has made it challenging to price deals, diminishing investment sales activity. Some contacts voiced concern regarding the renewal of commercial real estate loans, particularly those secured by office properties.

Financial Services

Loan demand continued to decline in March as bankers reported worsening business activity. Loan volumes fell, driven largely by a sharp contraction in consumer loans. Loan performance worsened slightly overall. Credit standards and terms tightened sharply, and marked increases in loan pricing were noted. Banking outlooks continued to deteriorate, with contacts expecting a contraction in loan demand and business activity and an increase in nonperforming loans over the next six months. Increased uncertainty and lack of confidence resulting from the recent banking issues were cited as concerns.


Energy activity was essentially flat over the past six weeks. The rig count was unchanged as activity shifted between and within basins in part due to lower natural gas prices. Oil and natural gas production increased in the first quarter, and expectations are for drilling and completion activity to rise moderately through the year. Outlooks worsened, however, partly due to uncertainty about the economy.


Drought conditions persisted in the western part of the district while soil conditions were quite favorable elsewhere. The La Niña weather pattern has ended, and rainfall is expected to increase moving into summer and fall. Cotton acres are expected to be down significantly this year, with farmers favoring crops with a relatively higher price and drought tolerance. On the livestock side, cattle prices increased dramatically over the past six weeks and were up from this time last year, and demand was solid.

Community Perspectives

Nonprofits saw increased demand for their services, with one contact citing higher activity compared with pre-pandemic levels. Utilization of housing assistance or temporary shelters increased notably, and some nonprofits said that housing assistance was the fastest growing need among their clients. Contacts cited growing financial difficulties for low- to moderate-income families in part due to the recent reduction in SNAP benefits. One nonprofit noted that more middle-class families were seeking financial help as their wages had not kept pace with rising living costs. High or rising operating costs remained a challenge for many nonprofits, and some were concerned that with many companies downsizing, they would not meet their fundraising goals.

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