August 9, 1972
The economy of the Eleventh District continued to show strength in June, although indicators were generally mixed. Texas industrial production continued to rise, and retail sales and automobile registrations grew substantially. Construction activity in the five-state region eased slightly in spite of a sharp increase in Texas. While the unemployment rate for the five states continued to edge downward, the level of employment also declined.
The seasonally adjusted Texas Industrial Production Index continued to rise in June, pushing the index to a level nearly 10 percent higher than it was in December 1971. All three sectors of industrial production-manufacturing, mining, and utilities-contributed to the June advance, but mining provided the main impetus, as production of crude oil rose sharply. In manufacturing, output of durable goods increased moderately over the previous month, with the largest advances occurring in transportation equipment and stone, clay, and glass products.
Two related industries-primary metals and fabricated metal products- showed declines in June but were still ahead of their outputs a year before, as were all manufacturing industries. Manufacturing of nondurable goods also rose only moderately in June, in spite of substantial gains in two industries-textiles and paper and allied products.
Seasonally adjusted total employment in the five southwestern states fell slightly in June. As a result of a sharp decline in the number of people looking for jobs, however, the unemployment rate continued its gradual decline started last October, falling to 4.3 percent of the labor force in these states, compared with 4.7 percent in June 1971. Employment fell below month-earlier levels in most categories of both manufacturing and nonmanufacturing. Finance was the only major reporting industry group to show a rise in employment. All other industries showed declines, the largest being in construction, transportation, and public utilities. In spite of the June drop, however, all industries continued to show year-to-year gains with the exception of mining, which was down slightly from June 1971.
Registration of new passenger automobiles in Dallas, Fort Worth, Houston, and San Antonio rose substantially in June. Total registrations were 11 percent higher than in June 1971. Cumulative registrations through the first six months of the year were 12 percent higher than in the corresponding period last year. All four metropolitan centers showed substantial increases in cumulative registrations.
Department store sales in the Eleventh District increased substantially in the four weeks ended July 22 over the corresponding period last year. Cumulative sales through that date were also much higher than in the corresponding period a year before.
Total construction activity for the five southwestern states fell slightly in June after two months of record-breaking activity. A sharp decline in nonbuilding construction accounted for most of the June drop, as well as for the sharp rise in April and May. Residential building continued to play a major role as it increased in June for the fourth consecutive month. Nonresidential building declined slightly. The cumulative value of contracts awarded in the five-state area for the first six months was 37.1 percent higher than in the comparable period in 1971. Texas's construction increased its already dominant role among the five southwestern states, as it rose in June to a level over 38 percent higher than in June of last year. Both residential and nonresidential building in Texas rebounded sharply in June after declining in May.
The winter wheat crop in states of the Eleventh District is expected to be nearly a third higher this year than in the below average 1971 season. The projection, revised upward July 1, is based on yields that appear better than previously expected. Texas feedlots had a record 2.1 million head of cattle on feed at midyear-a fourth more than a year before. Higher prices for meat animals boosted the index of prices received by Texas farmers and ranchers in the month ended June 15, to a level 18 percent higher than a year earlier. The index of prices paid by U.S. farmers moved up slightly from a month earlier to a level 5 percent higher than a year before.
Although District oil allowables continue to permit maximum production, U.S. crude supplies are apparently in tight supply, causing Gulf area imports to surge. A special supplemental quota is now in effect for the second half of the year. Drilling in the District states is showing continuing strength and should be bolstered still further by lease sales of the Louisiana coast scheduled for December. The industry is, however, suspicious of tax reform that could significantly reduce incentives for exploration.
Total credit at weekly reporting banks in the Eleventh District declined slightly in the five weeks ended July 26, as a rapid expansion in loans was more than offset by an even sharper decline in bank holdings of government and municipal securities. Total deposits increased moderately, and banks reduced their net purchases of Federal funds. An abnormal rise in business loans paced the growth in total loans and probably reflected further improvements in District economic activity. Consumer loans D, the highly volatile loans to nonbank financial institutions also registered unusual strength. The expansions in total deposits resulted from larger inflows of both demand and time and savings deposits. The volume of large-denomination CD's outstanding rose moderately, and bank borrowing from nondeposit sources was virtually unchanged.