June 13, 1973
The economy of the Eleventh District is continuing to expand, although the expansion appears less widespread than in earlier recent months. Industrial production in Texas continued to increase in April, but employment in the five District states declined slightly. The pace of construction activity also slowed in April. And although sales of District department stores rose substantially in May, automobile registrations in April were sharply below their previous month's levels.
In response to a survey of the nonbanking Directors of the Bank, only a third of the respondents indicated that their companies have altered their 1973 plans for plant and equipment expenditures since the first of the year. Those indicating that their companies' capital spending plans have been altered stated that these plans have been scaled up only moderately. The majority of the Directors also felt that the current inventory-sales ratios for their companies were not below their desired long-run levels. However, most of those with companies having abnormally low inventory-sales ratios indicated that they were unable to build their stocks because of rising sales.
A sizable number of the respondents reported shortages in the goods or production supplies their companies purchased, and about two thirds indicated that their companies were having at least some difficulty in employing or retaining skilled workers. On average, the Directors expected wage rates for employees in their companies to increase at an annual rate of about 7 percent in the second half of the year.
Without exception, the Directors stated that the recent increases in the commercial bank prime rate have not caused their companies to decrease their use of bank lines of credit. Furthermore, the overwhelming majority of companies have not altered their borrowing policies at all in recent months.
The seasonally adjusted Texas industrial production index rose sharply in April as every industry category reported an increase over the month before. The manufacturing sector was again primarily responsible for the rise, although both mining and utilities also showed monthly increases. In manufacturing, substantial monthly increases were reported in leather and leather products, petroleum refining, printing and publishing, primary metals, and apparel products. In mining, crude petroleum and metal, stone, and earth minerals reported the largest monthly increases as natural gas and natural gas liquids rose only slightly. Utilities also reported a small gain over the revised level in March.
The energy shortage is becoming increasingly evident in the District. Several municipalities have experienced trouble in receiving bids for future energy supplies, and farmers are being threatened with fuel shortages which could hamper harvesting operations. There has also been some rationing by service stations to motorists, as monthly gasoline quotas for the stations have fallen behind demand. Although drilling was predicted to increase this year, first quarter drilling was off 4.1 percent from the corresponding period last year, probably due to unfavorable weather conditions.
Seasonally adjusted total employment in the five District states fell slightly in April, the first drop since June of last year. Although the labor force also contracted slightly in April, the unemployment rate edged up to 3.8 percent from 3.7 percent in March. The employment drop was attributed to the manufacturing sector, where both durable and nondurable industries reported declines in the number of jobs. Nonmanufacturing continued to report employment increases, in spite of reported declines in the mining and construction industries. All industries reported year-to-year increases.
The value of construction contracts awarded in the five District states fell slightly in April as both residential and nonresidential building slipped from their March levels. Spurred by large volume contracts in Louisiana and Texas, nonbuilding construction was the only category to show an increase. The cumulative value of contracts awarded through April of this year fell to a level only 6.2 percent above the corresponding period last year.
Sales of department stores in the District continued to show substantial increases over year-ago levels in May. Cumulative sales for the first five months of the year were 13 percent above the levels for the corresponding period last year. However, the number of new automobile registrations for the four largest metropolitan areas of Texas—Dallas, Fort Worth, Houston, and San Antonio—suffered a sharp fall in April from the previous month's high level. Nevertheless, cumulative car registrations through April were over a fifth higher than in 1972.
Agricultural activities in the five states of the Eleventh District gained momentum in May after a slow start due to excessive moisture in the early spring. Flooding in Louisiana continued to hamper planting, but in Texas and Oklahoma, planting was nearing average completion levels. Wheat and oat crops in the District states were reaching maturity, and early yields were above average. The outlook for farm income this year in the District states remained good as cash receipts from farm marketing continued at record levels through the first quarter.