October 21, 1975
Despite the suspension of the oil depletion allowance, drilling activity in Texas continues at a rate nearly 20 percent ahead of a year ago. Higher prices for new oil and natural gas sold in the intrastate market account for most of the 7,855 wells drilled so far this year. Most efforts, however, are concentrated on developmental drilling—recovering more oil from proven fields—while riskier exploratory drilling has been deemphasized. Lack of a national energy policy is cited as the major factor that has led oilmen to steer away from high-risk ventures. Exploratory drilling offshore, for example, has come to a virtual standstill.
Increased drilling activity worldwide has continued to fuel the demand for oil field equipment. The state's largest manufacturer of oil field equipment estimates demand is running 25 percent ahead of a year ago. Several producers report a year's production of unfilled orders on their books. Industry suppliers are also experiencing brisk sales. Some steel fabricators, for example, have been able to sustain high production levels by shifting resources to their oil field equipment business and away from construction-related products.
The current upswing in the Texas industrial production index has been largely due to the recovery in petrochemicals—the biggest sector in the index. Chemical manufacturers now warn the recovery may be short-lived. The recent strength has been mainly due to a heavy influx of orders by user industries to replenish inventories. But because purchases by users are currently outpacing their sales, new orders are expected to fall once stocks have been brought up to desired levels. The upturn in chemical production, which is dependent on petroleum-based feed stocks, has stimulated much of the 10 percent increase in crude oil refining since May.
Apparel and textile manufacturers also report production continues to grow on a deluge of new orders that began last April. Clothing retailers, especially large chain stores, are rebuilding inventories. One indication of the strength of the wholesale market was the quantity of orders placed by retailers with manufacturers last summer. According to one industry spokesman, area manufacturers accepted one-third more orders than they could comfortably produce without extending delivery schedules.
Commensurate with increased manufacturing activity, the labor market for production workers in Texas continues to improve. After declining during the first half of the year, factory employment has risen since July, and the trend will likely continue. The average manufacturing workweek, seasonally adjusted, is 40.9 hours, substantially above the February low of 39.7 hours. Moreover, the layoff rates for major Texas cities have been at least halved since January, and recent gains in the quit rates suggest workers sense job prospects are improving.
A survey of new car dealers indicates consumer interest in the new models is much higher than it was a year ago. Improved gas mileage and a smaller increase in sticker prices were cited for the more favorable reception of the 1976 models. In addition, buyers appear more willing to accept the added expense of optional equipment. (It must be remembered, however, that this year's models come stripped down, and the back seat in one car is optional.) A Fort Worth dealer feels buyers plan to keep their new cars longer and are willing to spend more for a model equipped for their individual needs. Several dealers warn that sales this year may be slowed by a shortage of new cars. Auto workers appear reluctant to work overtime this fall and heavy demands for some smaller models are expected to keep dealer inventories below desired levels.
Since April, sales at Eleventh District department stores have been increasing at a brisk pace. Over the past 60 days, however, the composition of sales has changed somewhat as there has been a marked pickup in purchases of durable goods, especially big-ticket items. Executives with the leading stores attribute much of the increase to greater response to a normal level of promotional activity. The manager of a Dallas store points out that recent big-ticket purchases were being made by customers who differ from the typical buyer two or three years ago. Then, customers were predominantly interested in buying "the top of the line," with prices playing a secondary role. Today's buyers, on the other hand, are extremely price conscious and are trading down in their purchases.
Agricultural conditions in the Eleventh District remain generally favorable. Harvests of corn and grain sorghum are about two-thirds complete and ahead of last year's pace. The cotton harvest is on schedule but only one-fourth finished. Cold, wet weather on the High and Low Plains of Texas late last month has substantially reduced the expected yield of cotton from September 1 estimates. Wheat seeding is progressing well, but much of the dryland crop needs rain to establish a stand.
Livestock are in good condition. However, top soil moisture is limited, and fall grazing prospects are deteriorating. Heavy marketing of livestock continues as ranchers closely cull herds in anticipation of high feed costs this winter. The number of cattle and calves slaughtered in Texas through August of this year is 42 percent larger than in the same period of 1974 and compares with only a 16 percent increase for the nation.