March 13, 1984
The Eleventh District recovery paused, although some sectors continued to show improvement. Manufacturing employment declined but most manufacturing respondents reported that orders are now rising. Strong performance in commercial and residential construction and in portions of manufacturing is offsetting weakness in the energy sector. Retail sales continue to grow. Auto sales are strong. Although the December freeze caused ongoing problems for District citrus farmers, prices for a wide range of District farm and ranch products are significantly above a year ago.
Manufacturing employment in the District fell somewhat in both December and January, as layoffs occurred in energy-related durable goods manufacturing. Nevertheless, respondents in most sectors of manufacturing reported increasing orders and expressed cautious optimism. Sales of lumber and wood products were down slightly in January because wet weather had slowed homebuilding, but production remained at high levels and manufacturers expect continued strength in the housing industry. Raw steel production was static to slightly improved, with respondents expressing much concern over foreign competition. Orders for steel plate and tubular goods are increasing at some steel fabrication plants. Overall, however, the fabricated metals industry is sluggish. Orders for electrical machinery and apparel products are increasing. Rising demand cut the already low inventories of chemical and allied products. Manufacturers said that they were working to replenish stocks and to meet new orders.
District drilling activity remains above year-earlier levels, but it slowed more than the normal seasonal amount in both January and February. The seismic crew count dipped between December and January, while remaining above its year-earlier level. This, and other factors, suggest that drilling activity may turndown slightly during the first half of the year, but that drilling activity should remain above last year's level. Expectations of continued firmness in oil prices, a rundown in natural gas inventories, and anticipations of natural gas decontrol in 1985 are all likely to motivate increased drilling during the second half of this year.
Auto sales in the District remained seasonally strong. Auto purchases are traditionally slow during the winter months but sales in January and February have been high compared to year-earlier levels. Respondents expressed optimism for 1984 sales and noted that their largest current problem is depleted inventories.
Retail sales continued strong in February. Department stores in all major district cities reported double-digit percentage gains from a year ago. Even in Houston, where recovery has been slow, stores reported double-digit sales growth on a year-over-year basis. Retailers noted that prices have begun to rise lately and some also complained about producer delays in filling orders. District retailers are very optimistic about sales for the balance of 1984.
Commercial construction continues at a high level, despite fears of overbuilding in the District's largest metropolitan areas. Nonresidential construction is growing rapidly in Austin, but continues to decline in Houston. Many Houston developers are looking to other cities for projects. Dallas nonresidential building continues at a strong pace, but fears of excess office space are rising.
Residential construction activity continues strong despite widely-voiced concerns about overbuilding in the multifamily market. In January 1984, Texas' value of residential building contracts was 22-percent higher than a year earlier and more than twice as high as two years ago. Declines seem likely later this year.
Year-over-year growth in total loans and securities at large weekly reporting District banks slowed in February 1984. January's year-over-year growth also was below the average growth for any quarter in 1983. Business loan growth increased in both January and February from its fourth quarter pace, although it was below growth in the first three quarters of last year. Growth in real estate loans slowed in January and again in February but the average level was still more than 40-percent above last year's volume.
District farmers are generally planning to plant more acres-to-crops this year after last year's PIK-reduced acreage. Cotton farmers have not fully rebounded to the levels of 1982 despite the encouraging outlook for exports. Winter wheat farmers, faced with large stocks overhanging the market and stiff export competition, planted fewer acres this year than either of the past two years. Texas livestock producers are making money at current prices and are likely to continue profitable operations through the first half of the year.