November 3, 1993
District economic activity continued to expand at a moderate pace in September and October. Wages were reported to have risen at a few companies, and several industries indicated that they had begun to hire. Some industries reported that they had increased their selling prices, but other industries said that competition continued to hold down prices. Manufacturing and business service contacts reported increased orders and activity. Retail sales continued to increase slowly. Homebuilding remained strong, and contacts reported a recent pickup in commercial projects. Energy industry activity continued to expand at a slow pace. Bankers reported that lending was slow. Agricultural production was mixed. Some parts of the District sported good crop production, while other areas still suffer from too much moisture.
District manufacturers reported a slow increase in demand and employment. Electronics contacts reported that their companies are hiring in response to continued increases in demand. Sales remained strong for construction-related products such as lumber, cement and brick, and prices have begun to rise. Contacts reported strong glass sales to both construction and automobile industries. Demand for paper products remained strong and some companies reported that they are hiring. Primary and fabricated metal producers reported that demand remains above last year's pace and some selling prices were increasing slightly. Demand for refined products has been better than expected and is slightly ahead of last year. Continued overcapacity is expected to keep refining margins weak. The chemical market continued to see modest volume increases and weak prices. Foreign demand was reported to remain a source of weakness for chemical producers. Oil machinery and service companies reported strong seasonal increases in demand. Sales of food and kindred products are reported to have remained strong, leading some manufacturers to increase wages and hiring. Prices for some food products have risen. Demand has increased for some apparel products.
Business service contacts reported that sales have increased and some companies say they are hiring. Prices, however, remained very competitive. Several service respondents said that their customers are still downsizing and working to increase productivity.
Retailers reported that sales continued to increase slowly in September and October. Sales in Houston and along the Mexico border are reported to be slower than the rest of the District. Retailers say that prices have been unchanged or lower because the industry continues to be very competitive. Retailers were generally optimistic that sales would continue to increase through the end of the year. District auto sales increased in September and were above last September's level.
A recent pickup in commercial construction projects has excited respondents, although activity remained at very low levels. Housing construction continued to be strong in most major cities with the exception of Houston. San Antonio, Austin and Dallas were still the strongest residential markets although contacts reported that home building was "booming" in Amarillo and El Paso. Respondents reported that resent increases in the price of labor, cement and brick have led to higher prices for new homes. Office real estate markets remained unchanged.
District energy activity continued to expand slowly. After slipping below $17 per barrel in mid-September, oil prices improved steadily to $18.50 per barrel in mid-October. Offshore drilling in the Gulf of Mexico remains near capacity levels. Most offshore and other domestic drilling has been for natural gas. Natural gas prices have declined recently but remain relatively strong compared to last year, above $2.00 per thousand cubic feet. The U.S. rig count has stalled at about 860 working rigs but contacts are confident that there will be a normal seasonal increase in drilling through December.
Bankers reported that loan demand has been slow. Demand for residential mortgages continued to be a bright spot but commercial loan demand remained below expectations. Demand for consumer installment credit increased but has been very competitive.
Agricultural production has been mixed. Crop production is reported to be good in parts of the District while some areas still suffer from too much moisture. Excess world supplies have lowered most crop prices and the Texas September All Crops Price Index was 8.3 percent below a year ago. Contacts report that damaged crops and low prices have led many District farmers to carry a heavy debt load. The September Livestock and Livestock Products Price Index increased 2.1 percent above last year's level. Texas cattle and calves on feed for the slaughter market increased in September to the largest inventory on record.