WASHINGTON (MNI) – The following is the text of the Federal
Reserve’s Beige Book survey Eleventh District summary, published
Wednesday:
Continued:
ELEVENTH DISTRICT-DALLAS
Retail
Reports from retail contacts point to solid growth. Department
store sales were slightly stronger than anticipated, but the pace is
expected to moderate in the second half. Consumers continue to
deleverage and correspondingly remain price sensitive. Sales growth in
the Eleventh District tracked slightly below the nation. Expectations
are for continued gradual improvement through year-end. Automobile sales
were unchanged over the reporting period, and contacts said inventories
were lean. The outlook is cautiously optimistic, with sales expected to
rise slowly.
Services
Most staffing firms report strong demand across a wide range of
industries. The majority of placement activity continues to be
conversions of temporary workers to hires. Direct placement remains
reduced as businesses are hesitant to add to permanent payrolls. While
near-term outlooks remain optimistic, respondents are still cautious
about the longer term. Demand for accounting services was sluggish, but
above year-ago levels. Tax-related services slowed seasonally, but
transactional and consulting activity picked up slightly. Demand for
legal services held steady at low levels, but most contacts were
slightly more optimistic in their outlooks. Accounting and legal
contacts said uncertainty about fiscal and financial reform was holding
back business activity.
Demand for transportation services strengthened. Several contacts
said cargo volumes were up considerably, with the increases being
broad-based across industry sectors. Railroad respondents noted cargo
volumes rose strongly across the board, with a particularly large
increase in metals that was likely due to an improved auto industry and
stronger demand for home appliances. Shipping firms said retail trade
was boosting volumes for small package shipping. Airline traffic was
down slightly since the last report, but up strongly compared to a year
ago. Outlooks for the transportation services industry were generally
positive but cautious.
Construction and Real Estate
Builders of low-to-moderate priced homes reported a significant
drop off in housing sales in May and June following the expiration of
the first time-homebuyer tax credit. The pace of decline slowed in early
July, and some contacts are hopeful the tax-credit “hangover” may be
over. New home starts overall are expected to come down in the second
half of the year, and outlooks for the homebuilding industry remain
guarded. Existing home sales softened slightly in recent weeks,
according to contacts, but activity for the year is up from the same
period in 2009. Apartment demand continues to improve.
Commercial real estate markets remain weak.
While a few lease deals have taken place, demand for space overall
remains subdued and rents are edging down. As such, nonresidential
construction activity continues to decline, and there were a few reports
of developers going out of business. On a positive note, contacts said
improvement in debt markets had spurred some property sales, and prices
were up from the trough. One contact noted an increase in lender sales
as banks work through nonperforming loans.
Financial Services
Loan demand remained soft with weakness across all categories.
Nonperforming loans have stabilized and are not expected to worsen,
although contacts said it will be a while before they come down
noticeably. Deposits were mostly steady, but responding institutions
said fewer loans pushed down the loan-to-deposit ratio. An over-riding
theme among financial industry respondents is uncertainty over fiscal
and financial reform legislation that has created a wait-and-see
mentality. The uncertainty is delaying transactions, depressing loan
activity and causing some institutions to look for alternative ways to
grow loan portfolios and earnings.
Energy
The U.S. and District rig counts increased during the reporting
period, despite a drop of 39 rigs in the Gulf of Mexico. As the share of
oil-directed drilling continues to rise, natural-gas directed drilling
was surprisingly steady despite high inventories and low prices. Some
contacts noted that shale activity is stronger than prices justify due
to urgency to secure leases in new basins and an influx of foreign
capital attracted by new shale technology.
Agriculture
Tropical storms brought widespread rains to Texas, particularly
benefitting parts of the state that had been getting dry. Favorable crop
conditions and robust forage production on pastures have increased
optimism among agricultural producers. Cattle prices have declined,
though ranchers still anticipate strong prices compared to last year.
The recent rainfall will boost yields for Texas cotton, potentially
pushing down prices.
End:
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** Market News International Washington Bureau: 202-371-2121 **
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