WASHINGTON (MNI) – The following is the first part of the latest
Beige Book survey of economic conditions in the Federal Reserve’s
Eleventh District, published Wednesday:

ELEVENTH DISTRICT-DALLAS

Services

Demand for staffing services remained steady at very high levels,
and contacts noted an increase in orders for financial analysts,
construction workers, and steel and metal fabricators. Outlooks were
mostly positive but slightly more cautious than the last report.
Accounting firms noted a seasonal slowdown in demand. Demand for energy
and audit-related services increased modestly while advisory,
transactional, and tax services activity softened slightly. Legal firms
reported a pickup in demand, with continued strength in real estate,
intellectual property, energy, and tax-related services.

Reports from transportation service firms were positive. Railroads
noted a slight increase in shipments, with particularly strong growth in
petroleum products, motor vehicles and equipment, crushed stone, and
metals. Air cargo, container, and small parcel shipments increased
modestly during the reporting period. Airlines reported stable passenger
demand over the past six weeks. Domestic demand remained strong buoyed
by both corporate and leisure travel. Demand for international travel
was strongest for travel to South America and Mexico. Airlines expect
passenger demand to soften in the fall and ramp back up over the holiday
season.

Construction and Real Estate

Contacts in the single-family housing industry said demand picked
up over the past six weeks. Respondents noted that demand was
outstripping supply in some areas, leading to falling inventories.
Construction activity was picking up as result. Realtors and builders
remained cautiously optimistic. Apartment market respondents continued
to report solid demand. While rental rates continued to rise, the pace
slowed slightly. Apartment construction activity is expected to pick up
in coming months. Commercial real estate leasing activity remained
steady since the last report. Energy and technology sectors continue to
drive demand for space, particularly in Houston. Contacts were
optimistic but remained concerned about the pace of U.S. economic
activity.

Financial Services

Overall, financial firms reported mixed loan demand. National banks
said middle-market lending declined, while auto and energy lending
activity remained positive. Regional and community banks noted
improvement in C&I and commercial real estate lending. Consumer lending
appeared to be steady, with strong mortgage demand and a healthy backlog
of loans in the pipeline. Loan pricing remained competitive at very low
rates. The quality of outstanding loans continued to improve slowly and
deposit growth was mixed. Outlooks are slightly more pessimistic than
the last report in part due to European debt issues and regulatory and
political uncertainty.

Energy

Respondents at energy-related firms said activity remained
strong, and the District rig count grew modestly over the past six
weeks. The rapid shift from dry-gas drilling to oil-directed drilling
has not reduced the overall pace of activity, and business remains
strong with long lead times and growing backlogs. Activity in the Gulf
of Mexico increased further, and the success of a recent auction of
offshore acreage suggests continued interest in the region.

Agriculture

Agricultural conditions deteriorated slightly due to
hot and dry weather. Planting neared completion and crops were mostly in
fair to good shape, with conditions much better than a year ago. Since
the last report, livestock producers have seen pastures dry out, cattle
prices fall, and feed costs increase. Crop prices generally increased
over the past six weeks, particularly for corn, although cotton prices
fell sharply.

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** MNI Washington Bureau: 202-371-2121 **

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