WASHINGTON (MNI) – The following is the first part of the text the
Dallas section of the Federal Reserve’s Beige Book report on current
financial conditions released Wednesday:

ELEVENTH DISTRICT-DALLAS

The Eleventh District economy grew at a modest pace since the last
report. Manufacturing activity held steady or declined, while demand for
business services was flat. Activity in the transportation services
sector was mixed. Retailers said sales growth moderated. The
single-family housing sector saw continued improvement, and activity in
the multifamily sector was strong. Office, retail and industrial leasing
activity increased, but commercial real estate investment activity
remained sluggish. Financial services respondents said overall loan
demand was soft during the reporting period. The energy industry
continued to expand at a robust pace, while agricultural conditions
remained weak. Employment levels were stable at most responding firms
and price pressures were mostly subdued.

Prices

Price pressures were minimal across industries. Most contacts said
prices were stable or down, although prices for new cars rose slightly
and staffing and legal services firms noted modest increases in billing
rates. The majority of respondents reported that raw materials prices
were unchanged or down. The exceptions were producers of paper and of
food who noted increased prices for some inputs. Contacts in the
agricultural sector said cattle prices rose since the last report.

The price of WTI was near $76 per barrel in early October, and has
risen to nearly $100 per barrel. Demand for gasoline has been soft.
Diesel demand, in contrast, has strengthened on a year-over-year basis
and prices have climbed much faster than gasoline. Prices of
petrochemicals and plastics declined due to weak domestic demand and a
stronger dollar. Natural gas prices remained low, near $3.50 per
thousand cubic feet throughout the survey period.

Labor Market

Most firms reported steady employment levels, although there were
reports of slight hiring activity. Staffing firms continued to note high
levels of demand. Some oil services firms, primary metals and
transportation manufacturers reported moderate employment increases, and
said they continue to look for additional workers. Retailers said
holiday hiring was ramping up, and one firm noted that they planned on
hiring more seasonal workers than last year. Contacts in the auto sales
and airline industries noted slight payroll increases. Wage pressures
remained minimal, although upward pressure for certain skilled positions
was noted by airlines and a few construction-related manufacturers.

Manufacturing

Most construction-related manufacturers reported stable demand,
although there were reports of stronger sales related to commercial,
government and apartment construction projects. Construction-related
outlooks were mostly unchanged, but a few contacts said they expect
conditions to improve next year.

Respondents in high-tech manufacturing report that sales have been
flat since the last report, with the exception of demand for mobile
devices, cloud computing and data storage which continues to increase.
Several contacts expect strength in demand for mobile and productivity
enhancing devices to accelerate, and thus improve overall activity in
the high-tech manufacturing sector by mid 2012, even if global output
remains sluggish or weakens. Most respondents said employment levels
have held steady and inventories are at desired levels.

Overall conditions in the paper products sector were mixed, but all
contacts described outlooks as weak. Automobile and aviation equipment
manufacturers said sales had softened since the last report but remained
significantly up from year-ago levels. Outlooks are optimistic, with
contacts expecting sales to remain strong through next year. Food
producers reported a seasonal increase in demand, and outlooks were
positive, although they are not hiring due to concerns about current
economic conditions.

Contacts described demand as seasonally weak for petrochemicals and
plastics. Sales in domestic markets continued to be sluggish. The recent
rise in oil prices together with lower petrochemical prices is making
Texas’ natural gas based products more competitive, spurring exports.
Refiner margins were strong and over $25 per barrel in October, but have
narrowed in recent weeks with the rise in crude prices. Refinery
utilization rates were low, as production declined for the fall
maintenance period.

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** Market News International Washington Bureau: 202-371-2121 **

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