Fed’s Lastest Survey: Texas Economy Stronger Than Most

Despite a tighter labor market, elevating commodity and fuel prices and sluggish
retail sales, the Texas business sector remains stronger than most other parts of the country, according to the Federal Reserve’s latest Beige Book survey for the Dallas district.
The Dallas district evaluates economic trends in Texas, as well as portions of northern Louisiana and southern New Mexico.

The most recent survey says the district’s economy grew “modestly” in late July and August. Many members of the district’s business community reported higher energy and commodity prices in the latest report, with some of the companies passing these costs on to their consumers in the form of higher surcharges or selling prices.

The labor market remains tight. Most members of the business community interviewed for the survey said hiring either remains flat or moderate when compared to years past. Wage pressures were mild, but some employers reported an increase in requests for higher wages.

With residential construction still weak, the manufacturing sector says demand for residential construction-related materials is lagging. A drop in production levels also has spawned a decline in inventory levels.

Retail remained consistent with the last Beige Book survey. Discount retailers noticed stronger sales in the most recent survey. However, growth levels remain lower than last year. Traditional department stores said sales remain below 2007 levels, with discretionary items like electronics, jewelry and housewares becoming increasingly less popular among buyers. Auto sales also remained sluggish. Most auto industry leaders expect to see no improvement until early next year.

Sales of new and existing homes are still sluggish with buyers worried about the economy, the report said. Inventories are going back down with homebuilders building fewer new properties. Prices are holding up relatively well in new and existing home markets, the Fed also added. However, the lending market is still feeling a pinch from tighter lending standards that are preventing some credit-worthy buyers from obtaining mortgages.

Oil and natural gas prices remain at high levels when compared to 2007, according to the survey. However, in the past few weeks, energy prices have declined — a trend attributed to weaker economies in the United States and globally.

Domestic rig counts increased in the latest report, with 79 rigs added in the past six weeks. A significant portion of new drilling activity in the most recent period was related to “land-based natural gas activity in the Barnett and Haynesville shale.”

Fed’s Lastest Survey: Texas Economy Stronger Than Most