Reports from the twelve Federal Reserve Districts indicated that the economy continued to expand at a modest to moderate pace from early October through mid-November. Activity in the New York, Cleveland, Richmond, Atlanta, St. Louis, Minneapolis, and Dallas Districts grew at a moderate pace, while Philadelphia, Chicago, Kansas City, and San Francisco cited modest growth. Boston reported that economic activity continued to expand.
Commercial Real Estate
Commercial real estate activity remained stable or improved slightly across many Districts. Philadelphia, Cleveland, Richmond, Chicago, St. Louis, and Minneapolis all saw gains in industrial construction, while Boston, Chicago, and St. Louis cited a rise in hotel construction. The technology sector drove demand for commercial real estate in the San Francisco District, and Cleveland saw gains in affordable housing and shale-gas-related activity. The outlook of market participants is for continued improvement in the Philadelphia, Atlanta, Kansas City, and Dallas Districts, while contacts were cautiously optimistic in Boston and Cleveland.
Eleventh District – Dallas
The Eleventh District economy expanded at a moderate pace over the past six weeks. Manufacturing activity increased overall, with demand weakening in only a few industries. Retail sales picked up over the period, but automobiles sales were slightly down. Nonfinancial services firms reported steady to somewhat improved demand. The housing sector softened due to seasonal factors and rising home prices, and apartment, office and industrial leasing activity remained strong. Loan demand softened at financial institutions. Energy activity remained strong, and drought conditions in the agricultural sector continued to ease. Prices were unchanged or increased mildly at most responding firms, and employment held steady or rose modestly. There were scattered reports of pay increases and wage pressures. Industry outlooks were generally more positive during the reporting period.
Construction and Real Estate
The Eleventh District housing sector softened during the reporting period. Contacts said the slowdown was partly due to seasonal factors. However, last year at this time there was no seasonal slowdown, thus contacts were somewhat cautious. Some of the weakening in sales and traffic was attributed to recent large increases in new and existing home prices. One homebuilding contact said the lull will give builders a chance to catch their breath. There is still very little inventory of new homes and most are already sold, and the forecast for single-family construction activity is positive. Despite the slowdown, contacts were optimistic in their outlooks.
Apartment demand was mostly unchanged from the last report. Most major Texas markets were seeing sizable demand that is outpacing completions, yielding occupancy and rent growth well above the long-term norm.
Commercial real estate respondents said tenant demand remained at a steady pace for industrial and office space. A Dallas contact said construction of office, industrial and retail space was picking up. A contact noted Houston may be close to having too much office development in the works. Overall, the outlook remained generally positive.