Summary of Current Economic Conditions by Federal Reserve District
Reports from the twelve Federal Reserve Districts suggest overall economic activity expanded at a moderate pace during the reporting period from early April to late May. Activity in the New York, Cleveland, Atlanta, Chicago, Kansas City, Dallas, and San Francisco Districts was characterized as growing at a moderate pace, while the Richmond, St. Louis, and Minneapolis Districts noted modest growth. Boston reported steady growth, and the Philadelphia District indicated that the pace of expansion had slowed slightly since the previous Beige Book.
The Eleventh District – Texas
The Eleventh District economy expanded at a moderate pace over the past six weeks. Manufacturing activity was flat to up, demand for business services rose and transportation services activity was mixed. Energy activity remained strong, and the housing sector continued to improve. Retail sales rose moderately, and auto sales were strong. Loan demand picked up since the last report. Drought conditions improved. Most firms reported no change in selling prices. Employment levels were steady to slightly higher, and wage pressures remained minimal. Most firms’ outlooks are optimistic, although many respondents expressed concern about U.S. political uncertainty and the European debt situation
Employment levels were flat to up slightly at most responding firms. Staffing firms said demand picked up over the past six weeks after a slight softening during the prior reporting period. Reports of small employment increases came from some high-tech, transportation, metals, construction materials and food manufacturers. Contacts in auto sales, staffing and transportation services also noted slight increases. Wage pressures remained minimal, although wage increases were noted by some legal firms.
Construction and Real Estate
Contacts in the single-family housing industry noted consistent indications of recovery in Texas markets. Respondents said sales are up year-to-date, and some builders were beating sales expectations. Agents noted solid sales for existing homes, and outlooks are more positive. Apartment market respondents said that after first quarter softness, demand came back stronger in recent months, as expected. Texas apartment markets continued to outperform other parts of the U.S., according to contacts. Rental rate increases slowed, but remain relatively healthy. Apartment construction activity is still at low levels, but is expected to pick up in the second half of the year.
Commercial real estate leasing activity remained strong across Texas metros. Houston, in particular, saw robust office and industrial demand growth thanks to strong energy sector expansion. Construction activity is expected to improve modestly in Texas markets in the second half of 2012. Some contacts noted a recent trepidation in the capital market/lending environment due to heightened worries about European debt problems.