11th District - Dallas

Regional Federal Reserve Banks

Most contacts in the Eleventh District reported steady, moderate economic growth in June and early July. The main exception was home builders, who reported a steeper decline in demand. Most contacts reported increased concern about price pressures and uncertainty about the national outlook. Rising prices for energy and transportation were reported as boosting costs for a wide range of industries and were said to be likely to lead to future increases in final product prices. View full report.

Prices

Continued increases in energy and commodity prices are negatively affecting a wide range of industries. Many producers report that profit margins have been squeezed and that productivity gains are no longer sufficient to hold off product price increases.

Since early June, light sweet crude prices have been fluctuating while setting record highs.... Futures prices for distillates (heating oil and diesel), spot gasoline, and oil- and natural gas-based chemicals have also increased sharply over the past six weeks.

Manufacturing

Although still solid and above year-ago levels, demand for commercial construction materials continued to soften and is expected to weaken steadily. Respondents in fabricated metal production said that demand was flat to slightly down, that backlogs are decreasing and that new orders and expectations of declining nonresidential building suggest further weakening. Primary metal producers report that sales have been flat to slightly down while costs have shot up.

Construction and Real Estate

Respondents say that nonresidential construction activity is beginning to slow and there are signs that activity may decline further. Commercial real estate respondents noted a continued decline in investment deals getting done, particularly for larger projects. There were reports of a general drying up of liquidity in the market and a flight of capital out of real estate.