Eleventh District Beige Book – Dallasfed.org


October 19, 2022

Economic Activity Summary

Growth in the Eleventh District’s economy continued at an overall modest pace. The expansion of manufacturing activity picked up somewhat, while that of the services sector slowed slightly. Retail and door-to-door sales fell. Loan demand fell for the first time in nearly two years amid rising interest rates. The energy sector continued to expand, but its growth was limited by equipment and labor shortages. Local nonprofits reported an increase in demand for assistance as household costs rose. Drought conditions eased, but relief came too late in the growing season for row crop growers. Solid employment growth continued, although some contacts reported a slowdown in hiring. Wage growth remained high but slowed slightly. Selling price growth also moderated slightly, amid growing difficulties in passing on cost increases to customers. The outlook was generally pessimistic outside of the energy sector and uncertainty remained high. Contacts mainly expressed concern about inflation, labor shortages and weakening demand.

Labor markets

Solid employment growth continued, with a slight recovery in the energy sector. There were, however, scattered reports of a slowdown in hiring amid weaker demand and recession fears. However, labor markets remained quite tight. Commercial truck and bus drivers were very rare, as were health care workers. Several contacts noted an inability to find qualified tradespeople. Industries that require on-site work were struggling to compete with industries that can offer remote work and flexible hours. Some employers have renamed unwanted positions to attract workers. A few contacts noted a higher degree of apathy among workers towards attendance and quality of work. Some contacts said their growth plans were limited by an inability to recruit and retain enough staff. Of the 384 Texas business executives who responded to a Dallas Fed survey in September, nearly half cited labor shortages as their top concern about their company’s prospects.

Wage growth slowed slightly but remained high. Employees continued to demand higher wages and companies responded in an effort to recruit and retain employees. Some contacts noted the loss of employees to competitors or other industries offering higher salaries. A recruiting firm said it saw many workers changing jobs for higher wages.


Input costs continued to climb at about the same high rate as in the prior period, while sales price growth continued to slow. Manufacturers reported higher raw material prices due to supply chain constraints, especially from overseas suppliers. Service companies noted the ripple effect of inflation as a challenge, and many contacts noted greater difficulty in passing cost increases on to customers. A restaurant said its biggest concern was customers’ refusal to raise menu prices. Retailers also said customers were starting to push back on prices. Fuel prices have fallen over the past six weeks, but airlines have noted ticket price increases amid strong demand and higher labor and non-fuel costs.


Texas manufacturing output rose moderately over the review period, accelerating from the more modest expansion seen over the summer. Growth was led by the manufacturing of durable goods such as machinery and high technology. New orders for manufactured goods, however, continued to weaken, with contacts citing customer concerns over inflation and a potential recession. A luxury goods maker said it expected lower sales as customers cut discretionary spending, and a personal electronics maker said it also expected weakness going forward. Upstream energy-related manufacturing continued to see rising demand over the past six weeks, while petrochemical companies and refineries reported slowing demand. The energy crisis in Europe is expected to boost demand from petrochemical producers and refineries in Texas, although it has caused further shortages in the supply chain of components produced there. The overall outlook for manufacturing was more pessimistic than optimistic, with contacts pointing to higher interest rates and a weaker business climate as headwinds.

Retail sales

Retail sales have declined over the past six weeks as inventories continue to pile up. Auto sales sagged, hampered in part by delays in vehicle production, labor shortages and high prices. A contact said new-vehicle inventory bottomed out in August and started to rise, with continued improvement expected in the fourth quarter. The overall outlook has deteriorated, with some concern over rising interest rates and squeezed profit margins.

Non-financial services

Services sector activity grew at a more modest pace during the review period. Revenue growth was widespread, although some contacts noted weaker demand. Transportation service companies reported higher freight volumes and ridership. Airlines reported exceptionally high leisure travel in the third quarter. Placement services companies reported strong demand, with increases in applications for low- and high-skilled workers. However, several contacts noted a decline in customer activity amid recession-related concerns. The outlook for the services sector remained broadly unchanged.

Construction and Real Estate

Housing market activity remained weak. Sales continued to fall and contract cancellations were very high, in part due to rising mortgage rates that crowded more buyers out of the market. Buying incentives have increased, putting downward pressure on home prices and builder margins. The outlook has deteriorated, with contacts expecting further deterioration in sales and housing starts. Apartment rentals moderated, although year-over-year rent growth remained solid. Office leasing increased, but uncertainty was high. The fundamentals of the industrial market remained solid. Contacts noted that the higher cost of capital is pushing investors away.

Financial services

Demand for loans has fallen for the first time in nearly two years and overall loan volumes have declined over the past six weeks. Declines in volume were seen across all loan categories, but the steepest occurred in residential real estate loans. Loan non-performance varied by category, but was broadly unchanged. Loan pricing continued to rise significantly, with 85% of contacts reporting an increase, the highest share since the survey began in 2017. Credit standards and conditions have tightened further. In the coming six months, contacts expressed greater pessimism than in the prior period and expect loan demand and general business activity to decline and delinquent loans to increase.


The energy business continued to expand. The Eleventh District’s rig count was virtually unchanged for the past six weeks, while well completions increased. Demand for oil services was high, but the industry was constrained by equipment and labor shortages. The outlook was good, with contacts expecting oil and natural gas prices to remain high enough to trigger an upward trend in energy activity for the foreseeable future.


Heavy rainfall early in the reporting period significantly improved drought conditions in much of the district, although soil moisture has started to deteriorate again in recent weeks. Many areas have seen little or no row crop production due to drought, which has resulted in plowing of fields. Heavy slaughter of cattle herds continued, although the pace slowed slightly as much-needed rains greened pastures.

Community insights

The nonprofits have reported an increase in demand for services among the communities they serve over the past six weeks. The use of food aid has increased, and several contacts noted increased use by middle-income people seeking to subsidize their household budgets in a context of rising inflation and rising rents. Demand for utility assistance has skyrocketed. Contacts were mixed on childcare assistance – some noted a lack of demand while others noted a lack of affordable childcare options as many childcare centers closed during the pandemic or cannot operate at full capacity due to labor shortages. Contacts reported an increase in demand for English language courses and workforce training to help workers get better paying jobs.


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