The regional economy brushed off most of Hurricane Harvey’s impact and sustained a healthy pace of expansion over the past six weeks, according to a survey released Wednesday by the Federal Reserve Bank of Dallas.
In its chapter of the Beige Book, an anecdotal survey of the economy compiled every six weeks by the Federal Reserve banks, the Dallas Fed said economic growth in its district “continued to expand at a moderate pace.”
The Dallas Fed’s district includes all of Texas and parts of New Mexico and northern Louisiana. Texas accounts for more than 95 percent of the region’s economic activity, and the greater Houston area accounts for about a quarter of that.
The economic effects of the storm that flooded Houston and destroyed thousands of homes and businesses along the Texas coast lingered into October, but they had become increasingly isolated.
Operations at refineries and chemical plants returned to normal, but construction of new industrial facilities had been delayed by three to six months, the report said. The leisure and hospitality industry rebounded in October after a decline the prior month, but some businesses said they were still recovering.
“An estimate from Texas A&M University puts agricultural losses from Hurricane Harvey at $200 million,” the report said, “which is not as high as expected and far less than what was seen from Hurricane Ike in 2008 and Hurricane Irma.”
Even some of the additional spending on recovery efforts returned to normal over the past six weeks. For example, the growth of auto sales eased after an initial post-Harvey surge of vehicle replacements, the report said.
Yet, broader economic indicators and business outlooks pointed toward a district economy that sustained its momentum — and might even be gaining some steam.
Retail sales expanded, albeit a little more slowly thanks to easing auto sales. Some retailers expressed concern about demand for American goods by Mexican customers, but Houston sports fans appeared to be a good bit more enthusiastic.
According to one clothing retailer, “Houston-area stores benefited from the Astros playoff and World Series excitement, as well as some additional spending by flood victims.”
Employment growth remained solid throughout the six-week period, and about two-thirds of the Dallas Fed’s contacts said they anticipated increased hiring over the next 12 months, with many citing expectations for strong sales growth.
They probably will be competing for employees in a tight labor pool that’s pushing wages higher. Over the past six weeks, the report said, worker shortages boosted wages of a wide range of industries, from manufacturing and construction to airlines and health care providers.
Manufacturers saw their robust pace of production expand even more in the past six weeks, with a rebound in the output of nondurable goods, such as chemicals and food, joining the already strong output of durable goods.
Increased volumes for both rail and air cargo helped drive accelerated demand across non-financial services industries. Most of those service-sector firms expect a strong 2018, but many also noted that uncertainty about federal health care and tax regulations made it difficult to plan for the coming year.
Banks and other financial-services firms said loan volumes increased over the past six weeks, but the pace of growth continued to slow, with easing demand for commercial and residential real estate loans. Growth in commercial and industrial lending was offset in part by a slight decline in consumer loan volumes.
Home sales rose thanks to a rebound in Houston after the hurricane, at least in parts of the city not affected by flooding. The pace of growth slowed in Dallas and Austin.
The apartment market improved as well, as it slowly returned to “a normal pace of growth following a few years of above-average expansion,” the report said.
Oil prices also returned to levels that might better support the energy industry. Drilling activity declined with a drop in the rig count, but the Dallas Fed’s contacts suggested healthy demand for oilfield services in the Permian Basin could spread to other fields with the rebound in prices.