Federal Reserve: Energy prices good for oil and gas industry, but hamper economy - Houston Business Journal:

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Rising oil prices in June and earlyhJuly — which have sincs pulled back to under $130 a barrel this week — were expectecd to contribute to price increases for a wide range of products affectes by higher transportation and production costs. “Many producers reporgt that profit margins have been squeezed and that productivity gains are no longer sufficient to hold off price thereport said. • Once again, the energyg sector reports the strongest activity due to increases in oil and natural gasdrilling operations, particularly in the rush by exploration and productioh firms to tap into natural gas shale deposits.
Drilling companies report shortages of skille d workers to meetincreased demand; • The labor market in the region remained relatively tight, but most respondentws reported flat to only slightly increasing payrolls. Respondents in slumpinbg industries such as those tied to constructiojof single-family homes reported reductions in hours worked and job cuts througb attrition; • Homebuilders said traffic and sales weakened in causing a sharp decline in single-familh home construction, though on a positive note, inventoriez of unsold homes continue to decline, especially at lowerf price points.
Producers of materialz used in home construction such as stone and lumber report continued weak with larger thandesired inventories; High-tech manufacturers report continued moderate salese growth, with firms selling outsider the U.S. performing well. Sales to Asia remain strong though sales were weaker inthe U.S. and Westerjn Europe; • Demand in the food products industry hasbeen moderate, with demand from restaurantas slowing but increased retail demand offsetting that slippage; Retailers sum up the outlook for the rest of the year in one Grim.
Retail sales were mixed, with discount stores boosting salesx and other retailers reporting flat to slightly declininvgnumbers — and one contact reported that accounts past due have increasef in the past six weeks; In the services sector, demand for temporarh staffing services picked up slightly, with a demand for professional and technicalo workers in IT, accounting, energyh and engineering services, while demand for legal services saw growtgh concentrated in the areas of litigation and bankruptcy • Truckinv companies reported reduced shipping volumes due to increased fuel prices, with a shar decline in shipments of motor vehicles eight of 12 regional districtsx around the country reported slower or sluggish growth during the latestr six-week period.
Brian Bethune, chief U.S. financial economisf for Global Insight, says consumer spendinv was slowing acrossthe country. “Perhaps most troublin is that the massivre tax rebates sent out durinvg the Aprilto mid-Julgy period are having only a very limited effecg on consumer spending,” he said. “For now, the Fed’ss best strategy in dealing with competing crosswinds ofweakefr growth, fragile financial markets and higher inpug price pressures is to keep interest rates steady.
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