Both retailers and auto dealers blame sales weakness in part on increased consumer caution because of stock market volatility. In general Houston area retailers and auto dealers were more optimistic than those in the rest of the state. The financial industry reported no change in loan demand but said activity has been slower than a year ago. Deposit interest rates increased, and contacts cite the uncertain stock market as having resulted in a shift of consumer funds to depository institutions. Small institutions and credit unions reported better activity than larger banks, which rely on off balance sheet activities to generate a larger proportion of income.
Large banks say advisory services are down and merger activities slowed.
Competition remains a factor in setting price, but institutions have begun to increase lending standards in response to the need to pay higher interest rates on deposits. Construction and Real Estate Construction and real estate activity remained strong in most areas but continued to show signs of cooling. With the exception of the Houston area, where new home sales and starts are up strongly, residential markets are softening. Builders say rising interest rates have put some would-be homebuyers on the sidelines. This has stimulated demand for apartments, and vacancy rates fell to 20-year lows in some areas.