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Oil prices have hovered around $70 per barrel for two months. While up more than 50 percent this year, prices are still more than 30 percent below year-ago levels. Natural gas has rebounded from its recent lows, but oil continues to trade at a significant premium on an energy content basis.

The outlook for U.S. and global growth remains uncertain, but the prospects have improved somewhat. The banking sector appears to have stabilized, but significant levels of slack have accumulated during the current recession (especially in the advanced economies), contributing to the perception that inflation may remain below its long-run trend for a while.

There are positive signals in the international data, although trouble spots still exist. Emerging markets were showing strong growth in the second quarter. Some advanced economies began growing as well. However, unemployment is rising in most countries, and credit growth in Europe is stagnant. Inflation remains low (negative in some cases) in advanced economies.

The Eleventh District economy continues to show signs of stabilization; however, downside risks could hamper growth. Household financial stress and continued softness in the labor market are suppressing consumer spending, and weakness in the energy sector due to low natural gas prices remains a drag on the Texas economy. Commercial real estate is an area of concern and will be for some time.

As we enter the final quarter of 2009, a number of important indicators are beginning to show expansion, suggesting that the trough of the current contraction may have come in the second quarter of this year. However, not all incoming information has been positive. Some data suggest that any optimism should be tempered, that this fledgling recovery has a long way to go before the economy achieves stability, and that the key word moving forward is “uncertainty.”

As we enter the final quarter of 2009, a number of important indicators are beginning to show expansion, suggesting that the trough of the current contraction may have come in the second quarter of this year. However, not all incoming information has been positive. Some data suggest that any optimism should be tempered, that this fledgling recovery has a long way to go before the economy achieves stability, and that the key word moving forward is “uncertainty.”

Oil prices have hovered around $70 per barrel for two months. While up more than 50 percent this year, prices are still more than 30 percent below year-ago levels. Natural gas has rebounded from its recent lows, but oil continues to trade at a significant premium on an energy content basis.

The Federal Reserve System’s latest Beige Book survey has been released. The Dallas Beige Book, along with a link to the national summary and reports from other Federal Reserve Districts, is available online.

Texas factory activity declined in October, according to the Federal Reserve Bank of Dallas’ Texas Manufacturing Outlook Survey. The production index, a key indicator of current manufacturing activity, edged further into negative territory, suggesting output in October contracted after remaining stable in September.

“How Robust Are Popular Models of Nominal Frictions?” and “Improving the ACCRA U.S. Regional Cost of Living Index”