While a number of Reserve Banks (Boston, Philadelphia, and Richmond)
report further slowing in overall business activity in July, others
(Chicago, St. Louis, and Kansas City) report a leveling off, and New
York, Cleveland, Minneapolis, and San Francisco report signs of
recovery. Economic weakness characterizes the Atlanta District, and
activity in the Dallas District continues to expand slowly. With the
exception of farm products, prices continue to increase but at a
slower rate than previously (New York, Cleveland, and Kansas City),
and some price cutting was noted in wholesale markets (Chicago).
Farm commodity prices have increased rapidly in recent months.
Although commercial loan demand is either flat or weak (Boston,
Atlanta, St. Louis, and Kansas City), some Districts (Chicago,
Minneapolis, and San Francisco) reported that mortgage lending is
increasing.
Consumer spending apparently began to increase in July. An upturn in
retail sales was reported in about one-half of the Districts (New
York, Cleveland, Chicago, Minneapolis, and Kansas City), while most
of the others reported that sales were unchanged. Automobiles and
air conditioners were among the items that gained during July.
Rising credit sales were apparently a factor in the increased sales
in July.
Three Federal Reserve Banks (New York, Cleveland, and Chicago)
reported the beginning of a slowdown in the capital goods sector.
This is the first indication of a decline in this sector at New York
and Cleveland. Chicago reported that capital goods are weakening on
a broad front.
Most Districts report that retail inventories are at satisfactory
levels with the exception of San Francisco where such inventories
remain high. Some inventory excesses were also reported by
purchasing agents in the Kansas City area. In contrast, commercial
construction in the West remains plagued by materials shortages.
Manufacturing activity continues to decline in most of the
Districts. Orders are down in numerous sectors such as consumer
durables, steel and other primary metals, and some nondurables.
Philadelphia reported another large drop in industrial activity this
month, Boston reported some declines in manufacturing, and Richmond
foresees further declines over the remainder of the year. Some
leveling off, however, was reported by St. Louis and some rebound in
manufacturing was reported by Minneapolis and by manufacturers of
construction supplies in Dallas.
Residential building is beginning to recover, and commercial
construction continues at a high level in those Districts where
mentioned (Dallas and San Francisco). In the latter District
commercial construction is described as booming. Residential
construction rose somewhat in July in several Districts from the
relatively low level of May and June, but remains low when compared
to year ago levels. Of those Districts that commented, all except
Chicago reported an upturn in residential construction in July.
Rising unemployment was reported by most Districts that commented on
the subject. Further layoffs were reported by Philadelphia,
Cleveland, Atlanta, and Richmond, and unemployment is expected to
rise further in the Twelfth District as the recession affects a
wider range of industries. Layoffs, however, have slowed in the
Minneapolis area, where unemployment remained at a relatively low
6.0 percent rate in the second quarter.
Unusually hot and dry weather conditions in July over most of the
nation have reduced current and future prospects for agricultural
production. Partially in response to these developments,
agricultural prices have risen, and overall farm income prospects
have improved. Livestock production has been affected by substantial
deaths of broiler chickens (Richmond, Atlanta, and St. Louis) and by
cutbacks in livestock herds due to poor pasture and range conditions
(Kansas City and Dallas). These cutbacks have led to some increase
in current meat supplies, but will reduce future supplies. Extreme
heat and drought have also reduced crop prospects throughout the
major growing areas of the nation.
