Economic activity remained weak in much of the nation, but there were some indications that the decline may be bottoming out. Retail sales were sluggish in most districts, with no sustained pickup following the end of the Persian Gulf war. Manufacturing showed indications of stabilizing, with some districts reporting slightly improved conditions and increased optimism about future activity. Other districts, however, report continued weakness in manufacturing. Wage increases appear modest and input prices in manufacturing are reported to be flat or down. Larger price increases continue, however, in certain service industries such as health care. Residential real estate activity improved across the nation, while non-residential construction remained weak. Loan demand was reported flat or slightly improving by most districts. Agricultural conditions outside of California are reported to be generally good. Stable oil prices and low natural gas prices are reducing exploration.

Consumer Spending
Retail sales remained sluggish in most districts, with the majority reporting no sustained pickup following the end of the Persian Gulf war. Districts report that renewed consumer confidence has yet to be translated into solid sales. Shoppers are remaining cautious and traffic is slow. Some softening of sales was reported by Philadelphia, Chicago, and Dallas. Cleveland reported a pickup in activity in areas not affected by auto layoffs, spurred in part by aggressive promotion. Increases also were noted in St. Louis for heavily promoted and discounted goods. Increased auto sales are noted by Kansas City, Cleveland, and Atlanta, but most districts reported little improvement and Dallas reported sharply reduced auto sales.

Low expectations for a significant improvement in sales are reported in Philadelphia and New York. Boston reports that the prevailing expectation among retailers is that 1991 will continue to he a tough year. Atlanta notes that some retailers fear that increased activity in their district may be "catch up" spending and not permanent. San Francisco, however, reports that expectations for improved consumer spending rose substantially. Richmond also reports increased optimism among retailers. Retail inventories are reported to be lean in most districts.

Manufacturing
Manufacturing activity showed signs of bottoming out in much of the nation. Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, and Kansas City all report stable or slightly improving conditions. Weaker conditions were reported by Dallas and St. Louis. Most districts report manufacturing input prices to be flat or down.

Cleveland noted some slow recovery in auto production, while Chicago reported an increase in orders received by suppliers to the auto industry. St. Louis, however, reported continued layoffs in the auto sector and a plant shutdown expected in May. Cleveland reports that steel production is expected to remain at 70 to 75 percent of capacity. Specialty steel and machine tool producers appear to be doing better than in previous recessions. Optimism among manufacturers for improvement was reported by Philadelphia, Richmond, and Cleveland.

Cleveland, Kansas City, and San Francisco reported strength in export activity. Richmond indicated that exports at District ports were higher than in the previous year and are expected to increase further. Boston, however, indicated disappointing export activity. Contacts in Kansas City, Dallas, and San Francisco expect orders related to the rebuilding of Kuwait.

Construction and Real Estate
Residential real estate activity improved across the nation, with most districts noting increased sales of new and existing single- family homes and modest improvements in residential construction. Increased buyer interest was attributed to renewed confidence following the end of the Persian Gulf war, and to the decline in mortgage interest rates. Atlanta, however, reported that some builders are skeptical whether the increased housing demand is sustainable.

Nonresidential construction activity remains weak. Boston reported that construction of new commercial space has nearly ground to a halt, but that vacancy rates continue to increase due to further contraction in the financial services industry. New York reported that office leasing activity in midtown Manhattan declined to its lowest level in three years. Vacancy rates rose in downtown Manhattan with the addition of new space. High vacancy rates also were reported in Los Angeles and in Minneapolis/St. Paul. Dallas reported that construction activity remains sluggish, with respondents attributing weakness to credit conditions and uncertainty over the actions of the Resolution Trust Corporation.

Banking and Finance
Loan demand was reported to be flat or improving slightly in the eight districts reporting on financial developments. Increases were reported in mortgage lending and refinancings. Commercial and industrial loan demand was reported weak by Philadelphia, but slightly increasing by Richmond. In general, loan demand was expected to improve with the economy.

Reports on credit availability are mixed. New York reports that a majority of their surveyed banks have not changed their credit standards over the last three months, but a few are more cautious with respect to lend development loans. Atlanta reports that most contacts feel that tight lending conditions continue to restrict loan growth. Boston indicates that half of their contacts report that a lack of credit is hampering capital spending, while the other half report ample credit for projects such as renovations and computer upgrades.

Agriculture and Natural Resources
Dallas reported that prices for cotton, grain sorghum and soybeans have increased, and producers are indicating they will plant more acreage for these crops. According to Kansas City, warm weather has resulted in rapid development of the winter wheat crop, which is in generally good condition. Kansas City reports dry soil conditions in the western part of their district, and Minneapolis reports below normal precipitation in South Dakota. Favorable planting weather is reported by St. Louis and Richmond. In California, the freeze in late December cut citrus fruit production and exports in half and destroyed many fruit and nut trees. Continued drought conditions have caused farmers to cut back on acreage planted for many crops, including a 15 to 20 percent drop in cotton acreage planted in the San Joaquin valley.

Kansas City reports that stable oil prices since the end of the Persian Gulf conflict have resulted in continued development of existing reserves, but current prices are not stimulating much exploration. Drilling activity fell in March but remained about 13 percent above its year-ago level. Dallas reports dampened oil and gas production and drilling efforts. While oil prices are little changed from a year earlier, natural gas prices are the lowest in several years.