Beige Book: National Summary
May 12, 1976
This month's District reports suggest that the overall recovery is continuing at about the same rate as during recent months. Sales of consumer goods remain generally strong throughout the country, although there are scattered indications of some moderation of consumer demand. Manufacturing activity appears to be accelerating. Several industrial Districts report further increases in orders and shipments and lengthened delivery schedules. Conditions are particularly tight in the steel industry. Despite the continued improvement of sales and output, most Districts indicate that both retailers and manufacturers are following cautious inventory policies. Reports regarding the outlook for business fixed investment continue to be mixed, but there are signs of increasing strength in this sector in the industrial Midwest and Southeast. Most Districts report further moderate increases in single-family home building but continued weakness in multi-family unit construction. Agricultural conditions are generally favorable, with crop plantings either on or ahead of schedule. Although consumer and farm loans are increasing in several Districts, business loan demand remains stagnant throughout the country.
Consumer spending remains the strongest force sustaining the recovery. The reports of several Districts, including Boston, Richmond, and St. Louis, suggest that consumer demand for big-ticket durable items is now expanding rapidly. Automobile sales are strong throughout the country. New car demand appears to be centered increasingly on large domestic models. Subcompact sales are sagging. Although retail sales remain buoyant overall, there are scattered reports of weakness. Philadelphia reports a recent slump in carpet sales. Both Cleveland and Chicago indicate that television sets are moving slowly, and Kansas City reports sluggish sales of durable goods in some areas.
Manufacturing activity appears to be accelerating. Manufacturers surveyed by the Philadelphia and Richmond Banks indicated increases in orders and shipments, and several Districts report lengthened delivery schedules. Increased appliance and automobile production has greatly increased the demand for flat-rolled steel. Cleveland indicates that steel producers in the Fourth District are presently operating at about 90 percent of capacity compared to 70 percent earlier this year. Chicago suggests that steel shortages might arise later in the year if capital goods manufacturers increase their demand for steel. The generally increased demand for industrial goods has contributed to recent increases in the prices of key industrial commodities. Several Districts report that businessmen expect an acceleration of industrial price increases as the year progresses.
Despite the continued recovery of sales, inventory restocking is proceeding cautiously in most areas at both the retail and manufacturing levels. Philadelphia, Richmond, Dallas, and San Francisco indicate that factory inventories have remained flat in recent weeks. Some retailers in the Richmond and Kansas City Districts reported stocks at higher than desired levels.
Although the outlook for business capital spending remains
uncertain, several Districts indicate favorable developments.
Atlanta reports numerous recent announcements of new plants to be
constructed in Alabama and Tennessee. Cleveland reports a sharp
upsurge in the demand for
heavy-duty trucks, bearings, and machine
tools. Chicago suggests a growing belief that margins of unused
industrial capacity may have been overestimated. In contrast,
however, Boston reports little change in orders for producers'
durables.
Comments regarding residential construction follow the pattern of recent months. Construction of single-family housing continues to increase at a moderate pace in most Districts, and the outlook in this sector is generally favorable. Multi-family unit construction remains sluggish, although St. Louis reports improved prospects for multi-family building in the St. Louis metropolitan area.
Most Districts report favorable agricultural prospects. Chicago, St. Louis, and Minneapolis indicate that crop plantings are on or ahead of schedule in their Districts. Kansas City reports that recent rainfall has broken the drought in that area and substantially improved winter wheat crop prospects. Kansas City expects the high prospective level of grain stocks to assist in holding retail food prices to their smallest increase since 1972. Agricultural conditions in the Southeast are less favorable than elsewhere. Atlanta reports that dry and cold weather has damaged cotton crops in some areas.
While consumer and agricultural loan demand has increased in some Districts, no District reports any increase in business loan demand. Philadelphia and St. Louis report that prime business borrowers can obtain money at rates below the announced prime rate. Inflows of funds into thrift institutions have remained strong. Cleveland, Chicago, and St. Louis report that thrifts are seeking to reduce these inflows by reducing rates paid on longer-term savings certificates, and Cleveland indicates that thrifts would like to reduce passbook rates. Mortgage rates have declined to the 8 1/2 - 8 3/4 level in recent weeks in several Districts.