Beige Book Report: San Francisco
August 7, 1979
While recent national statistics suggest that the economy is in a recession, 12th District states are experiencing only scattered layoffs and cutbacks in output. Most regional industries are continuing to post gains in production, sales and employment. From Utah's Wasatch Front up to the Pacific Northwest and down to San Diego County in California, strengths are noted in such major industries as aerospace, electronics, pulp and paper, aluminum and agriculture.
Trade and service industries continue to expand in line with the demands of an ever-increasing population. Retail sales in convenience and fast-food stores have increased from dips of May and June. And classified newspaper advertising, always a good business barometer, is up in volume and profitability.
Some layoffs have occurred in the Northwest, as for example in Spokane's recreational vehicle and heavy-duty truck industries, and also in sugar-beet refineries. But these layoffs are offset by continued gains in other manufacturing industries.
The Southern California region is experiencing weakness in the auto and auto-related industries, with General Motors furloughing 1,700 workers at its plant producing full-sized Chevrolets and Cadillacs, and Firestone laying off 475 workers at an auto-tire facility. Also, service-station employees are adversely affected by less shop work and shorter hours worked. Most stations in Southern California are open only to pump gasoline three to five hours a day.
Scattered signs have occurred of weaker retail sales and resultant production cutbacks, as manufacturers and retailers attempt to avoid unintended inventory accumulation. Most firms remain very cautious in ordering, and are keeping inventories under control and in balance. However, some excess inventory accumulation is evident in automobiles, trucks, appliances, furniture and clothing.
Retail sales in Oregon are up some eight percent over a year ago, while California sales also continue to show gains. Problems in Washington retailing can be traced to energy shortages—with sluggish sales and an unwanted accumulation of large-car inventories, with lower gasoline sales due to rising prices and lessened availability, with slightly lessened weekend traffic at suburban shopping malls, and with a dropoff in business at resort restaurants and shops. Tourism is off considerably in Utah, due to both the fear of gas shortages and the present stress on conservation.
The gasoline situation in Los Angeles County has increased the usage of public transportation in that freeway-happy region. The Southern California Rapid Transit District reports that it averaged 1.37 million daily riders last month, more than 15 percent above the previous month's figure and almost 25 percent above the year-ago figure.
The market for industrial and commercial properties in Southern California is very strong, with shortages of office space a pressing problem. Sales of larger homes in that area have slowed down, with owners/builders refusing to lower their prices. In Seattle, sales have remained steady, with a large inventory of homes available. The market for apartments in that area continues to be very tight.
New home construction in Utah is off about 30 percent from a year ago, but non-residential starts are up 60 percent over last summer's figures. Idaho's housing starts are off 40 to 50 percent from year- ago levels. Some homes in the Boise area, priced in the $100,000 to $125,000 bracket, have remained on the market for up to a year. A slowdown is also evident in Oregon's single-family housing market, but multi-family housing continues strong.
Throughout the 12th District, increases in bank borrowing have been prompted by expanding business activity and inflation—as well as the anticipation of continued inflation. And this inflationary pressure is causing businesses to purchase now those capital items that they expect to need for expansion and/or efficiency in the future. Borrowers generally expect that inflationary price increases will continue to outpace interest costs.