Beige Book: National Summary
January 28, 1981
Overview
The Federal Reserve Bank reports indicate further slowing
in economic activity in January in some Districts and generally
sluggish growth over most of the nation. Slower growth was reported
by Cleveland and Richmond; Chicago reported the economy of the
Seventh District was probably the weakest in the nation. Activity
was described as sluggish or showing little strength in the Third,
Ninth and Tenth Districts. In contrast, improvement in economic
activity was reported in the Eleventh District, and factory
employment and hours worked rose moderately in the Sixth.
Consumer Spending
Retail sales slackened in most Districts in
January following an upsurge around Christmas. An upsurge during or
prior to Christmas was reported by New York, Philadelphia,
Cleveland, Atlanta, Chicago, Minneapolis, and Dallas. Most of the
Districts, however, report sales declines and softness following the
holidays. Those specifically reporting declines include San
Francisco, Dallas, Kansas City, Minneapolis, St. Louis, Cleveland
and Philadelphia.
Manufacturing
Manufacturing activity is varied among the Districts.
With few exceptions the reports indicate some slowing or
sluggishness in manufacturing. Boston reported a slight decline in
output and new orders; Philadelphia, small cuts in payrolls and
working hours; Richmond, a slight reduction in shipments and a
decline in new orders; and, Chicago, that serious problems exist for
the major District industries (motor vehicles and components, farm
equipment and construction equipment). Philadelphia reported no
change in overall manufacturing activity, while Cleveland reported
strong steel shipments, aerospace business in excess of capacity and
very strong petrochemical business. Rising manufacturing activity
was reported in both the Sixth and Eleventh Districts led by a
strong wood, pulp and electronics industries in the Sixth, and a
booming oil and gas drilling equipment industry in the Eleventh
District.
Construction
Homebuilding activity is quite weak or declining
according to District reports. On the other hand, relatively strong
commercial and industrial construction was noted in the Richmond,
Chicago, St. Louis, and Dallas Districts. High interest rates were
commonly cited as the main factor depressing home sales. San
Francisco, for example, reported that most potential homebuyers
cannot qualify for loans at present interest rates. Cleveland and
Dallas noted, however, that home sales were somewhat higher than
might be expected at these high interest rates because of special
financing arrangements. These include lower rates to buyers of homes
on which the lender holds the construction loan (Atlanta), federal
government programs (St. Louis) and local housing bonds (Dallas).
Inventories
Relatively high interest rates have reduced the desired
level of inventories according to several reports (Chicago,
Minneapolis, Dallas and San Francisco). No widespread inventory
buildup was reported but some Districts noted inventory excesses.
Richmond reported that nearly one-half of all manufacturers in their
District felt that current stocks are excessive even though actual
stocks of materials and finished good were down slightly. Some
retailers and manufacturers in the Tenth District reported slightly
higher than desired inventories. Dallas noted that inventories of
unsold new homes are rising, although builders did not consider them
excessive.
Financial Developments
Recent loan activity is mixed. Increases in
business loan activity were reported by Philadelphia, Dallas, and at
New York at year-end. Declining or sluggish activity was reported by
Richmond, Minneapolis, and St. Louis. Among other types of loans,
such as real estate, agricultural, and consumer loans, declining
activity was generally noted. Financial officials reported a
somewhat greater response to NOW accounts than expected. Most funds
placed in NOW accounts are coming from existing accounts at the
institutions, according to Dallas and San Francisco. San Francisco
reports that NOW accounts appear to be creating a higher cost
structure for all financial institutions, and St. Louis reports that
some bankers expect their introduction to depress profits.
Agriculture
Lack of moisture throughout much of the nation is
reported to be endangering the nation's winter wheat crop and, if
sustained, could endanger spring-planted crops as well. The Kansas
City District, a primary wheat growing area, reports that the winter
wheat crop is in "reasonably good condition," but that moisture will
be needed soon to prevent its deterioration. Atlanta reported that
Florida's orange and vegetable crops were substantially reduced due
to unusually cold weather.