Beige Book: National Summary
September 30, 1981
The nation's economic activity, as reported by the twelve District Banks, was generally slow during August and September. Only Dallas reported a relatively strong regional economy. Consumer spending was weak for most goods and services in most districts. Automobile sales, even with rebates and promotions, were strong in only three districts. Manufacturing orders and production were sluggish. Some inventories increased in some districts. Construction, particularly for new homes, was slow almost everywhere. Agricultural growing conditions were very good in most districts, and farm prices generally declined. The demand for most types of loans slowed, and the quality of loan portfolios at financial institutions deteriorated somewhat.
Consumer Spending
Consumer spending generally has declined in most districts, with
only a few bright spots. General merchandise sales are reported weak
or mixed by nine districts, and San Francisco reports that even
retail food sales are slowing in some areas.
Sales of consumer durables, such as major appliances, have been languid in most of the nation. Sales are "down" in St. Louis, "disappointing" in Kansas City, "weak" in Cleveland, and similarly slow in many other districts. Only Dallas reports that appliances are "selling well."
Sales of automobiles have been stimulated by rebates, interest subsidies, and other promotions, but they are still low in most areas. Richmond calls auto sales "weak." Chicago notes that production schedules for the fourth quarter have been cut. Only Dallas, St. Louis, and New York have experienced strong auto sales.
Some districts observe that certain other goods and services were selling well. St. Louis and Philadelphia report strong sales of electronic equipment and entertainment systems, such as video tape recorders; Philadelphia and Boston report a good showing in sales of soft goods, such as apparel; Dallas indicates that back-to-school sales were strong; and Minneapolis reports that tourist spending was good.
Manufacturing
Manufacturing orders and production have been sluggish. Except for
Philadelphia, all districts report that orders and production have
been weak or declining. Boston attributes the weakness in
manufacturing to the strong U.S. dollar making U.S. goods
uncompetitive overseas. Minneapolis, St. Louis, Atlanta, and San
Francisco attribute the weakness to the soft homebuilding industry,
which has depressed the forest products industry. Cleveland and New
York attribute it to cutbacks in capital spending; St. Louis
attributes it to poor auto sales; and Chicago attributes it to both
of these developments. Oil field equipment is the only product that
has enjoyed strong orders and production.
In spite of the sluggishness in new manufacturing orders, there are no reports of serious general increases in inventories. A few districts do report some build-ups. Minneapolis and Richmond report slight general inventory build-ups; Cleveland reports build-ups in steel; and Atlanta reports build-ups in forest products. Chicago, on the other hand, reports that inventories of certain manufactured products are below comfortable working levels.
Construction
Construction, particularly homebuilding, was weak in most districts.
Home construction and sales were depressed almost everywhere.
Atlanta, for example, reports that housing construction has been
"reduced to a trickle" by high interest rates. St. Louis reports
that single-family housing permits in the St. Louis area were down
about 50 percent from a year ago.
In some areas, weak homebuilding activity was partially offset by strong commercial and industrial building. Dallas, Richmond, and Atlanta report vigorous activity in nonresidential building.
Agriculture
Crop production has been very good in most districts. Virtually all
districts indicate that crops and harvests have been robust.
Richmond expects gains over last year in peanuts, cotton, soybeans,
and corn. St. Louis expects above average output in corn, soybeans,
milo, and rice. Kansas City looks for record production in corn and
near-record production in soybeans. Minneapolis anticipates a 20
percent increase from last year's corn crop, which was harmed by
drought.
Farm prices have generally declined. Minneapolis reports that cash grain and livestock prices since July have remained the same or declined. San Francisco reports that crop prices in its district have been depressed by the impact of the strong U.S. dollar on crop exports and by fears of the Mediterranean fruit fly infestation. The one exception to the soft farm prices is tobacco prices, which Richmond reports up 15 percent over last year.
Financial Conditions
High interest rates and weak economic conditions appear to have
slowed demand in most districts for most types of loans. Weak
consumer or mortgage loan demand is reported by half the districts:
Philadelphia, Richmond, Atlanta, St. Louis, Kansas City, and San
Francisco. Richmond and St. Louis report that business loan demand
is easing. However, energy-related loan demand is reported as strong
by Kansas City, Dallas, and Chicago.
The quality of loan portfolios also has declined at financial institutions in some districts. Farmers in the Kansas City district are continuing to have trouble servicing their debt, and Dallas reports that its banks expect more carry-over loans this year because of low prices for grains and cotton. San Francisco reports that much of the business loan demand in its district is attributable to cash flow problems, and Boston reports that problem loans are showing up among home developers and home furnishing firms.