Beige Book: National Summary
August 10, 1983
Introduction
All districts reported that economic conditions continued favorable
in July. Atlanta, Kansas City. New York, and San Francisco noted a
further "quickening" or "acceleration" in the expansion. Job markets
continue to improve, but at a disappointing pace in much of the
Midwest. All districts emphasized strength in retail sales,
especially big ticket items. Price inflation continues moderate.
Capital expenditures by business continue to lag the consumer
sector. Inventories remain lean and businesses are cautious about
restocking. Virtually all goods are in ample supply. Manufacturing
output is rising gradually, except for most heavy capital goods.
Higher mortgage rates threaten the upswing in housing, but momentum
in new construction is still strong in most regions. Nonresidential
construction is relatively weak because of overbuilding of office
space, but several districts note signs of improvement. Hot, dry
weather has seriously damaged corn, soybean and other crops.
Business loan demand continues very slow, while consumer credit is
relatively strong. Boston, Chicago, and Richmond expressed concern
over increased foreign competition related to the high value of the
dollar.
Industrial Output
Further increases in factory output, shipments, orders, and backlogs
were widespread. Atlanta, Dallas, New York, Philadelphia, and
Richmond emphasize the breadth of the recovery including building
materials, textiles, apparel, chemicals, electronics and other
sectors. Boston, New York, and St. Louis report further gains in
defense procurement. Cleveland points to a contrast, strength in
aluminum accompanied by continued sluggishness in steel. Minneapolis
mentions depressed iron ore mining and Dallas the much reduced rate
of oil and gas development.
Employment
Although job markets have strengthened in most regions unemployment
remains generally high. Rehiring of laid-off workers is cautious.
Despite relatively low jobless rates, Boston says employment figures
show "no recovery." Chicago reports substantial worker recalls in
motor vehicles, but not in capital goods. New York reports shortages
of skilled workers in residential construction. Cleveland notes
rising employment but no improvement in unemployment.
Consumer Purchases
Retail sales and other consumer outlays have been excellent. New
York, Philadelphia, and San Francisco report merchants to be highly
enthusiastic. Large autos, compact trucks, recreational vehicles,
furniture, and appliances are selling especially well. Air
conditioners and summer apparel benefited from the heat wave.
Consumers are using credit more freely and delinquency rates are
low. Dallas notes weakness in sales near the Mexican border
associated with the weak peso. Several districts commented on strong
tourist business.
Housing
Residential construction continued high relative to a year earlier.
But higher mortgage rates since May have reduced home purchases.
Realtors have lowered their expectations for the year. The backlog
of contracts already signed will keep many builders busy throughout
year-end. Demand for adjustable rate mortgages has held up better
than for fixed rate financing.
Nonresidential Construction
Some improvement in office building or leasing activity was reported
by New York and Atlanta. San Francisco expects increased commercial
construction activity in coming months despite high vacancy rates.
Cleveland and Dallas reported substantial excess office and suburban
shopping center space, with sizable incentives offered to secure
tenants. Significantly increased highway building is expected in the
second half of this year.
Capital Expenditures
In general, business capital expenditures are not as vigorous as
consumer buying. Electronic type equipment is doing much better than
mechanical equipment. Chicago reports little improvement in producer
equipment from the "abysmal" levels of the recession. Richmond sees
emphasis on modernization and replacement. Dallas reports a slight
improvement in oil and gas well drilling, which had dropped sharply
last year. San Francisco notes a recent rise in orders for
commercial aircraft. Minneapolis reports computer sales
"unexpectedly strong."
Business Inventories
Retailers and manufacturers report inventories to be lean but
adequate. Inventory investment policies are described as
"conservative" or "cautious" in most districts, but New York
reports some rebuilding by retailers. Additional merchandise is
generally available when needed, prices are expected to remain
relatively stable, and carrying costs continue high. All these
factors encourage business to keep inventories low relative to
activity.
Agriculture
Several districts noted the adverse impact of hot, dry weather on
growing crops. Corn, soybean, cotton, alfalfa, tobacco, and
vegetable yields have been seriously affected and further damage is
possible if moisture conditions do not improve. The reduction in
supply caused by the drought reinforces the large acreage cuts
associated with PIK and other government programs. On the bright
side, Kansas City reports a record winter wheat crop harvested
before the drought struck. Also, San Francisco reports improved
supplies of fresh fruits and vegetables following the losses caused
by wet weather earlier in the year.
Financial
Business loan demand at banks generally has remained sluggish.
Balance sheets have strengthened as cash flow has increased,
inventories have been reduced, and short-term debt has been
refinanced. Consumer and mortgage borrowing have been growing, but
higher mortgage rates are expected to dampen demand for real estate
loans.