September 20, 1983
Overview
The economic expansion continued through August and the early part
of September in all 12 Federal Reserve districts. Retail sales
continued to be strong, and both factory orders and production rose.
The level of employment has increased, and the rate of unemployment
has fallen from its peak in the early part of this year.
Manufacturing output is increasing at a slow pace relative to most other sectors of the economy. The demand for heavy capital equipment, which had been particularly sluggish, is showing signs of improvement. Auto sales continue to be brisk and would have been even stronger were it not for short inventories of larger domestic and Japanese models. Housing sales have declined recently throughout the nation, and the hot dry weather that has persisted over much of the Midwest has severely damaged many crops.
Retail Sales
Consumer products have been setting well for some time now. Chicago
and St. Louis report that demand has been particularly strong in the
areas of autos, furniture, appliances and floor coverings. Boston
reported smaller-than-expected sales increases in July and August.
However, retailers expect a return to the levels established earlier
in the year, and merchants generally expect the Christmas season to
be particularly good.
Manufacturing
On the whole, moderate increases in manufacturing production have
continued. Dallas reports unusually large orders during July and
August. Backlogs of orders have developed at electronics firms which
have been producing at near capacity. Minneapolis, San Francisco and
Boston report increased orders at high technology and electronic
companies.
Sales of heavy capital equipment, on the other hand, continue to be sluggish. Many plants in the Chicago District remain closed or are operating at less than 50 percent capacity. However, the manufacture of tandem trailers, permitted under the new federal law, has been particularly strong.
Employment
Employment in most districts is responding to the turnaround in
economic activity. Dallas indicates that job growth has been
particularly strong in durable goods manufacturing and primary
metals. New claims for unemployment compensation are down sharply in
the Chicago District, and St. Louis notes that many construction,
manufacturing and service firms expanded their work forces during
August. Employment has increased modestly in the Boston District,
with job opportunities in the professional and technical areas
particularly strong.
Construction and Real Estate
Housing starts, construction and the sales of new and older homes
were mixed during July and August. San Francisco reports that sales
of new homes fell by 14 percent in August, and many respondents
expected sales to slow further. Atlanta, Philadelphia, Dallas and
Chicago indicate that residential construction slowed in July. In
each case, the reductions were attributed to higher interest rates.
However, New York, Richmond and Kansas City indicate that construction activity remains an relatively high levels. Construction activity in New York has been so brisk that shortages of supplies and labor have developed.
Finance
Commercial and industrial loan activity at banks has been soft over
much of the nation. Any increases in loan activity have been
concentrated in the areas of consumer installment credit and auto
loans. San Francisco indicates that these loans have increased at a
12 percent rate over the past three months.
Demand for mortgage loans continued at the relatively high levels established earlier in the year. However, a number of districts, indicating that this is a result of previous commitments, report a drop in applications for new mortgage loans.
Agriculture
The hot and dry weather that has continued over much of the nation
has severely damaged the corn and soybean crops. Kansas City and
Chicago estimate the yields of these crops to be roughly 50 percent
below normal. Crop prices have risen in anticipation of the poor
yields. The marketing of livestock has increased due to higher feed
cost and poor pasture conditions, and the price of livestock has
fallen as a result.
San Francisco reports that unseasonable rains in Southern California have damaged a number of crops. However, farm income in this District is expected to be relatively high this year due to the combined effects of the drought experienced in the rest of the nation and large PIK transfers.
Tourism
The tourist trade continued to be strong in July and August
this is expected to continue into the early fall. Occupancy
rates at hotels and motels in the St. Louis, Atlanta and
Minneapolis districts were generally higher than year-ago levels.
Respondents attribute the brisk trade to lower room rates,
discounted airfares, and reduced gasoline prices.