January 20, 1984
Overview
Retailers across the country enjoyed an excellent Christmas season.
Year-over-year sales increases, largely real, were well into double
digits. Post-holiday sales were also relatively strong. Increases in
manufacturing activity were widespread. Price hikes are becoming
core frequent; delivery times are lengthening. Capital spending is
picking up; the emphasis is on modernization but some capacity
expansion is also planned. In the banking sector, commercial and
industrial loan demand increased modestly, consumer loan demand
strongly. Homebuilding and housing sales have held up well in most
districts. Severe weather damaged citrus and vegetable crops in the
South, but did not affect winter wheat in the Midwest.
Retail Trade
Retail sales were very strong this Christmas. Year-over-year sales
gains in December were in the 10 to 25 percent range. Several
districts noted that these increases were largely real. Sales of big
ticket: items such as appliances, consumer electronics and
recreational equipment were particularly strong. Apparel also fared
well in some areas. Credit use was heavy, according to Chicago,
Minneapolis and San Francisco. Sales volumes in early January were
also goad, but the year-over-year increases were not as large as in
December. Inventories are generally satisfactory. Retailers are
optimistic about 1964 and in the Philadelphia district they are more
worried about losing sales than about accumulating excess
inventories.
Automobile sales have been brisk, although low inventories have been a limiting factor in several districts.
Manufacturing
The manufacturing sector continues to recover. Increases in orders
and production were widespread. Among the industries for which
increases were reported were motor vehicles and automotive products,
especially trucks; nonelectrical machinery; electronics; some types
of steel; chemicals; semi-conductors; paper and paper board.
However, an expected upturn in farm equipment did not materialize.
The demand for aircraft remains depressed in the Cleveland district,
but has improved in San Francisco. Boston notes that export sales
remain very weak, although sales by foreign subsidiaries are
improving slightly.
Capital spending is picking up. Philadelphia, commenting on its survey of manufacturers, observes that "for the first time in seven years, half of the respondents...intend to increase outlays for plant and equipment during the next six months." The emphasis is on modernization and productivity enhancement, but some expansions are planned.
Price increases are reported to be more frequent but, for the most part, still moderate. Lead times are lengthening. According to Chicago, cutbacks in domestic capacity have contributed to the scattered supply problems.
In the Atlanta and Dallas districts, higher rig counts point to a recovery in drilling activity. Minneapolis also reports an upturn in oil activity, but not in gas and coal.
Increased manufacturing activity has been reflected in more trucking and railroad business in the St. Louis district. Barge traffic has also been increasing gradually.
Banking
Commercial and industrial loan demand increased modestly in several
districts, declined in St. Louis and rose sharply in Cleveland and
Kansas City. Demand for consumer loans is strong in most districts.
As loan demand has increased, banks have improved credit quality but
become somewhat less liquid, according to Richmond.
Real Estate
Homebuilding and housing sales have held up well in most districts,
although New York, Kansas City and Cleveland report a slowing in
sales at year-end. Respondents in New York and Cleveland do not
expect 1984 to be as strong as 1953 because most of pent-up demand
has been satisfied. New York and Atlanta are also concerned about
the effects of shortages and the increasing prices of housing
materials. However, Chicago builders expect
1984 to be a better year and Richmond reports an upturn in
speculative building, indicating that industry expectations are
high. Variable rate mortgages are becoming more prevalent in the
Chicago and San Francisco districts; initial rates are substantially
below those on fixed rate mortgages.
Agriculture
Severe weather damaged citrus fruit crops in the Dallas and Atlanta
districts. Fresh vegetables were also affected. However, San
Francisco growers expect to benefit from the resulting price
increases. The weather does not appear to have harmed the winter
wheat crop, but cattle are not gaining weight at normal rates.