Beige Book: National Summary
October 23, 1984
The economic expansion has slowed in most districts, but a resurgence in consumer spending suggests that the slowdown may only be a pause in a recovery that has not run its full course. With the exception of Boston, which reports a continuation of steady growth, the districts report moderating economic recoveries in the third quarter. Slower growth has been especially apparent in residential construction and manufacturing activities. Agricultural conditions are mixed. Generally, crop conditions continue to improve, but low prices are expected to keep most districts farm income depressed. There is a very bright spot, though, in the economy. Consumer spending in September and early October was robust throughout the country. These developments in real economic activity are reflected in financial conditions: business loans have been somewhat weak, while consumer loans have been strong.
Construction
Part of the recent slowdown in the recovery can be attributed to
residential construction activity. While the reports are mixed, half
the districts report that housing starts have weakened, even though
they remain at a high level. Philadelphia, Cleveland, St. Louis,
Minneapolis, Dallas, and San Francisco all report that either
housing starts or home sales have slowed. New York and Atlanta are
the only obvious exceptions; housing is reportedly doing quite well
there. Several districts also report strength in commercial
construction.
Manufacturing and Industry
The slowdown in the recovery is also being caused by some slowing in
manufacturing activity. Although manufacturing continues to expand
in most districts, it is doing so at a modest pace. New York, for
example, reports that upstate managers recently experienced a slower
growth of new orders and a considerable number of actual declines.
Similarly, Philadelphia, Cleveland, St. Louis, and Dallas-districts
that specifically report on new orders-say that demand generally
remained unchanged or declined somewhat in recent weeks.
Agriculture
Agricultural conditions are mixed. Most areas expect average to
above average crop yields this year. For example, Minneapolis
reports favorable crop conditions in its district, and St. Louis
expects its crop production to be near the 1982 levels. However,
crop prices remain low and continue to fall. Minneapolis reports
that the farm price index for Minnesota fell 3 percent between July
and August. With low and declining prices, districts expect cash
receipts and farm income to be depressed this year. Only Richmond is
optimistic for its farm sector. It expects production gains to
outstrip falling prices, leaving farmers with higher cash receipts
and income than last year.
Consumer Spending
Consumer spending is the clear bright spot in virtually all district
reports. While somewhat restrained in most of July and August,
consumers started to spend again in September and early October.
Richmond reports that consumer activity is back on its earlier
strong trend, with a significant rebound in durable good purchases.
Atlanta reports that retail sales were generally robust in
September, with department store sales in its metropolitan areas
outpacing those in the nation. St. Louis points to retail sales as
the greatest strength in its district economy. Only Chicago and San
Francisco report that consumer spending has been mixed. Both see
some weakness in durable good sales. San Francisco, however, notes a
recent pickup in retail sales in the Pacific Northwest.
Overall, inventories appear to be satisfactory relative to sales.
Finance
Loans at commercial banks generally mirror the slowdown in the
recovery and the recent strength in consumer spending. Business loan
demand is reported to be sluggish and very soft in several
districts. Yet most districts that report on consumer loans say
these loans are quite strong and are expected to remain so.
Philadelphia, for example. reports that over the past six weeks
business loans in its area grew only between zero and 2.5 percent,
while consumer loans grew from 4 to 10 percent.