Beige Book: National Summary
August 6, 1985
The economy remains sluggish. Retail sales have been disappointing, but some districts see signs of a pickup in July. Despite the weakness in retail sales, inventories remain under control. The manufacturing sector is stagnating; orders and shipments are flat and employment seems to be declining. Residential and nonresidential construction continues to be a source of strength; several districts report increased activity. Consumer lending continues to rise. Commercial lending is up in some districts and down in others. Agricultural prices are below year ago levels and decreasing. While harvests are expected to be good in general, some parts of the country are suffering from very dry weather and grasshopper infestations.
Consumer Spending
Retail conditions are mixed. Most districts report that recent sales
have been disappointing. However, in about half the districts, July
appears to be an improvement over June. Exceptions occur in the San
Francisco district where sales are well ahead of a year ago but.
slowing and in Richmond where there has been a marked softening in
recent weeks. Minneapolis cites especially slack sales in distressed
agricultural areas. A majority of districts find soft goods
performing better than durables. Prices are relatively stable,
partly because of promotional markdowns. Inventories have generally
been kept in check, even in areas with slackening sales growth.
Automobile and light truck sales are up in a number of districts but down in others. Foreign cars are said to be selling better than domestic, at least partly because the loosening of quotas for Japanese cars has increased availability. Economic activity in resort areas is stronger than last summer, although New York reports reduced foreign tourism.
Industrial Activity
The manufacturing sector continues to stagnate. While Philadelphia
reports that new orders and shipments have picked up marginally,
Cleveland and Richmond find that business is flat to down slightly.
Industries cited as experiencing difficulty outnumber sources of
strength. Both Cleveland and Chicago observe that orders for heavy
trucks have fallen recently. The steel industry remains troubled as
do a number of capital goods Industries in the Chicago district.
Semiconductor and related firms are a source of weakness in the San
Francisco district, and in Dallas a weak energy sector is depressing
sales in many industries.
Experience varies among districts, however. For example, while Richmond reports that textiles, apparel and furniture are losing market share to imports, Dallas observes that apparel orders are well above year ago levels and furniture makers in the Atlanta district are looking forward to increased sales.
Reductions in manufacturing employment are taking place in a number of Districts including some in which manufacturing activity is flat or up slightly. Chicago reports deep cutbacks in such industries as steel, capital goods and electronics.
The mining sector remains weak, with activity generally below year ago levels. There have been a few encouraging developments, however. In the Richmond district coal production is expected to increase shortly because stocks have been drawn down sharply. Gold mining has strengthened in the San Francisco district. Dallas reports that the rate of decline in drilling appears to be slowing, with the seasonally adjusted rig count actually increasing in July.
Construction and Real Estate
The pace of residential construction differs across the country. New
York, Richmond, Atlanta and San Francisco report continued strength
in homebuilding. Construction activity has picked up in the
Cleveland and Dallas districts. However, the level of activity in
Dallas is said to be low relative to a year ago. Residential
construction is also below year earlier levels in the Chicago, St.
Louis and Kansas City districts.
Nonresidential construction activity is strong in a number of districts. Construction has increased substantially in the St. Louis district while Chicago and Dallas report small advances. Dallas observes that the city of Dallas is now said to lead the nation in vacant office space; New York also notes that vacancy rates remain high.
Finance
Consumer lending is continuing to increase, with several districts
reporting substantial gains. Richmond, however, finds weakness in
retail sales reflected in consumer loan demand. Commercial lending
also appears to be increasing but rates of growth are generally
smaller than for consumer loans. Dallas reports a decline in
business loans, while at Kansas City banks commercial, industrial
and agricultural loans are unchanged or down.
Agriculture
Agricultural prices continue to weaken. Corn, soybeans and cotton
have been particularly hard hit, with prices down substantially from
last year because of ample supplies and weak export demand. Drought
conditions and grasshopper infestation pose severe problems in parts
of several districts. Poor pastures have speeded up the sale and
slaughter of livestock, causing prices to decline. Minneapolis
reports live cattle prices at their lowest level since 1978.
Chicago reports continuing declines in farmland values; however, Dallas finds that the decline in land values in its district abated in the second quarter.