August 5, 1986
Available information suggests that slow growth continues in most Federal Reserve districts, although conditions vary substantially across both sectors and regions. Retail sales appear to be growing modestly overall, with substantial regional variation, and domestic automobile sales also show a mixed performance. Summer tourist traffic appears strong in most areas. Manufacturing activity remains weak. The decline in oil prices has hurt manufacturers in some areas, in addition to energy producers. Agricultural producers in the Midwest expect high crop yields, contrasting sharply with the drought-plagued Southeast. Homebuilding continues strong in most areas, although some districts report weakening from the frenzied pace of the spring months. Commercial construction and real estate activity remains in the doldrums in many areas. Total bank loan demand has grown in most districts, with residential real estate portfolios showing particularly strong growth.
Trade and Services
Retail sales have shown modest growth overall, with considerable
variation across regions. Boston reports that sales were weak in May
and June, but picked up in the beginning of July. New York,
Philadelphia, Cleveland, and Chicago report relatively strong sales
growth, while Minneapolis, Kansas City and Dallas report weakness.
Atlanta, St. Louis, and San Francisco report that their sales
performances varied considerably in different parts of their
districts. Prices generally are flat, and inventories appear under
control. All districts reporting on tourism cite it is a source of
strength.
Chicago and Minneapolis report that sales of domestic automobiles are outpacing last year's, while the Kansas City and Dallas districts have seen reduced sales during the past year. Philadelphia, Cleveland, and Atlanta report improved sales in recent weeks although sales remain below last year's levels.
Manufacturing
Manufacturing activity remains flat or down slightly in most parts
of the country. Aerospace industries are providing a boost to the
Boston and San Francisco districts, but in both districts the
expected upturn in electronics has not yet materialized. Prime
defense contractors in the Atlanta district report that new orders
have fallen, although defense spending continues to bolster that
region's economy. In the Philadelphia district, manufacturers report
marginal improvements in orders and business volume. Cleveland
reports that threatened labor disputes are hurting steel orders.
Weakness in energy related industries has hurt manufacturers in the
Chicago and Dallas districts. Many districts report that efforts to
cut costs and retool are crucial to maintaining profitability in the
current competitive climate.
Mining
Problems related to low oil prices continue to plague most energy
producing parts of the nation. In Virginia and West Virginia,
however, coal production reportedly is up because demand for
electrical power has risen due to hot weather, and because new
emphasis on environmental protection has increased the demand for
low-sulfur coal.
Agriculture
Favorable weather conditions in the Midwest should result in
excellent crop yields in that region. In contrast, extreme heat,
drought, and insect problems are causing severe crop damage along
the eastern seaboard as far north as Delaware. In the Southeast's
inland regions, the damage is less acute, and in some areas late
rains could salvage crop production. Recent surveys suggest that
deterioration in farmland prices is continuing in the Minneapolis
district, slowing in the Chicago district, and accelerating in the
Dallas district. Prices of most farm products remain low, and Kansas
City reports that a shortage of storage space for corn could reduce
corn prices further.
Construction and Real Estate
Most districts report strong homebuilding activity, with single
family construction stronger than multifamily building. There is
however substantial variation among regions. Although Cleveland,
Atlanta, St. Louis, and San Francisco report a recent slowdown in
housing starts, strength remains and is expected to continue. Some
areas, however, report weak homebuilding activity, including New
Orleans, Montana, parts of West Virginia, and the Dallas district.
Nonresidential construction and leasing activity are slowing in most areas, and concessions to tenants are becoming increasingly common. Despite the widespread weakness, particularly in the oil belt, some areas report strength, including New York City, Atlanta, Birmingham, Jacksonville, and Tennessee.
Financial Sector
Total loan demand grew in many districts. In the Dallas district,
however, loan volume is down due to an absolute decline in non-real
estate loan volume. Mortgage loan demand is particularly strong in
most regions, although the rate of growth is slowing in some areas.
In most areas the rate of growth in installment loans is positive
but falling, although Kansas City reports an absolute decline in
demand for consumer credit. Commercial and industrial loan activity
is relatively weak in most districts, showing little or no growth.