Beige Book: National Summary
August 9, 1989
Summary
Comments received by Reserve Banks from business and other contacts
suggest that the nation's economy continues to grow slowly. Most
Districts report slow growth in general merchandise sales, with
strength in women's apparel Auto sales are weak in a majority of
Districts, although Dallas reports significantly stronger sales than
a year ago. Overall manufacturing activity shows slow growth in
several Districts and declining activity in some areas. Oil drilling
activity has improved in recent months, although it remains at a low
level. Demand for paper shows signs of weakening from high levels in
some areas, while logging restrictions are limiting lumber
production in several northern states. Farmers in many parts of the
country expect good harvests, but weather problems are hurting
production in some regions. Real estate markets and loan demand are
strong or growing in some Districts, but weak in others.
Trade and Services
Most Districts report relatively slow growth in general merchandise
sales. Several report that retailers are cautious and are reducing
their orders for the remainder of 1989. Most report relatively weak
sales of home furnishings, electronics, and appliances. Women's wear
is a leading source of retail sales growth in many parts of the
country. Texas retailers report "moderate to strong" growth in
retail sales compared with year-earlier levels, but Philadelphia,
Richmond, Chicago, and St. Louis report that sales for many
retailers in their Districts were flat or down in real terms.
Reports of inventories suggest that most stores have satisfactory
stocks, although some unplanned increases were reported in the St.
Louis District.
Auto sales are reported to be below year-ago levels in most parts of the country. Dealer inventories are accumulating to higher-than- desired levels in most parts of the country, and several Districts report that dealers' profit margins have fallen. However, car sales in Texas have increased sharply with sales in Dallas up 13 percent from a year earlier.
Manufacturing
Reports on manufacturing industries vary considerably from one
District to another. Boston, New York, and Cleveland report
declining rates of growth in orders for some manufactured products,
with no growth in some cases. Manufacturing conditions in the
Atlanta District vary by product line, with chemical producers in
Louisiana planning plant expansions. Nearly a third of manufacturers
contacted by the Philadelphia bank reported declining activity,
while half reported no change. Dallas and San Francisco report
softening orders for electronic components. Chicago reports that
orders for cutting machine tools, particularly from abroad, trail
last year's levels. Richmond and St. Louis report declines in
manufacturing activity. Some layoffs and plant closings associated
with reduced auto production have occurred in the Chicago and St.
Louis Districts, with further cutbacks anticipated. Reduced auto
production, seasonal slowing, and reduced export demand have
curtailed the demand for steel, according to manufacturers in the
Cleveland, Chicago, and Kansas City Districts. Most Districts report
that manufacturers' inventories are at satisfactory levels, although
Kansas City notes efforts to trim inventories.
Agriculture and Resource-Related Industries
Conditions in the resource industries are mixed. Increased oil
drilling activity has boosted demand for oil field equipment
although activity remains below last year's levels.
Strong foreign demand for lumber is buoying the lumber industries in the Richmond and Dallas Districts, but logging restrictions are hurting lumber producers in the Pacific Northwest and North Central regions. Accumulation of paper inventories were noted in Arkansas and in the Atlanta District. In contrast, orders to Dallas District paper manufacturers remain high and prices for paper products have been rising recently.
Farmers in many parts of the country expect good harvests, but weather problems are hurting production in some regions. Harvest prospects are reported to be good in the Richmond. Chicago, and San Francisco Districts, and in most of the Kansas City District. Heavy rains have hurt production throughout much of the South. Much of North Dakota is suffering from a drought which is expected to hurt wheat yields. Kansas and Nebraska wheat production is suffering from a plethora of weather and pest problems. Apple and grape producers in the West report declining sales which they attribute to concerns about food safety.
Construction and Real Estate
Construction and real estate market conditions are mixed. Strong
activity is occurring in upstate New York and in the Chicago and San
Francisco Districts, with particular strength noted in Seattle.
Exceptionally strong markets in California appear to have cooled
off, although prices continue to rise. A slow rate of increase in
activity is reported in Texas and in the Boston and New York City
areas. Flat or declining activity is noted in the Richmond,
Minneapolis, and Kansas City Districts. The recent decline in
mortgage rates reportedly had a slight positive effect on markets in
the Boston, New York, and Richmond Districts.
Financial Sector
The pace of lending activity varies considerably by region and by
type of loan. Overall loan growth is reported to be strong in the
St. Louis and San Francisco Districts. Demand for mortgage loans has
softened in New York, while Chicago attributes its pronounced upturn
in residential loan applications to lower rates and refinancing
activity. Richmond reports mixed mortgage activity, with most
reports of improvement attributed to refinancing. Demand for home
equity credit and second mortgages is strong in the New York and
Atlanta Districts and increasing in the Kansas City District.
Commercial and industrial lending activity is reported to be up in
Chicago and Kansas City growing at a slower rate in Philadelphia,
and flat to down in Richmond.