Beige Book: National Summary
November 1, 1989
The pace of economic growth is reported as slow to moderate in most Federal Reserve districts. Consumer spending is mixed, with a number of districts describing retail sales as steady to growing slowly. Manufacturing activity is also mixed, with some districts reporting weakness in orders and shipments. Weakness of construction in some markets contrasts with evidence of some improvement elsewhere. Resource industries, including the energy sector, appear to be improving, as is agriculture generally. Loan demand at commercial banks continues to vary by region and type of loan.
Consumer Spending
District reports show that retail sales have been mixed across the
country. Overall retail sales are described as steady to growing
slowly in several districts (Philadelphia, Richmond, Atlanta,
Chicago, Kansas City, and San Francisco). Dallas reports a recent
acceleration in retail sales increases, Cleveland notes better-than-expected sales recently, and Minneapolis says general merchandise
spending is strong. Boston and New York report mixed retail sales
results. Where specific lines of goods are mentioned, sales of
apparel, basic housewares, and other nondurables are described as
relatively strong. Sales are weaker for discretionary, big-ticket
items such as furniture, home appliances, and consumer electronics;
auto sales have also been weakening recently. Retail sales
expectations for the upcoming holiday season are modest in the
Boston district, average in the Kansas City district, generally
positive in the Philadelphia district, and optimistic in the
Cleveland and Dallas districts. Most businesses in the San Francisco
area have resumed operations since the earthquake, but road closures
and property damage are delaying a complete return to business as
usual.
Manufacturing
Manufacturing performance is mixed, both among districts and across
industries. Philadelphia reports further declines in manufacturing
activity, especially for durable goods, as orders and backlogs fall.
Chicago reports slower growth, and some declines in orders and
sales, for most manufacturers. Producers of both high-tech and
traditional capital goods in the Cleveland district report slower
growth or outright declines in orders and production in recent
months. Boston reports sales and orders up modestly for most
manufacturers, and Dallas notes a slight expansion overall in its
manufacturing sector. San Francisco reports solid manufacturing
activity in the West. Richmond and St. Louis report varied business
conditions for their district manufacturers. Prices of materials
inputs are reported as mostly stable by four districts, while
Richmond reports a slower rise in input prices.
Significant variations in manufacturing performance also exist across industries. Minneapolis says "troubles have continued to mount in the computer and electronics industries," citing recent employment reductions by Minnesota computer manufacturers. But Cleveland notes that orders for office equipment may be leveling out, following a decline. And Chicago says the slowdown in communications equipment demand appears to have bottomed out. Producers of construction machinery and heavy duty trucks in the Cleveland district report further slowdowns in orders and sales. Chicago reports steel shipments are down as "industrial procurement of steel has peaked," but that order backlogs will continue to support steel production. Auto industry contacts are optimistic about maintaining current assembly schedules, and shipments of large farm tractors and combines are well above those of a year ago. St. Louis reports declines in manufacturing employment in several sectors, with recent layoffs by makers of autos and home appliances. San Francisco reports capacity constraints in commercial aircraft manufacturing still exist but are no longer worsening.
Construction and Real Estate
Signs of weakness in housing markets in some districts contrast with
some evidence of improvement elsewhere. Residential construction is
showing signs of weakness in the St. Louis district, with
considerable weakening in Louisville and St. Louis. Kansas City
reports soft housing activity with starts down and sales stable to
down slightly. Atlanta says residential construction continues to be
slow across the Southeast. Dallas reports little change lately in
residential building. Chicago is receiving mixed reports on
residential sales, while Richmond reports stronger demand for
mortgage loans in most parts of its district. Home sales have picked
up somewhat in the Boston district, due partly to lower prices and
creative financing. New York reports strong demand for new housing
in Buffalo and Syracuse, but an abundance of resale homes weakens
the market in the New York metropolitan area.
Nonresidential construction activity also varies among districts. Signs of weakness in nonresidential building are present in the St. Louis district. Office construction continues to be slow in the Atlanta district, but some manufacturing plant expansions are underway. Construction is holding up well in much of the Chicago district, as evidenced by strength in shipments of construction materials. Commercial building in downtown Chicago remains at a high level. Dallas reports a mild improvement in nonresidential building. Office vacancy rates, though still high, are falling in most cities in the Dallas district, and industrial vacancy rates are also falling. Office leasing activity has picked up recently in the New York district, especially in midtown Manhattan. Construction and real estate activity have been strong in the San Francisco district, except in Arizona.
Resource Industries and Tourism
Conditions appear to be improving in some resource industries,
including the energy sector. Minneapolis reports a good year for
mining, especially copper mining, and continued expansion for the
lumber industry. Both Dallas and Kansas City report further gradual
expansion in oil and gas drilling activity. Exploration and
development activity are significantly above the year-ago 1evel in
the Kansas City district. Dallas reports a slow steady increase in
its drilling rig count. All of the increase has been in Texas, with
declines elsewhere in the district. A turnaround is expected in
Louisiana and New Mexico along with further growth in Texas.
Minneapolis reports moderately strong tourist activity. Yellowstone National Park received a large number of visitors this summer, but their spending was lower than expected. Tourist activity in the Richmond district is up from a year ago in spite of Charleston's lost business due to Hurricane Hugo. With about 85 percent of the city's hotels reopened, however, bookings for the fall are about the same as a year ago.
Agriculture
Conditions in the farm sector generally continue to improve. The
fall harvest brought better than expected crop yields to the Chicago
district, especially in Iowa. While cool, wet weather delayed the
harvest of cotton and soybeans in the St. Louis district, other fall
crops were harvested on schedule. Fall crop yields were average to
above average in the Kansas City district, where good prices for
wheat and feeder cattle are maintaining farm incomes. Minneapolis
reports generally good agricultural conditions and notes that the
Montana range recovered well from last year's drought. Soil,
moisture conditions have improved for much of the Dallas district,
but parts of southern and central Texas still have serious drought
problems. In the Richmond district, yields were excellent for most
fall crops, farm income prospects are bright, and land prices are
steady to rising in most areas. Hurricane Hugo severely affected the
agricultural sectors of North and South Carolina, bringing extensive
damage to crops and structures as well as considerable destruction
of livestock and poultry. Total damage to the farm sector in both
states has been estimated at nearly $1.2 billion.
Banking
Loan demand at commercial banks continues to vary by region and type
of loan. Demand for business and real estate loans has been slow to
moderate at small and medium-sized banks in the New York district.
Philadelphia reports strong growth in most types of lending at major
banks, but growth in consumer loans and real estate loans is
expected to slow soon. Slow-growing or steady loan demand is noted
by Cleveland, Richmond, and Kansas City. Atlanta reports slightly
higher—but still low—demand for most consumer and business loans;
real estate and auto loans are weak. In the St. Louis district,
total lending by large banks is growing. San Francisco reports strong growth in construction loan activity during recent weeks.