Beige Book: National Summary
January 24, 1990
Economic activity is expanding slowly in most of the nation, with conditions somewhat stronger in the West than the East. Retail sales in the holiday season ranged from "disappointing" in Boston to modest in Philadelphia and Atlanta and relatively strong in Chicago, Minneapolis, and San Francisco; however, widespread discounting generally reduced store profits. Manufacturing activity is generally sluggish with production declines in some industries (autos, in particular) offsetting gains in others (such as commercial aircraft and oilfield equipment). Several Districts reported that the steel and computer industries, among others, may be "bottoming out."
Unseasonably cold weather dampened construction activity in some areas, but real estate markets generally held steady. Cold or dry weather also adversely affected citrus, vegetable, and winter wheat crops. Other agricultural and resource-related sectors did moderately well. The outlook is for slow growth in all regions in 1990; some respondents expect improvement late in the year.
Retail
Retail results for the Christmas season were mixed. Most Districts
in the eastern third of the nation - Philadelphia, Cleveland,
Richmond, and Atlanta - found sales up about 5 percent. New York
respondents reported stronger sales and Boston somewhat weaker
sales. Retailers in Districts farther west -Chicago, St. Louis,
Minneapolis, Kansas City, Dallas, and San Francisco - had a better
holiday season. Consumer durables, such as furniture and housewares,
moved less briskly than apparel and other nondurables. Inventories
of certain items were high in Boston, Cleveland, and Chicago, as
Christmas sales ran below expectations and promotions failed to
bring stocks into line. Auto sales were reported to be weak
nationwide, although Chicago cited national data indicating that
sales picked up at the turn of the year.
Most Districts reported widespread discounting. In some Districts, especially steep discounting by department stores adversely affected sales at discount and specialty stores.
Retailers expect flat sales or modest increases through the first six months of 1990. Results in the first weeks of January were said to be encouraging.
Manufacturing
Manufacturing activity was reported to be slow in most of the
Districts. In Boston, Cleveland, Chicago, Dallas, and San Francisco,
however, some industries were said to be showing signs of "bottoming
out" and were posting slight gains in orders from year-ago levels.
Food, apparel, lumber, commercial aircraft, and farm, oilfield, and
some electric equipment all made gains. Defense, construction, and
automotive products continued to face weak demand; however,
respondents from Chicago and Cleveland suggested that current
cutbacks in auto production may prove adequate to eliminate the
industry's inventory overhang. Orders for first-quarter delivery
also suggest a gradual improvement for steel. Although a Minneapolis
computer firm recently made a large layoff, Dallas and San Francisco
reported signs of a pickup in that industry as well. Manufacturers
in the Chicago, Dallas, and Boston Districts found that significant
foreign sales are helping to offset weak domestic demand.
Manufacturing employment was reportedly flat to down compared with earlier in 1989, with firms in the New York, Chicago, St. Louis, Minneapolis, and San Francisco Districts facing major layoffs in autos, aerospace, or computers. Except for fuel, input prices were said to be steady or falling. Scattered evidence suggests that selling prices were also steady or falling, with discounting occurring in some industries.
Despite weakness in autos and parts of aerospace, New York and San Francisco reported major investment projects by firms in those industries. Boston, Cleveland, and Atlanta also indicated that several respondents plan capital spending above 1989 levels.
Most manufacturers expected slow growth in 1990, with a weak first half followed by gradual improvement. Despite widespread public concern about possible defense cutbacks, defense contractors in the Boston and St. Louis Districts expected declines in defense spending to be gradual, with limited local impact.
Agriculture and Natural Resources
December's severe cold weather adversely affected some agricultural
sectors and led to large increases in fruit and vegetable prices.
Richmond, St. Louis, Minneapolis, and Kansas City also noted
possible or confirmed damage to winter wheat crops due to cold, dry
weather.
Reports from other agricultural and resource-based sectors were more positive. Minneapolis, Kansas City, Dallas, and San Francisco all mentioned high cattle prices and strength in the beef or dairy industries. Atlanta and St. Louis referred to sharp energy price increases, believed to be temporary and weather-related, while Atlanta, Kansas City, and San Francisco described greater oil and gas exploration or drilling activity. Mining and lumber industries were reported to be doing well in the Minneapolis and San Francisco Districts.
Banking
Regional financial conditions varied by District and by type of
loan. Bankers in Atlanta, St. Louis, Kansas City, the Pacific
Northwest and central California reported increased demand for
business or consumer loans. By contrast, New York District banks saw
a decline in demand for most types of credit. While Philadelphia
lenders experienced an increase from year-earlier levels in total
loans outstanding, they noted a recent decline in loan demand.
Mortgage lending is down, according to New York, Atlanta and St.
Louis institutions, while San Francisco mentioned that some Arizona
and Alaska banks face real-estate related problems. Several
Districts noted that banks have initiated credit reviews and were
tightening criteria for making loans—especially for real estate
purposes.
Real Estate
Most Districts discussing real estate reported steady or modestly
improved conditions. Atlanta, Kansas City, and Philadelphia noted
some signs of weakness, however. Expected declines in mortgage
interest rates provided some reason for optimism in the real estate
outlook.
Homebuilding activity was mixed. Richmond, Chicago, Minneapolis, and San Francisco showed strength in at least some parts of their Districts, but New York, Atlanta, and Kansas City experienced slow or declining activity.
Reductions in home prices in Boston and the New York metropolitan area have boosted sales activity but have not eliminated the oversupply of homes available for resale in either region. Real estate prices were also said to be declining in St. Louis; by contrast, they were reported steady in Kansas City and up sharply in the state of Washington. Sales of expensive homes were said to be holding up well in parts of Miami, while lower-priced homes were the top performers in California and Boston.
Nonresidential property markets were generally slow. Office vacancies rose in Manhattan and Florida, and Atlanta reported slower pre-leasing of new projects in its downtown. Dallas, in contrast, found increases in office building occupancy.