Beige Book: National Summary
September 19, 1990
Economic activity is expanding more slowly or declining in most Federal Reserve districts, but several districts report continued, modest growth. Weakness is most apparent in the northeastern and mid-Atlantic districts. Although patterns of consumer spending vary widely among districts, rates of increase are generally slowing. The districts' assessments of manufacturing activity range from moderate expansion to absolute declines. On average, however, there seems to be little movement in orders or production. Signs of a construction downturn are widespread, but not universal. While drought persists in some agricultural areas, soil moisture conditions are good or at least improved in most reporting districts. So far, the recent increase in oil prices has not affected domestic oil and gas drilling. Several district reports of credit markets focus on soft loan demand and some district banks offer examples of tighter credit conditions.
Consumer Spending
Retail sales patterns vary widely among districts, but growth
appears to be ebbing. While Minneapolis cites "good" sales
increases, Atlanta and Boston note flat to modest expansion. New
York and Philadelphia report absolute declines in dollar volumes
from a year earlier. Sales of big ticket items are said to be
particularly soft, but clothing sales continue to show strength in
some districts. Several districts mention the negative impacts of
higher oil prices. Despite demand weakness in some districts, most
retailers say their inventories are at desired levels.
Auto sales are up in Minneapolis and Cleveland but are weak or slowing in Atlanta, St. Louis, Kansas City, and San Francisco. One district says that credit tightening has caused some potential auto buyers difficulty in finding financing.
Manufacturing
Demand for manufactured products shows little overall change in
either direction. Minneapolis and San Francisco characterize their
manufacturing sectors' performances as mixed, while growth in
Atlanta is moderate except for construction and auto-related
products. Orders to Boston, Richmond and Philadelphia firms are
down, and sales have not changed lately in the Dallas District.
Sales patterns differ greatly among industries. Atlanta, Chicago, Cleveland, Dallas, and San Francisco mention strength in demand for primary metals, while Boston and Dallas note weakness in orders for computer, and some construction-related products. Some districts report increased producer uncertainty about future demand.
In some cases, export demand appears to be stronger than domestic sales. Richmond notes exports of manufactures as among the few district manufacturing indicators that are not negative. Minneapolis says that strong foreign demand for producers' equipment has more than compensated for declines in domestic orders. In the Boston district, however, export sales are below a year earlier.
With respect to changing costs of operation, a number of districts cite rising freight costs in the wake of energy price hikes. Several districts, including Philadelphia, Richmond, and Chicago report increasing prices of inputs, but Atlanta reports prices of industrial commodities as steady.
Construction and Real Estate
References to declining construction activity and weakening real
estate markets are common. Increases in homebuilding in the Dallas
and Minneapolis markets are exceptions, but Minneapolis also notes
marked declines in overall construction contract values in the
Minneapolis-St. Paul area. While Kansas City mentions recent upturns
in housing starts, homebuilding there remains below a year earlier.
According to the San Francisco report, construction activity is
slowing in many parts of the west. Moreover, Boston, Chicago, St.
Louis and New York all refer to weakening residential construction
or weak housing sales and Cleveland notes high office and retail
vacancy rates. Several reports say that respondents expect continued
construction weakness in the near future.
Agriculture
Reports on agricultural production are generally positive, in part,
because the soil moisture problems mentioned in the last beige book
have ameliorated. In the Richmond District, rainfall in August was
mostly above normal and soil moisture levels are now said to be
adequate, but the dry weather in June has lowered corn yields. The
Dallas District reports that rainfall has improved soil conditions
there. Crop conditions are also good in the Chicago, Kansas City and
Minneapolis districts. Inadequate soil moisture continues to impede
crop development in portions of the St. Louis district. The St.
Louis and Dallas districts discuss the negative effects upon rice
prices of the embargo on sales to Iraq. St. Louis also notes that
recent increases in freight and insurance costs have discouraged
exports to other Middle Eastern countries. Several district reports
mention generally falling grain prices.
Energy
Despite marked increases in oil prices in the wake of Iraq's
invasion of Kuwait, reporting districts say they have seen few
effects on drilling so far. Dallas and Kansas City note recent
declines in drilling activity, although the rig count remains above
a year earlier in both districts. Moreover, industry observers in
both districts say they do not expect the recent price shock to have
much of an effect until oil prices remain high for an extended
period and natural gas prices rise as well.
Finance and Credit
Most reporting districts say that lending activity is soft. Atlanta,
Cleveland, and Philadelphia all mention recent slowdowns in lending,
while New York notes signs of weaker demand for business loans. St.
Louis cites slow loan growth at the large banks, but Kansas City
district bankers report moderate increases in loan demand -
including demand for commercial and industrial, consumer, and home
mortgage loans. Financial organizations in several districts note
tightening credit policies for at least some borrower groups. Banks'
and thrifts' concerns over the viability of economic growth is said
to have discouraged some lending.