Beige Book: National Summary
December 5, 1990
Business conditions are somewhat mixed in different parts of the country but on balance display a weaker pattern. In many of the Federal Reserve districts, economic activity appears to have declined recently while it has remained sluggish or grown slowly in the rest. Several districts report a decline in consumer and business confidence and many refer to expectations of continued diminution in economic activity. Retail sales, adjusted for inflation, appear to have declined below their year-ago levels in almost all districts. Manufacturing conditions have weakened in most districts. However, soft domestic demand has been partially offset by strong export orders. Most districts report continued weakness in construction. Several districts report a decline in business loan demand as well as some tightening of loan standards by banks. In contrast, agriculture is reported to have been doing very well. Crop yields have been good and livestock prices have been high.
Consumer Spending
Retail sales apparently have weakened in almost all the Districts.
The dollar volume of retail sales in October was lower than a year
ago in most of the districts. At best, only slight increases are
reported in the rest of the districts. Thus, real retail sales
appear to have fallen from their year-ago levels. The Chicago,
Atlanta, and St. Louis districts cite sharply lower consumer
confidence as s key factor in the retail sales slowdown. Several
districts report that sales of durable goods were particularly hard
hit. Automobile sales in particular are reported to have weakened,
except in Dallas. Inventories are generally reported to have been at
satisfactory levels.
Most districts report that retailers were pessimistic about sales prospects for the Christmas season as well as for 1991. However, the Richmond district reports unexpectedly strong sales in metropolitan areas immediately following Thanksgiving, and the Kansas City district reports that retailers expect sales to be steady to moderately improved throughout the Christmas season.
Manufacturing
The Cleveland, Chicago, and St. Louis districts note particular
weakness in the automobile industry. Weak domestic demand for
manufactured goods was partially offset by strong export orders. An
aircraft manufacturer reports that 90 percent of orders were from
overseas compared to an average of 60 percent of orders during the
previous two years. The Richmond and Atlanta districts also report
strong export shipments. Manufacturing inventories have been
described as under control.
Manufacturers have expressed concern about business prospects for the coming months, The majority of manufacturers contacted in the Boston district expect a national recession lasting two to four quarters. Business leaders contacted in the San Francisco district expect continued deterioration in the national economy. Manufacturers in the Philadelphia district, however, expect modest increases in orders and shipments over the next six months, and manufacturers in the Richmond district were less pessimistic about prospects than they had been a month ago.
Construction and Real Estate
Most districts report continued sluggishness in construction
activity. Residential construction continued to be weak, with
several districts citing a glut of houses for resale. Atlanta, St.
Louis, and Minneapolis report a decline in sales of existing homes.
Nonresidential construction is also reported to be generally weak.
New York and San Francisco point to an abundant supply of office and
commercial space as big factors in the slowdown. However, there are
a few bright spots. New York reports a recent pickup in office
leasing activity in downtown Manhattan. Chicago reports that
construction slowdowns are not universal and that development
continues in communities outside major metropolitan areas in the
district. Minneapolis reports a recent rebound in construction
activity.
Wages and Prices
None of the districts report significant wage pressures. Minneapolis
reports that medical insurance costs have continued to rise sharply.
Atlanta reports some easing of medical worker shortages. Dallas
reports strong demand for service workers.
Reports of price increases for goods are mixed. San Francisco reports price increases in the 3 to 5 percent range, but Boston reports that materials prices for oil-based products have increased as much as 8 percent. Richmond reports steady finished good prices, even for products using oil-based inputs. Several districts report expectations of discounting by retailers this Christmas season in the face of weak demand.
Finance and Credit
Activity in the financial sector has been generally softer. Several
districts report a decline in consumer and business loan demand.
Almost all districts also report some tightening by banks of
business loan terms, particularly for construction and land
development. Reports of banks' willingness to lend are mixed, with
New York reporting that banks are somewhat less willing to lend but
with St. Louis reporting no change.
Agriculture and Resource Related Industries
The agricultural sector is reported to have been strong across the
country. Crop yields are generally reported to have been fairly
good. Partly as a result of these high yields, crop prices have
fallen recently and reports are mixed on farmers' incomes. However,
Minneapolis reports that farmers' balance sheets are in excellent
shape. Several districts note that livestock producers have had an
outstanding year.
Oil and gas extraction reports show little change in Dallas or San Francisco and a modest pickup in Kansas City and Minneapolis.