Beige Book: National Summary
June 19, 1991
Economic conditions appear to be improving modestly in much of the nation. Retail sales are up moderately in some districts. Manufacturing is gaining strength in some regions and industries, although several districts report weaker foreign demand for some manufactured goods. Prices are generally steady to up slightly at both the wholesale and retail levels. Home purchases continue to strengthen, but homebuilding has picked up in only a few regions. Mortgage lending continues to be the only source of strength in loan demand. Delayed planting could reduce production of some crops. Stable oil prices and low natural gas prices are keeping oil drilling in check.
Consumer Spending
Retail sales vary across districts. While there are no reports of
substantial improvement, the overall situation is somewhat brighter
than that described in the last Beige Book. A few districts describe
gains as slight or moderate, while others report lackluster sales.
Richmond reports a slight decline in sales, and Atlanta notes that
spending increases of recent months have stalled. Sales are uneven
in several districts, with soft goods selling better than consumer
durables. But sales advances in the Chicago district were led by
housing-related durable goods. Unseasonably warm weather has brought
improved sales of summer goods in the Northeast, but skepticism
remains about future gains. Retailers in several districts are also
concerned about future sales gains in light of shaky consumer
confidence and uncertainty about the course of the economy. A few
districts, however, report optimism about future sales, particularly
for items related to purchases of both new and existing houses.
While retailers in some districts are comfortable with current
inventory levels, others continue to emphasize keeping stocks lean
and under tight control. Only modest increases in retail prices are
reported. Most reporting districts say that new car sales remain
weak.
Manufacturing
Manufacturing activity seems to be improving overall, but several
districts report slower export growth. Prices of inputs are
generally stable. Philadelphia reports activity picking up in most
major industries, and Boston notes a recent pickup in both sales and
orders. Cleveland says that manufacturing output appears to have
bottomed as capital goods industries near a trough, but New York and
San Francisco report continued slow activity. Steel industry
respondents see little change in production, with gradual
improvement in domestic markets offset by softer export markets. St.
Louis reports mixed activity with some firms expanding but many
still contracting due to defense cuts spreading to smaller firms. In
the Chicago district, consumer durables producers are doing better
than heavy equipment producers. Automobile production is improving,
as is production of goods going into new homes. Weakness continues
in the production and sales of capital goods. Dallas reports that
oil field machinery production has declined slightly due to
decreased domestic drilling.
Views of the outlook vary among respondents, with stagnation expected in the Boston district until early 1992 but healthy gains expected in the Philadelphia district for the rest of this year. New York respondents see no significant turnaround before late summer, while Cleveland and Richmond respondents are optimistic for the second half of the year.
Construction and Real Estate
The improvement in home sales reported in the last Beige Book
continues and is being translated into increased construction
activity in some areas. While buyer interest and purchases still are
found mainly in the market for existing homes, reduced inventories
of new houses are leading to increases in starts in several parts of
the Midwest. In the Atlanta district, tight lending conditions are
restricting the rebound in residential sales and construction. And
in the St. Louis district, new construction remains mixed in spite
of lower inventories of unsold homes. Nonresidential construction
remains weak. Little commercial construction appears to be under
way, as vacancy rates are high and leasing activity sluggish.
Construction activity is being supported by public projects in the
Atlanta and Richmond districts, but Dallas reports a significant
slowdown in most types of public construction.
Banking and Finance
Bank lending continues to be weak in the eight districts reporting
on financial developments, despite a pickup in demand for home
mortgage loans. Much of the strength in mortgage lending stems from
refinancing rather than new purchases. Demand for business and
consumer loans is weak, except for some modest strength in consumer
lending in the Cleveland and Kansas City districts. While sluggish
growth in business loans in the Richmond district is attributed
mainly to week loan demand, some supply restraints were also noted.
Small and mid-sized banks in the New York district report slower
repayment for all types of consumer loans. Some respondents expect
continued sluggish growth in lending even after the recession ends.
Agriculture and Natural Resources
Extreme weather conditions in several districts have hampered spring
planting. Production estimates are being lowered for several crops.
Heavy rains have delayed spring planting in parts of the Atlanta,
St. Louis, Minneapolis, and Kansas City districts. Crops affected
include cotton, soybeans, peanuts, rice, corn, and grain sorghum.
Dry conditions in west Texas and the Texas panhandle have reduced
production estimates for the areas wheat and cotton crops. Richmond
reports generally favorable agricultural prospects, and Minneapolis
notes that conditions are good in the Dakotas. Kansas City reports a
high level of farm income, with strong cattle prices continuing to
reduce the impact of weak crop prices.
Oil drilling in the Dallas and Kansas City districts has declined despite stable oil prices. The decline stems partly from low natural gas prices, which are down 20 percent from a year ago.