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Beige Book: National Summary

June 23, 1993

Business activity was increasing at a slow to moderate pace in most Federal Reserve Districts in May and early June. Manufacturing was steady or improving in most Districts, with only scattered reports or upward pressure on prices in this sector. Retail sales were generally higher. Energy industries reported slight gains. Residential real estate sales and construction were on upward trends, mainly in the South and West (except California). There were also some reports or declines, albeit slight, in office vacancy rates in some markets. Reports on bank lending were about evenly divided among increases, decreases, and no change. Crop planting was hampered earlier by wet weather, but has been completed recently or is nearing completion.

Expectations generally are for continued slow growth. Manufacturers anticipate moderate expansion. Energy markets are forecast to improve slightly. Retailers expect improved sales for the balance of the year, and home builders anticipate a good summer. The agricultural outlook depends on a summer sufficiently warm to boost crop growth, which has been lagging due to poor weather.

Businesses commented that investment and hiring were being delayed because or uncertainties about federal tax increases and national health care reform. Retailers also said that such concerns might be preventing a more vigorous increase in consumer spending. Possible changes in U.S. international trade policy were also prompting caution among importers.

Manufacturing
Manufacturers in Chicago, Cleveland, Dallas, and Minneapolis generally reported improving business, while activity was generally steady in Atlanta, Boston, Philadelphia, and Richmond. In the San Francisco District, manufacturing in California was reported to be slipping further. Sales gains were reported by makers of electrical and electronic equipment, building materials, transportation equipment, and textiles. Demand for construction equipment was good in Chicago and Dallas, but weakening in Atlanta. Demand for aircraft engines and parts was also softening.

Manufacturing employment was reported up in the Minneapolis District but down in Boston and Philadelphia. In addition, the outlook for employment was negative in Boston, Philadelphia, and Richmond.

Manufacturers in Boston, New York, Philadelphia, Richmond, and St. Louis look for continued improvement, but are not forecasting significant increases in capital spending plans. In fact, Boston and New York reported that some manufacturers were trimming planned outlays.

Manufacturing contacts in Atlanta, Boston, Kansas City, and New York reported little or no upward movement in sales or input prices. Information from industrial firms in Chicago's region indicated that price pressures have moderated in recent months. Some Districts, however, reported that firms have been able to sustain increases in their prices recently. Firms in the Richmond region reported increases in finished goods prices. In the Cleveland and Dallas Districts, higher prices were noted for some industrial materials, including steel, several chemicals, glass, and truck parts, although Dallas noted that prices of some other products were declining.

Mining and Agriculture
Dallas and Kansas City reported slightly higher oil-drilling activity, compared with the beginning of the year, and also reported expectations of an increase from current low levels for gas drilling. Minneapolis reported that coal shipments on the Great Lakes were off to a good start for the year.

Most of the Districts filing agricultural reports indicated that planting had been delayed by wet weather. Where seeding had been done, plant growth was said to be behind the normal schedule in the Chicago, Minneapolis, St. Louis, and San Francisco Districts. The outlook for grains, fruits, and vegetables now depends on whether the summer is sufficiently warm to boost plant growth. Soil moisture levels were generally termed adequate. Kansas City and St. Louis said the winter wheat harvest was getting under way and there were indications that it would be a good harvest. St. Louis said concern was growing that cotton crops are at risk from serious boll weevil infestation.

Livestock conditions were reported to be good by Kansas City, Minneapolis, Richmond, and San Francisco. Feedlots were at capacity, according to contacts in the Kansas City District, and some softening of fed cattle prices was expected.

Retail Trade and Tourism
Nearly all Districts reported increased retail sales for May and early June. The exceptions were Boston and New York, where retailers had mixed results, and California, where sales were flat. Atlanta and Chicago said appliances, home furnishings, and consumer durables were selling well. Auto sales were up year-over-year in Atlanta, Cleveland, Dallas, Minneapolis, and the San Francisco District outside California. Domestic car sales were up in St. Louis, but foreign car sales were down. Philadelphia District dealers said truck sales were strong, but car sales, while still showing year- over-year gains, had eased recently.

Retailers expect moderate gains for the balance of the year in Cleveland, Kansas City, Philadelphia, Richmond, and St. Louis, but some Atlanta merchants believe the upward momentum may be waning.

Tourist officials and contacts in the lodging and transportation industries reported modest year-over-year improvement in the Atlanta, Minneapolis, and Richmond Districts. They expect further gains during the summer.

Finance
Reports on bank lending were mixed. Overall loan volumes were increasing at slow to moderate rates in St. Louis, Dallas, Cleveland. Kansas City, and some parts of the San Francisco District. Loan volumes were described as flat by bankers in the New York and Philadelphia Districts and down in California and Richmond. Cleveland and Kansas City reported recent gains in commercial and industrial loans. Atlanta said business loans were flat, while Richmond and St. Louis reported declines. Consumer borrowing was up in Atlanta, Kansas City, Philadelphia, Richmond, and St. Louis. Residential mortgage refinancing was generally said to be waning, except in Cleveland, where it was rebounding. Atlanta, Richmond, and St. Louis indicated that purchase mortgage activity was up.

Real Estate and Construction
Sales and construction of single-family homes were reported to be on an upswing in southern and western parts of the nation, except for California. Kansas City and St. Louis noted that improvements in housing activity in some areas were still delayed by wet weather. Nonresidential real estate activity was mixed, although Minneapolis and parts of the San Francisco District outside of California have experienced some improvements. In addition, slight improvements in office vacancy rates were noted in Boston, Minneapolis, New York, and Richmond.