Beige Book: National Summary
September 8, 1993
Slow to moderate growth characterized economic conditions in most Federal Reserve districts in late July and in August. Geographically, economic growth appears weaker on the East and West coasts while central areas such as Cleveland, Dallas, Kansas City and Minneapolis report stronger than average growth. Employment continues to grow slowly in spite of large companies' continued efforts to restructure and cut labor costs. Manufacturing reportedly is improving in several districts. Home construction is strong in many districts compared to a year ago, and a few see some improvement in commercial real estate markets. In agriculture, several districts describe weather-related damage to cops but note generally favorable conditions for livestock producers. Mining shows little overall change, but there is some increase in oil and gas exploration. Small increases in loans are noted in some districts, and some business lending rates reportedly have fallen. General retail sales show a mixed pattern, with strength in several districts but weakness in the remainder. Auto sales are strong in most districts. Tourism is a bright spot for some districts. With the exception of lumber, prices are generally stable and there is little evidence of inflationary cost pressures.
Labor Markets
Continued corporate restructuring is taking the bloom off employment
growth. Cleveland indicates that several manufacturers emphasize
near-term revival in employment growth is unlikely, since curbing
labor costs appears to be the favored option for improving profits
in view of uncertainty over sales. Several large firms in the
Minneapolis and New York districts recently have announced sizable
layoffs. Boston and Philadelphia look for no change in manufacturing
employment, and Richmond foresees a decline. In the St Louis
district flooding is still keeping some people from working.
But some districts also state that labor markets may be reviving. Several manufacturers, according to Dallas, have boosted employment, and in the Cleveland district retailers report cautious hiring. Some Minneapolis district firms have recently added workers. Moreover, even though employment has continued to decline in the New York district, the recent pace of decline has been modest.
Manufacturing
Manufacturing production and sales are increasing in many districts.
Several districts report strong sales for firms making building
materials or construction-related items. Boston notes double-digit
sales increases for automotive and electronics products compared to
year-earlier levels. Cleveland reports a surge in appliance
production and indicates that sheet steel and heavy truck
manufacturers are operating at capacity. Chicago also notes very
strong heavy truck sales along with strong light vehicle assembly.
St. Louis lists improved business for petroleum equipment and
apparel. Dallas also notes improvements in oil field equipment, in
addition to strong orders for semiconductors and telecommunication
devices. San Francisco describes improvements in semiconductors and
electronics. Respondents to a Richmond survey of manufacturers are
optimistic about prospects for the next six months.
The situation for some products varies by location. Dallas, Minneapolis and San Francisco have positive comments about food processors, but Boston reports food manufacturing output as flat. Similarly, Atlanta, St. Louis and San Francisco see strength in the furniture industry, which is described as flat for Boston. Textile sales are reportedly declining for Atlanta and Boston, but higher in California.
In the Atlanta, Boston and San Francisco districts the aerospace and defense industries are still weak, as are chemicals and petroleum for Dallas.
Construction and Real Estate
Home construction is improving in many regions. For Dallas and
Minneapolis, residential construction is strong. Home building
reportedly is picking up momentum for St. Louis, and sales and
permits rose for Richmond, particularly in the Carolinas. While
housing starts for Kansas City were slightly below year-ago levels,
they are rising and expected to continue to increase. San Francisco
describes regionally mixed conditions, with strong construction in
Arizona, Idaho, Oregon and Utah, but relative weakness in
California, Hawaii and Washington. New York notes no change in home-
building activity, and Philadelphia describes the pace of
construction and sales as about even with last year. In non-
residential construction, Minneapolis reports strong commercial and
public building across its district.
Boston and New York see some improvement in commercial real estate markets. New York describes the sale of a new, large office building as eliciting greater than expected interest and selling for a higher price than expected. According to Richmond, commercial real estate markets have improved in Virginia and the Carolinas but are slow elsewhere. For Philadelphia, commercial real estate is stagnant.
Agriculture, Mining and Energy
It is either too wet or too dry for normal crop development,
according to reports from several districts. Continued drought has
damaged corn, sorghum, tobacco and other crops as well as pastures
in the Dallas and Richmond districts and in southern portions of the
St. Louis district. On the other hand, flooding and excess moisture
are the principal problems for Chicago, Kansas City and Minneapolis.
These districts report substantial damage to corn, soybean and
spring wheat crops. Slow crop development caused by unseasonably
cool, wet weather has left many crops in the Midwest vulnerable to
damage from early frosts.
But some positive crop developments are also noted. Scattered rains brought relief for some crops in Richmond's area, while Dallas reports good cotton crops in west and northwest Texas and estimates that overall crop output will be up from last year, in spite of dry conditions. Winter wheat production is good for Kansas City and excellent for the Minneapolis district. Cotton and peanuts in Oklahoma are reportedly in good condition. And San Francisco reports generally favorable agricultural output. The livestock sector is generally better than crops, with favorable range conditions in most areas and strong prices. Kansas City notes that cattle feeders reduced inventories somewhat in response to higher feed costs.
According to San Francisco, new mines are opening in Nevada in response to higher gold prices. An existing gold operation in South Dakota is contemplating expansion. Mining is stable for Minneapolis, though a strike at four iron mines in August cast a cloud over increased production in that sector. Dallas reports rising oil and gas drilling rig counts compared to earlier in the year and describes activity in the Gulf of Mexico as very strong. Kansas City also notes that drilling rig numbers continue to rise and are substantially above 1992 levels. St. Louis reports that lumber producers are rebuilding inventories.
Financial Institutions and Credit
Most districts report slight increases in loan volumes. Consumer
borrowing and mortgage financing are up modestly in Atlanta,
Chicago, Cleveland, Dallas, Kansas City, Philadelphia, Richmond and
parts of the San Francisco district. Mortgage refinancing is
especially strong in Atlanta, Philadelphia and Richmond.
Commercial and industrial loans, however, are generally flat across the country, though there are signs of improvement. Philadelphia reports that business loans may increase as previously postponed projects are reviewed. Loan volumes in California continue to decrease, though at a slower pace than in recent months. Chicago and Dallas observe that increased competition among banks in their districts is bringing down rates for prospective borrowers, and New York notes that about half of surveyed loan officers report moderately lower rates.
Consumer Spending and Tourism
General retail sales are strong in several districts, but weak in
the remainder. For Cleveland, durable goods are moving well. Several
retailers in the Kansas City and St. Louis districts report moderate
increases in sales over last year. In California and New York sales
are flat and mixed respectively. However, sales are unseasonably
slow for Atlanta and Boston, and Minneapolis indicates that strength
earlier in the year has ebbed somewhat. Boston, Chicago, Cleveland,
Dallas and Richmond report that retail inventories have returned to
satisfactory levels.
Auto sales are strong in most districts. Cleveland notes that dealers of domestic new cars and light trucks enjoyed the best summer sales in more than five years. St. Louis car dealers report that sales of new and used domestic cars are up, in many cases by 10 percent. In the Philadelphia district, auto sales are running above year-earlier levels, while Minneapolis characterizes them as stable. While domestic auto sales have climbed, import sales, especially of Japanese cars, have dropped according to Cleveland and St. Louis.
Tourism is cited as a bright spot for several districts. Chicago, Minneapolis and Richmond report strong summer seasons. According to San Francisco, Idaho and Utah are enjoying record years, but Hawaii's visitor industry has slumped.
Prices
Atlanta, Boston, Dallas and Kansas City report little or no change
in prices. Food prices, according to Minneapolis, are stable, and
gasoline prices continue below year-earlier levels Boston and Kansas
City say retail prices are holding steady, and Dallas states strong
competition has been restraining retail price increases. While
Kansas City area manufacturers indicate input prices are modestly
higher than a year ago, Atlanta's factory contacts report stable
prices for both raw materials and finished goods. Prices are even
flat for manufacturers in strong markets, Boston observes.
Lumber is an exception to this pattern of stable prices. In the Atlanta district, home builders note lumber prices are beginning to rise again in anticipation of increased demand from rebuilding in Midwestern flood areas. Lumber prices, San Francisco says, are up about 30 percent from a year ago.