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Beige Book: National Summary

September 13, 1995

On balance, the district reports point to some further expansion in economic activity with no clear change in underlying price pressure. Broadly interpreted, the expansion in business activity is seen as largely the same as in the previous report with minor modifications. Industrial activity appears to have stabilized and in some areas may now be strengthening. Many districts also report a pickup in construction. In sectors where business conditions are reported to be soft, such as retailing and agriculture, the hot, dry summer weather is commonly blamed. Only the New York and Dallas districts characterized business conditions as having deteriorated since the last report.

Prices
There has been little change in price pressures since the last report. Industrial materials prices have slowed from their strong pace in 1994, although higher costs for some materials (including paper, certain plastics, and building materials) continue to trouble some manufacturers. Overall, however, industrial cost pressures appear to be relatively minimal. Reduced crop yields have boosted prices for a range of agricultural commodities, and in some cases, such as grains, prices are substantially above levels at this time last year. More generally, consumer price increases are somewhat restrained, and there is little apparent concern about an acceleration in retail price pressures over the immediate term.

Labor Markets
Few changes in employment conditions are reported. In the New York and Cleveland districts, unemployment has risen, although in the latter instance, the higher rate of joblessness is tied to model- year changeovers in the auto industry. Some labor market tightness is noted, such as for construction workers in the Richmond and San Francisco districts, and in some specific areas of the St. Louis and Dallas districts. By and large, however, the demand for labor is seen as growing moderately with little unusual pressure on wage gains.

Retailing
A preponderance of districts report lackluster retail spending in August. Exceptions are the San Francisco district, where spending has improved after weakening earlier, and the Atlanta region, where a strong pace of back-to-school purchases and optimism over holiday sales are reported. The Philadelphia district notes a typical seasonal increase in retail activity. These reports break from a general pattern of a subdued back-to-school shopping season caused in large part by unusually hot August weather in much of the country.

Apparel sales are described as soft in a majority of the district reports. August home goods sales were off from July levels in the Boston, Cleveland, and Chicago regions, but stronger in the Kansas City district. Auto sales were mixed by district, showing little propensity to move much in either direction. With a few exceptions (many districts report high apparel stockpiles), retail inventories are described as being in good shape.

Manufacturing
The slowing in manufacturing activity reported in the last district summary appears to have leveled off. In some districts, such as Philadelphia, Richmond, and San Francisco, manufacturing activity appears to have strengthened slightly. Only the New York district indicates a continued falloff in overall manufacturing production. Most reports echo the Minneapolis district, where manufacturing sales are described as "good, but not growing at the pace they were a year ago." Continued high levels of production are noted in the Cleveland and Kansas City regions, and by sector, demand is strong in the areas of computer, fabricated metals, telecommunications, and electronics manufacturing.

Construction and Real Estate
Among the more favorable developments since the last district summary has been an apparent strengthening in construction activity in many regions. The Chicago and St. Louis districts note strong home sales, and Cleveland reports an improvement in residential construction. The Atlanta district indicates that single-family home sales are running "modestly above year-ago levels" and that residential construction has improved. Multifamily construction activity has picked up in the Kansas City district, and nonresidential construction has increased in many parts of the Cleveland, Atlanta, and San Francisco districts.

Agriculture
Of the seven districts reporting on agricultural conditions, the St. Louis, Minneapolis, and Dallas regions indicate that crops are in good shape, although heat and insect problems have affected some areas. The Kansas City district sees crops in fairly good condition, but their development is two to four weeks behind schedule as a result of spring rains. In the New York, Richmond, Chicago, and San Francisco districts, dry, harsh weather and other calamities have adversely affected crop yields and pushed some prices higher. In particular, corn, soybean, cotton, peanut, and tobacco harvests are down from last year.

Other General Business Conditions
The tourist season appears to have been a bright spot in many district economies. The New York district describes tourism as brisk, especially from abroad, Philadelphia reports a good season, and Minneapolis sees tourism in its eastern region as having improved. In addition, Minneapolis reports tourism as "outpacing that of last year," as does Richmond, although traffic has apparently fallen off slightly in recent weeks.

In other sectors, business reports are mixed. Service-sector growth has decreased in the Richmond district, and drilling activity is flat in the Kansas City and Dallas regions. In the Dallas report, however, business services demand is seen as having strengthened, and the San Francisco district reports continued strong demand in service-producing industries.

Banking and Finance
Lending activity is reported to have held steady, and in some cases, such as the Philadelphia, Cleveland, Richmond, St. Louis, and Kansas City districts, it has actually grown somewhat further. Consumer borrowing has declined "considerably" in the New York district and is characterized as "soft" in the Atlanta report, but is growing in many other parts of the country. In two districts, Philadelphia and Cleveland, revolving credit demands are especially strong. Most districts report continued growth in commercial credit demand, while mortgage credit extensions are mixed by region. No deteriorations in credit quality are noted.