Beige Book: National Summary
November 1, 1995
Reports from the twelve Federal Reserve districts suggest that moderate growth in economic activity continued in early fall, although perhaps at a slower pace than at the time of the previous set of reports. The evidence of a possible slowing in demand mainly was from the reports on consumer spending, which suggested a pause in retail sales in some districts. However, a pickup in exports and strong domestic demand for certain types of business equipment led to stable or increased manufacturing activity in most districts, after the dropback earlier in the year. Although the summer rebound in residential construction was not generally augmented by additional gains, the slightly improved level of building activity appeared to be maintained in recent months. Some districts reported that nonresidential construction strengthened, and several districts noted a firming in commercial and industrial leasing activity. A few districts reported new manifestations of labor market tightness, but overall wage gains remained moderate, and reports of rapidly rising materials costs have lessened substantially.
Retail Trade
Retail sales, on the whole, appeared to be soft in early fall.
Several of the districts with preliminary reports on October sales--
Boston, Chicago, New York, and Philadelphia--noted some signs of
weakened spending, although this partly was attributed to weather-
related sales volatility. Elsewhere, retail sales results generally
were described as disappointing and below expectations. Retail
inventories are somewhat heavy with fall merchandise in several
districts, and some retailers have scaled back stocking plans to
prevent a further runup. Apparel and other soft goods appear to have
been the weakest sales areas. Reports on sales of autos and other
big ticket items were mixed.
Manufacturing
Many districts reported stable or increased manufacturing activity,
after the dropback earlier in the year. Chicago, New York,
Philadelphia, and Richmond noted generally rising manufacturing
output. Dallas, Philadelphia, and San Francisco pointed to makers of
semiconductors, computer products, and other electrical machinery as
a major source of strength. Elsewhere--in Atlanta, Boston,
Cleveland, and St. Louis--changes in manufacturing activity were
mixed, as renewed strength in exports offset slowing domestic demand
for some types of goods.
Real Estate and Construction
On balance, residential building activity appears to have been
little changed this fall, after the summer rebound. However, the
pace of residential construction varied widely by geographic area.
In Philadelphia and Richmond, residential construction was scaled
back. Chicago and Minneapolis finished the peak building season at
high levels, and parts of the San Francisco district reported
increased residential construction. In Atlanta and Kansas City,
multi-family construction strengthened recently, whereas Dallas
reported a pickup in construction of single-family units. In many of
the areas with increased residential construction, home sales also
have improved lately, as buyers took advantage of lower mortgage
interest rates.
Some districts reported strengthening nonresidential construction. St. Louis and San Francisco suggested that there has been a general increase in nonresidential building activity. Atlanta and Richmond pointed to gains in construction of structures for commercial use, whereas Minneapolis noted increased construction of office and warehouse space. Moreover, demand for nonresidential space picked up in Atlanta, Dallas, Richmond, St. Louis, and parts of the San Francisco district. In contrast, office and commercial real estate markets were sluggish in Philadelphia, Boston, and New York.
Services
Some districts mentioned increased activity in selected service-
producing industries. Demand for business services increased in some
districts; Dallas and San Francisco noted increased demand, for
legal or financial advice on business transactions, and Boston
mentioned a pickup in outsourcing of personnel department functions
to temporary help agencies. Atlanta, Boston, Minneapolis, and San
Francisco noted gains in tourism.
Financial Institutions
Loan demand reportedly increased in early fall in most districts.
Philadelphia, Cleveland, Atlanta, and San Francisco singled out
business lending as the primary source of increased loan volumes.
New York found that demand for consumer loans also increased in the
last two months.
Agriculture and Natural Resources
The recent harvests of many major crops were marked by lower than
average yields and increases in prices. St. Louis, Kansas City, and
other districts noted that yields of corn and soybeans were below
average, and prices increased in recent months. Richmond, St. Louis,
and Dallas also noted that adverse weather and insect problems hurt
the cotton crop. In the San Francisco district, yields for selected
crops were low too, but some agricultural producers there recently
have benefited from increased exports of apples and other
agricultural commodities.
Wages and Prices
Reports of rapidly rising materials costs have lessened, and several
districts noted a partial reversal of earlier commodity price run-
ups. Boston mentioned softening of prices of paper packaging
materials, metals, and plastics. Cleveland reported a drop in steel
prices, after earlier increases. Some finished manufactured goods
prices still are under pressure from the earlier runup in costs of
intermediate materials. However, reports from several districts
suggest that retail goods prices were little changed, and in some
cases, discounting this fall was heavier than last year.
A few districts reported new manifestations of labor market tightness, but overall wage gains apparently remained moderate. The report from the Minnesota district noted that, as it has become harder to attract and keep good workers in that area, some firms have expanded employee eligibility for benefits. Many districts continued to emphasize that skilled workers--particularly construction workers in fast-growing states and employees in high technology industries--have been commanding larger than average wage gains. In this report, Cleveland also noted that the movement of workers from less-skilled jobs into skilled positions is increasing training costs of employers and pushing up wages for less-skilled workers, who reportedly also are in short supply in many parts of that District. In Richmond and Chicago, salaries of workers at temporary help supply agencies were said to have increased particularly fast. Reports from San Francisco suggested that other types of workers are focusing more on job security than on wages, restraining the overall pace of increase in labor compensation rates.