January 17, 1996
Reports from the twelve Federal Reserve Districts suggest that the national economy was growing at a generally modest pace at the end of 1995. Holiday retail sales were generally reported to be below expectations, with extensive discounting. Manufacturers saw uneven growth, with weakness noted in auto-related production. The federal government shutdown hurt winter tourism at national parks, but other areas reported increased activity. Single-family home sales are experiencing some seasonal slowing in most of the country. However, commercial real estate contacts in many areas report strengthened markets. Loan demand is steady in most areas. Firms say that prices are generally remaining stable, but some areas still report shortages of skilled workers.
Consumer Spending
Retail sales during December generally fell below retailers'
expectations, with heavy discounting the rule. However, the majority
of retailers in the Atlanta, Kansas City, and St. Louis Districts
experienced moderate growth over last year's levels. Reports from
Boston, Chicago, Minneapolis, New York, Philadelphia, and San
Francisco retail contacts indicated that year-over-year growth was
mixed within each of these regions. According to District contacts,
electronics, computers, fine jewelry, and cosmetics were the best-
selling items, while apparel sales were generally disappointing.
According to retailers in the New York and Cleveland Districts,
overall retail sales suffered because of harsh weather; however,
hardware stores got a boost from high demand for snow-related
equipment. Merchants in the Atlanta, Kansas City, New York, and St.
Louis Districts report that inventories are in line with plans.
Overall, retailers' outlook for the first quarter is guarded, with
retailers in the Atlanta and Kansas City Districts anticipating
little growth year-over-year, while the St. Louis District's outlook
is mixed. Several retailers in the Dallas District are contemplating
scaling back new store openings, and contacts in the Boston and
Cleveland Districts anticipate rising retail vacancy rates this
year.
Sluggish auto sales were reported in the Boston, Chicago, Cleveland, Kansas City, and Minneapolis Districts. Dallas was the only District that noted auto sales increases.
Manufacturing
Overall factory activity was mixed, according to District reports.
Manufacturing output growth has slowed in Atlanta, New York,
Philadelphia, and Richmond since the last Beigebook. Atlanta,
Chicago, and Cleveland report recent orders weakness for auto
suppliers. New orders have fallen for heavy equipment producers in
Minneapolis. Dallas reports weaker orders for manufacturers over the
past six weeks and points to a slight deceleration in the rapid
growth of semiconductor production. San Francisco also reports
excess capacity and rising inventories among some California
semiconductor firms, but notes that, in general, demand for
electronic goods continues strong.
Manufacturers continue to operate at high levels in Boston, Chicago, Cleveland, and Kansas City. Machine tool orders in Boston are above year-ago levels, and computer products continue to grow robustly. Steel orders have improved for producers in the Chicago and Cleveland Districts. St. Louis reports that although the pace of industrial activity remains relatively unchanged, new announcements of large plant openings will add to the District's factory payrolls. Atlanta contacts anticipate that rebounding home sales and construction will boost building material and carpet production.
Tourism and Convention Business
The Federal Government shutdown is hurting winter business in
national parks, according to District reports. However, an early and
above-normal snowfall has boosted tourism in the Minneapolis and
Richmond Districts. Visits by Europeans are up, and advance bookings
are strong in southern and central Florida.
Real Estate and Construction
Contacts in most Districts report a slowdown in single-family home
sales during December mainly because of seasonal factors. However,
home sales improved over last year in Cleveland, while sales equaled
last year's levels in the Kansas City District and fell slightly in
the Atlanta District. Single-family home construction in the
Atlanta, Kansas City, and St. Louis Districts fell slightly behind
last year's levels and equaled last year in Cleveland. Atlanta,
Chicago, and Kansas City District Realtors report tight home
inventories in several markets. Both Atlanta and Kansas City
District contacts report rising home prices, while Richmond contacts
reported declines. Real estate contacts in the Atlanta and Chicago
Districts are optimistic going into 1996, while contacts in the
Minnesota District anticipate building will be somewhat less.
Nationally, commercial real estate contacts report improving markets. Real estate agents in the Atlanta, Kansas City, and New York Districts report that new multifamily construction and conversion is strong. However, reports from the Dallas District indicate that worries about overbuilding are causing developers to curtail plans for new projects. Contacts in the Atlanta and Dallas Districts report that build-to-suit projects dominate nonresidential construction activity. Office vacancy rates continue to decline in the Atlanta, Chicago, Richmond, and Dallas Districts; however, downtown Boston and midtown Manhattan have shown little improvement recently. Overall, commercial real estate contacts report a positive outlook.
Financial Services
Loan demand appears to be steady, according to reports from most
Districts. In general, loan demand is stronger from businesses than
from consumers. Refinancing activity has increased for all loan
types. Banks say that, although credit quality remains very good,
delinquencies have increased modestly in the majority of Districts.
Contacts in the Atlanta and New York Districts report weaker
consumer loan demand since the last Beigebook; but in southern
California, as well as in the Cleveland, Dallas, and St. Louis
Districts, stronger demand was noted. On the commercial side, loan
demand was reported as strong in the Atlanta, Chicago, Cleveland,
Dallas, and St. Louis Districts. Only the Richmond District noted
weaker commercial loan demand.
Agriculture and Forest Products
Agricultural conditions across the U.S. were, for the most part,
reported to be normal for the season. Notable exceptions include the
Dallas and Kansas City Districts where dry weather and insect damage
have hurt the winter wheat crops. The St. Louis, Minneapolis, and
San Francisco Districts reported slower lumber and forest product
production.
Wages and Prices
Boston, Dallas, Kansas City, Chicago, Richmond, and San Francisco
report some shortages of skilled labor. Manufacturers in Dallas say
that lack of skilled workers is a major concern, and wage pressures
remain prevalent. In Chicago, placement specialists note a high
number of unfilled orders for permanent and temporary employees.
Most manufacturers report modest wage and salary increases. Some
Districts, such as Boston, report few or reduced cost pressures.
There are scattered reports of increasing materials prices in some
Districts, but prices remain generally stable, according to their
contacts.