Beige Book: National Summary
September 11, 1996
Inflation indicators from the District reports were varied and
generally inconclusive, although there appears to be greater upward
pressure on wages than on prices. Business activity in most
Districts is reported to be generally good and expanding moderately.
Wages and Prices
Reports of substantial price increases were notably absent from many
District summaries. Several Districts indicated that consumer prices
are either stable or rising only slightly (Boston, New York,
Cleveland, and Kansas City). Price increases were cited for a wide
variety of industrial commodities, but these appear to be confined
to a small set of markets, such as lumber (Boston, Richmond,
Chicago, and Dallas), steel (Cleveland and Chicago), and various
agricultural commodities including grains and dairy products.
Several Districts also noted price declines in a few areas,
especially memory chips (Boston and Dallas).Wage gains have tended to outstrip price increases, however. The
Richmond District sees "widespread" upward pressure on wages, and
rising labor costs were also noted in the San Francisco District.
The Boston District's wage and salary increases are in the 2% to 4%
range. In Cleveland, wage growth is reportedly 2% to 3%, although
"the cost of new hires is accelerating." This is consistent with the
Minneapolis report, in which several sources observed "upward
pressure on entry-level wages." The Chicago District notes that
small retailers in Michigan were "raising their starting wages to
attract qualified workers," but most contacts reported no
discernible acceleration in wages. In the remaining regions, upward
wage pressures were characterized as either "subdued" (as in the New
York and Chicago Districts), or "scattered" (Atlanta, Kansas City,
and Dallas).None of the Districts indicated inflationary pressures are subsiding
and at least one report noted that price increases are expected to
intensify. According to the San Francisco District, although about
55% of respondents see inflation remaining constant over the next 12
months, "nearly 40% expect [inflation] to accelerate."
Labor Markets
Many District reports indicated pockets of labor market tightness,
and in a few regions, this tightness appears to be broadly based. In
the Richmond District, tight labor markets are "widespread," labor
markets "remained tight in much of the [Kansas City] District," the
Chicago District's labor markets are "tighter than the nation as a
whole," and tight labor markets "continue to be a concern for most
contacts" in the St. Louis District. Elsewhere, "some reports of
labor shortages" were noted in the San Francisco District, and a
number of District summaries contained scattered indications of
labor shortages in entry-level positions, retailing, and some
skilled occupations. Low unemployment rates were noted in the
Cleveland and Minneapolis Districts.
Business Activity
Overall, the District reports reveal a moderately expanding economy,
with only a few exceptions: Growth in the San Francisco District is
characterized as "strong," and the St. Louis region has "continued
to moderate slightly."
Manufacturing
In most Districts, industrial activity is either expanding or
holding steady at a high level. Richmond reports "substantially
faster" manufacturing growth. Although a moderation in industrial
production growth is seen in the Cleveland and Kansas City
Districts, both report continued high levels of production. Orders
growth is indicated by many Districts (Philadelphia, Cleveland,
Richmond, Chicago, and Dallas). Notable exceptions include continued
cutbacks or closings in apparel and textiles (Atlanta and St. Louis)
and drop-offs in heavy truck production (Cleveland and San
Francisco). Only a few constraints on industrial capacity are
reported, and capacity increases are occurring in the Boston and
Atlanta Districts.
Retailing
The back-to-school shopping season got off to a good start, and
several Districts indicated that sales are meeting--or exceeding--
expectations. A good number of Districts reported strong apparel
sales (Boston, New York, Cleveland, Atlanta, and Kansas City),
although these vary by type and outlet. Household appliances and
other "big-ticket" items are a noted weakness in two reports
(Cleveland and Chicago).Overall, inventories are considered "in line with sales," and the
Boston District reported that some retailers are "cautiously
building inventories." While auto sales are generally described as
flat or declining slightly, thin car stocks are seen as a
contributing factor (Cleveland, Kansas City, and Dallas).
Real Estate and Construction
Building activity remains strong in most parts of the country. The
Chicago District reports "robust" construction, Minneapolis sees all
types of construction as "brisk," and Kansas City indicates "solid"
home building activity. The San Francisco District reports "tight" residential and commercial real estate markets in most areas, and
office vacancy rates are low in parts of the New York, Philadelphia,
Minneapolis, and Dallas Districts. Construction and sales vary more
for residential properties than for commercial ones. Boston reports
the residential real estate market to be in good shape across much
of New England. Residential real estate has improved in the New York
District, and inventory problems are noted in downstate New York and
Massachusetts. However, softer residential markets are reported in
the Cleveland, Richmond, and Dallas regions.
Banking and Financial Markets
Loan demand appears to be holding steady at a generally high level.
Exceptions to this trend include the Richmond District, where
overall lending has slowed slightly, the Atlanta District, where
demand is "moderate," and the St. Louis District, which saw slight
declines in total loans between mid-June and mid-August. Borrowing
activity is mixed by category. Several Districts indicate a
moderation in commercial lending (New York, Richmond, and St.
Louis), but some also see relatively strong commercial lending
growth (Chicago and San Francisco). Consumer borrowing reports are
equally varied. While some deterioration in credit quality and
increases in delinquency rates were noted, no concerns about overall
debt quality were expressed.
Seasonal Industries
Agricultural conditions vary widely by District, but most regions
report better crop conditions today than earlier in the summer.
Still, a delayed planting season has resulted in underdeveloped
crops in many areas, and there is concern that crops could be
threatened in the event of an early frost (Chicago and Minneapolis).
The Richmond and Kansas City Districts report very good corn and
soybean crops. High feed costs are contributing to livestock
liquidations, and milk production is down substantially from last
year (Chicago and Minneapolis).
Districts with a significant tourist trade reported mixed results for the summer season. "Ticket revenues for the Olympics, overall, exceeded projections," according to Atlanta. That District also notes that while tourism in central Florida remains strong, its other, non-Olympic venues have been disappointing. In New York, hotel occupancy rates are near record highs, and the San Francisco District indicates strong hotel occupancy and other tourism trade in several states. The Richmond region had "below average" tourism revenues in the Atlantic coastal areas, and a "weak, but not disastrous year" for tourism was reported in the Minneapolis District.