Business and banking contacts in the Reserve Districts generally report continued economic growth, though most noted that the pace was slow or had slackened recently. Among those Districts whose respondents commented on costs or prices, wages were reported as rising in a range of 3 to 5 percent, in most cases excluding benefits. Reports on prices did not display as much consensus, with some reporting widespread increases and others noting difficulty in passing on cost increases and attendant pressures on margins. Retail sales were generally described as a little better than a year ago or soft, with weaker-than-expected demand for big ticket items cited most often. In some Districts retailers indicated they had become less optimistic about the outlook for the rest of the year, though in others they were anticipating a slight pickup in sales.

Manufacturing activity is said to be flat, on balance, though healthy growth in tradable goods is seen in a number of regions. Reports on real estate construction and sales suggest, for the most part, that activity is remaining below levels seen in 1989, largely because of continuing high inventories. Credit is said to be tight in some areas. However, little uniformity of opinion about the reasons for this was evident in the reports. Contacts in the agriculture and natural resource sectors indicate a pretty good outlook at this point, reflecting better weather conditions in major crop and livestock producing areas and an improved energy sector.

Consumer Spending
Retail sales activity is described as soft to a little higher than a year ago, though contacts in Cleveland, Minneapolis, and Dallas noted strength in some areas. Retailers in New York City are less optimistic about the outlook given the continuing layoffs at banks and brokerage firms, while those in St. Louis expressed similar views in light of anticipated defense cutbacks.

Several Districts reported that demand for women's apparel in recent months was described as strong, while that for men's was weak. A few noted that sales activity in July had fallen off, though retailers in the Philadelphia District indicated that this was seasonal. Those in New York and Minneapolis remarked that an influx of Canadian shoppers was adding to sales in their Districts, while Dallas reported that retail activity in Houston and areas near the Mexican border was doing well. Reports on sales of home furnishings and appliances more frequently cited weakness, though there were exceptions to this. Vehicular sales were generally said to be flat or below year-ago levels, though contacts in Atlanta and San Francisco reported strong demand for used models.

Of Districts that inquired about inventories, five cited indications that they were higher than retail respondents desired, while four noted that they were at levels acceptable to them. Kansas City added that financing for inventories is adequate.

Manufacturing
Contacts at manufacturing firms suggest that overall activity is flat, though responses varied considerably from industry to industry. Strength was reported in demand for products that are exported, and Richmond added that producers are looking to these markets for sales gains. Demand for domestic steel was also said to be stronger, and respondents in Dallas and Cleveland said that this reflected the reduced availability of imports given healthy demand in Europe. Current levels of auto production were also cited as a reason for the better demand for steel. Chicago noted that orders for liner board were stronger than contacts had expected.

With the exception of steel and commercial aircraft, backlogs and lead times were said to be working down. St. Louis, Minneapolis, and San Francisco noted that weakness was described as pronounced in defense-related activities. Dallas, Richmond, and Atlanta contacts saw weakness in textiles and furniture production.

Of Districts reporting on employment and price trends, most respondents indicated that labor utilization was either flat or likely to weaken based on announced layoffs. Wage increases appeared clustered in a 3-5 percent range, though two Districts noted that the benefit costs were rising faster, and two mentioned shortages of entry-level workers. Reports on materials prices were mixed, with stability to slight increases noted by some contacts and flat to slight declines mentioned by others. Cleveland, Richmond, and St. Louis said costs and prices were generally rising, and contacts in the latter put the cost increases in a 3-5 percent range.

Construction and Real Estate
Reports on residential real estate construction and sales generally suggest that activity was below the pace of a year ago. High inventories of housing were said to be causing weakness in construction and in many cases causing downward pressure on prices. Cleveland, however, noted a mixed picture for sales, adding that prices were up in some cities by 6-8 percent over the last six months. St. Louis reported good demand for starter homes in the Memphis area. New York and Chicago realtors suggested that high- priced hones were the most difficult to sell. Respondents in San Francisco noted that a cooling of activity in coastal California dominated statistics for that District. Those in Boston indicated that the widespread media attention given to weakness in the District may be hurting real estate sales.

Five Districts reported asking about nonresidential construction, and most respondents saw weak or slackening activity in their regions due to large inventories of space. Some in New York added that, while rent concessions had increased leasing activity in Manhattan, corporate relocations had led to a rise in vacancy rates anyway, in contrast to stable or declining ones elsewhere in the District. Firms polled by Dallas indicated that construction of petrochemical plants remains at a high level, and Atlanta respondents viewed public infrastructure as a bright spot.

Finance and Credit
Several Districts report that the pace of commercial loan growth has recently slowed, and some indicate that its levels are below those of a year ago. Lending to consumers appears to have decelerated by a smaller margin in most Districts that reported on this, with current growth attributable largely to credit card and home equity lending. Respondents in several Districts indicate that new credit is more difficult to obtain for construction projects, though their remarks suggest some divergence of view as to the causes of this. In New York, the glut of homes for sale is said to be the major deterrent to building, even though the shortage of finance for acquisition and construction loans appears to be spreading. Regulatory restrictions on S&Ls are said to be affecting small builders in Chicago, though Cleveland notes that a shift from thrifts has caused real estate lending to rise at banks. They also add that while increased borrower scrutiny is reported, there are few known outright cancellations.

About half the respondents in Boston saw the availability of bank credit as problematical for their own or other businesses. San Francisco notes similar views by a few respondents, though businesses and bankers in the District disagree about the extent of tighter standards and its impact on lending activity. Businesses in the Atlanta and Philadelphia Districts report problems with collecting on receivables.

Agriculture and Natural Resources
District reports suggest that the outlook for agricultural production generally appears good at this point, though poor weather conditions are hurting crops in some areas. Kansas City indicates that wheat production in Kansas, the largest producing state, is the highest on record and more than twice last year's output. Prices are down sharply. St. Louis reports that wheat yields are lower by 12 to 26 percent due to disease. Chicago said that heavy rains earlier in the year had delayed planting. While Richmond said that rain brought relief to earlier drought conditions, Atlanta reported that hot and dry weather is reducing corn, soybean, and forage production by as much as 25 percent. Dallas also said that District crops, including cotton, corn and grains, were adversely affected by the heat and that prices in June averaged 6 percent above those a year earlier. Minneapolis noted that production costs for corn and soybeans were up 6-10 percent from last year.

The Districts reporting on meat production said output and prices were both strong, and Atlanta described robust conditions for poultry with export sales especially healthy. Minneapolis indicated that forest products were doing well. San Francisco, in contrast, said that a widely expected deterioration in logging and lumber had emerged due to weaker housing construction and environmental concerns. Kansas City and Dallas noted that oil production was up from a year ago.