March 12, 1985
Economic activity throughout the nation continues at a modest pace, though the agricultural and mining sectors are depressed in some areas. Most Districts report small but steady gains in overall employment levels, though there has been little growth in manufacturing employment. Unemployment rates have remained steady or fallen slightly in most Districts. Retail sales continued strong in February and promotions remained prevalent. Industrial activity increased from January to February in most Districts. All Districts reporting on new orders indicate they were up or unchanged with New York the only exception. Some Districts report involuntary inventory accumulation although equally as many note that inventories were at desired levels. Nonresidential construction continues at a strong pace in most Districts.
Construction
While multi-family residential construction was robust in many
Districts, single-family construction was mixed, despite lower
mortgage interest rates. Kansas City reports housing starts slightly
lower than high year-ago levels and Dallas indicates that all
residential construction is declining at an accelerating rate.
Nonresidential construction continues to be strong in most Districts. Many report that commercial construction is outpacing absorption rates for office space, however, and several express concern that a weak period may be in store as vacancy rates increase.
Industry
Manufacturing output has improved in most Districts. Weakness was
cited in the following manufacturing industries: textiles and
apparel, chemicals, machinery and equipment, furniture, and semi-
conductors. Automotive parts and aerospace were among manufacturing
industries contributing to strong growth. Increases in steel
production are cited by Cleveland, Atlanta, and Chicago.
Indicators of manufacturing activity were inconsistent from District to District. New orders are reported to be up by respondents in the Boston and Philadelphia Districts and unchanged in the Cleveland and Richmond Districts while New York reports a sizable increase in the number of agents whose orders had decreased. Order backlogs generally were unchanged or declining. Manufacturers' inventories were at desired levels in the New York, Philadelphia and Kansas City Districts. Some involuntary inventory accumulation is reported by Richmond, St. Louis and Dallas.
Agriculture
The recession in the agricultural economy remains widespread. Grain
farmers dependent on export markets appear to be most affected.
Livestock producers have enjoyed a slightly better fate although
some weakness is expected in the near future. Land prices continue
to decline particularly for cropland. Dallas, however, reports
modest gains in the value of ranch land. Kansas City estimates 5 to
10 percent of banks' agricultural borrowers will be denied credit
for planting and that 5 percent or less of the District's farmers
will leave farming this spring.
Consumer Spending
Retail sales are widely reported to have been strong in February,
despite the colder-than-normal weather experienced in many areas
earlier this year. Many Districts mention that price discounting and
promotions remained prevalent as retailers attempted to increase
sales volume. Inventories have been reduced to desired levels in
most cases. Automobile sales ranged from vigorous in January and
February in the Chicago and Dallas Districts, to slow in Atlanta due
to cold weather. Most other Districts report generally strong auto
sales. Auto dealers across the nation are optimistic about sales for
spring and summer, and some are building inventories in
anticipation. Cleveland indicates that sales of small trucks are at
a record pace, but sales growth of heavy-duty trucks has slowed.
Minneapolis and Chicago also report that trucks sold well in their
Districts.
Banking and Finance
Most Districts are experiencing sluggish loan growth mainly due to
seasonal factors. Atlanta, Cleveland, Dallas, and San Francisco,
however, cite healthy commercial and industrial loan growth while
New York reports a contraction in business lending at large banks.
Consumer lending increased after the Christmas season although many
districts have experienced a slowdown in the most recent periods.