Beige Book: National Summary
December 1, 1987
Most Districts report overall economic expansion with particular strength noted in Boston, Chicago, Minneapolis, and San Francisco. Despite general optimism among surveyed firms, there was also widespread evidence of increased uncertainty about future growth in demand. Furthermore, while the majority of survey respondents said that the stock market crash had not materially altered their capital spending plans, reports of at least some deferrals of plans appeared in a number of District discussions. The manufacturing sector has been a prime source of recent expansion in most Districts. Retail sales are either flat or only slowly growing in most Districts and auto sales are generally sluggish. Construction activity is mixed. Mining is strong across a broad spectrum of extractive industries, but reports of the possibility of future softening in oil and gas drilling expansion were common. The agriculture sector is in a generally favorable condition among the Districts. In the financial markets, some slowing in the growth of loan demand was often cited.
Manufacturing
Manufacturing activity continues to expand. No District reported
that a majority of surveyed firms had revised capital spending plans
as a result of the stock market crash. Survey respondents generally
had positive expectations for the near future. There was clear
evidence, however, that the stock market crash had led to increased
uncertainty and to a declining degree of optimism about future
demands for manufacturers' products. St. Louis, San Francisco, and
Chicago all cited the declining value of the dollar as a significant
factor in generating recent manufacturing growth. Cleveland and
Dallas noted increased demands for steel and St. Louis and Dallas
mentioned rising demands for electrical equipment and for apparel.
Despite the generally positive reports for manufacturing, the
Chicago and St. Louis banks both referred to layoffs at auto
assembly plants in their Districts and Atlanta reported that
appliance and furniture producers are concerned that the stock
market plunge may lead to reduced sales.
Consumer Spending
Retail respondents in most Districts report flat or at best slowly
growing retail sales. The stock market decline appears to have had
little effect, even in areas where the drop was cited as a reason
for slower sales growth. The major effect seems to have been on big-
ticket items. New York, Cleveland, Richmond and San Francisco each
reported weakness in such items, while Kansas City noted markedly
lower sales among stores targeting upper income groups. Those
Districts reporting on them cited reduced auto sales in October and
November, although Philadelphia respondents said sales were above a
year earlier. The withdrawal of manufacturers sales incentives was
cited as the reason for auto sales declines more often than the
stock market drop.
Construction
Construction activity varies considerably among Districts. Chicago
reported overall growth, while weakening was noted in the Dallas,
Atlanta, and St. Louis Districts and was expected in the Boston
District. The drop in the stock market appears to have had a
depressing effect on New York, Richmond, and Chicago home-buying.
New York District office space demands remain high despite softening
in the downtown Manhattan market, while high vacancy rates linked to
past overbuilding have induced Atlanta District office and
industrial developers to put projects on hold.
Mining
The strength in the mining sector continues across a broad spectrum
of minerals, but several Districts report recent small declines in
oil and gas drilling and the possibility of future sluggishness in
energy extraction. Atlanta cites recovery in the coal industry.
Minneapolis notes that the boom in gold mining continues and copper
production is expanding. Dallas, Kansas City and Minneapolis all
note that the recovery in drilling is slowing and report concerns
that future expansion in drilling may cease.
Agriculture and Forestry
Most reporting Districts note improved prospects for their farm
sectors, but several noted that recent dry weather has caused
problems. Richmond, St. Louis, Minneapolis and Dallas all report an
improved farm income outlook. Richmond and Chicago cite widespread
increases in farmland prices, while farmland prices have bottomed
out in the Minneapolis District and price movements are mixed in the
St. Louis District. Agricultural credit conditions are improved in
most reporting Districts. Some Districts cited problems with soybean
yields, in part, because of dry weather conditions. Cotton
production and livestock prices are generally cited as favorable in
Districts that discussed them. In forestry, demand for wood used in
paper and pulp is generally up. Lumber demand and prices are down,
in part, because of seasonal factors.
Financial Services
Growth in overall loan demand appears to have slowed in a number of
Districts. Consumer loans are either growing more slowly or have
been unchanged at most reporting District banks, although New York
cited strong demand since the stock market crash. Real estate loan
expansion was fairly widely noted. Philadelphia and Kansas City
reported essentially flat business loan activity, while Atlanta
cited stable to increased loan demand and Cleveland noted recent
expansions.