March 15, 1988
Economic conditions in the Fourth District remained optimistic, exhibiting little change from the previous report. Manufacturing output and new orders continued to grow, fueled in part by continued improvement in exports. Employment growth in both goods-producing and service-producing sectors held unemployment rates steady. Strong auto sales contributed to a slight increase in retail sales, offsetting weak apparel sales.
Retail Sales
Auto dealers reported surprisingly strong sales during February,
while retailers posted generally weak sales. Auto dealers felt that
buyer incentive programs were responsible for much of the surge in
sales. The sluggishness in retail sales was attributed to weak
apparel sales, especially women's clothes, and to slow sales in
consumer durables. Retailers continued to express concern that their
lackluster sales figures were still reflecting consumer caution in
the aftermath of the stock market.
Housing
Recent housing activity throughout the District was mixed. Akron
area home sales fell 10.5 percent in January from a year ago, but
sales in the Canton-Massillon market edged up 2.4 percent, according
to monthly reports by boards of realtors in the two areas. One
realtor attributed Akron's decline in home sales to a combination of
local economic conditions, poor weather in January and the
possibility that home-equity lines of credit may have reduced the
number of homeowners seeking to move up to more expensive housing.
Cincinnati realtors also reported a decline in the number of home sales in recent months compared with a year ago. However, new home construction in the Cincinnati area from October through January rose 10 percent compared with the same period the previous year.
The Columbus area housing market continues to show the most consistent growth. Home sales and new housing construction are reported to be above the levels set a year ago. The strong housing market is reflected in housing prices. According to a recent survey, house values in Columbus have appreciated 110 percent over the last 10 years, exceeding price increases in the other major cities in the District.
Manufacturing
The export boom continues to have favorable effects on the Fourth
District's manufacturing sector. Local producers reported that they
are capturing some of the markets lost to imports in recent years
not only because of a lower dollar but also because of more
technologically advanced products. One machine tool manufacturer
attributed his increased foreign sales to several years of intense
engineering and marketing efforts.
Reports from purchasing managers indicated broad-based strength in manufacturing. Nearly 50 percent of the Cleveland area producers surveyed reported increased production, and only 7 percent reported declines. Representatives from some companies commented that they are producing all they can, and a few said they are even looking for subcontractors. In the Cincinnati area, production was reported higher by over 40 percent of the purchasing managers surveyed. Only 16 percent said it was lower.
Increases in new orders and a sizable backlog of existing orders point to continued expansion of production in both areas. However, purchasers expressed some concern that steady price increases, key material shortages, and some inventory buildup may dampen this outlook.
Labor Markets
Ohio's employment level in February surpassed 5 million workers,
marking the first time monthly statistics have reached this level.
The increase of 25,000 jobs during February contributed to a slight
reduction in Ohio's unemployment rate from 6.5 percent in January to
its present level of 6.4 percent. Unemployment rates within various
regions of the District also remained roughly the same. The
Cincinnati and Columbus area reported unemployment rates of less
than 5 percent, while the Cleveland and Pittsburgh area recorded
unemployment rates around 6 percent.
Ohio's employment growth in January was divided evenly among goods- producing and service-producing sectors, adjusted for seasonal factors. Two-thirds of the new jobs in the goods-producing sectors came from construction, with manufacturing contributing the rest. Employment growth in the service sector was dominated by employment gains in wholesale and retail trade.
The average workweek of manufacturing workers in January dropped by half an hour to 42.8 hours.
Banking
On balance, district loan demand has been relatively flat over the
last month and a half. Total loans outstanding at large banks fell
at an annual rate of 2 percent from the beginning of January to mid-
February. The marginal loan contraction was attributed to a large
decline in consumer installment loan volume. Seasonal factors and
the wariness of consumers to assume additional debt may have
accounted for the recent weakness in the demand for consumer
installment loans.
In contrast, the demand for business and real estate 1oans has picked up. Real estate mortgages outstanding grew at an annual pace of 23 percent as homebuyers took advantage of falling mortgage rates. Business loans outstanding increased at an annual clip of 12 percent.