November 30, 1988
Summary
The Fourth District economy continues to expand. Manufacturing
output is growing at close to the national rate, with particular
strength in nonelectrical machinery and primary metals. Purchasing
managers report fewer price increases, as the backlog of orders has
fallen and new orders have risen only slightly. Service jobs lead
recent employment gains, and unemployment rates are only slightly
above the national rates. Retail sales and loan demand continue to
grow at moderate rates.
Retail Sales
Retailers report moderate gains in sales from a year ago. Home
electronics products and apparel are reported to be selling well,
while other general merchandise is lagging. Although retailers are
posting price increases cautiously, they are relying much less on
discounting to move inventory than they did a year ago after the
stock market downturn. Some retailers expect price increases, as in
hardware, kitchenware, and apparel because suppliers of these
products are operating at capacity.
Domestic auto dealers report that sales are about the same as a year ago. The current pace of auto sales has been sustained without resorting to special incentive programs, which were used extensively a year ago. Few 1988 models remain in dealers inventories, and dealers indicate that inventories of 1989 models are in line with expected sales. Popular imported cars are selling well, although not as briskly as a year ago.
Labor Markets
Employment in Ohio continues to grow at a moderate pace. Total
employment increased 2.1 percent over the last year, which marked a
slightly slower rate than in previous months. Increases in service
jobs, particularly business services, accounted for most of the
employment gains. Manufacturing employment showed only slight
increases. Despite the slightly slower overall employment growth
rate, unemployment rates throughout the District remained at or
slightly above the national rate of 5.3 percent. Shortages of
skilled workers are reported in several metropolitan labor markets.
Average hourly earnings of manufacturing workers have been very stable, despite the recent upturn in average weekly hours from 42.3 hours to 42.5 hours. According to two separate surveys, area compensation managers are budgeting about the same level of wage and salary hikes for the coming year (4.6 percent) as they granted in 1988. Average pay increases range from a low of 3.4 percent for unionized production workers to almost 5 percent for executives and managers. Manufacturers reported lower expected increases than did nonmanufacturing companies.
Manufacturing
Backed by strong capital-goods demand and rising exports,
manufacturing production in Ohio continues to advance at a rapid
pace. The gains have come despite some softness in demand for
consumer durables, and particularly in auto and truck production.
According to the Federal Reserve Bank of Cleveland's Ohio
Manufacturing Index, Ohio production rose 5.2 percent from a year
ago, roughly the same magnitude as output gain at the national level
(5.9 percent). Producers of nonelectrical machinery led the advance,
up 11.6 percent over the past year. Also posting large gains over
the year were electrical machinery and primary metals, up 6.7
percent and 8.8 percent, respectively. Production of transportation
equipment, which accounts for roughly 20 percent of Ohio's
manufacturing output, has fallen to its lowest level of the past
three years—down 1.9 percent over the year.
Purchasing managers report that, while production continues to increase, the backlog of orders has fallen and new orders are up only slightly. In addition, vendor delivery performance continues to improve, indicating that vendors have more time to service their accounts.
Commodity, service, and equipment prices are still increasing, but less quickly, according to purchasing managers. For the first time in several months, less than half the respondents reported general commodity price increases.
Banking
District loan demand continues to be moderate. Total loans
outstanding at large banks grew at an annual rate of 7 percent from
mid-September to the beginning of November. Although this growth is
considerably less than the double-digit pace registered over the
same period a year ago, it represents a slight pickup from the loan
growth experienced during the summer months. Real estate loans,
which increased at a 13 percent annual clip, accounted for a large
share of the loan growth. Business and consumer loans grew at annual
rates of 3 percent and 4 percent, respectively.