October 31, 1990
Economic activity appears to have grown slowly in most Federal Reserve districts since early August, but seems to have declined somewhat in others. Many districts reported a weakening in business and consumer confidence. Retail sales, including new car sales, were sluggish or down in most of the country. Indicators of manufacturing activity were mixed to weaker. Commercial and residential construction declined, although sales of homes rose in some areas. Total loan demand at commercial banks was lackluster, and business lending decreased across the nation. In agriculture, crop yields and livestock prices were generally strong, although various factors detracted from farm sector conditions in some areas. With respect to energy, higher oil prices appeared to be stimulating oil drilling, although some shortages of skilled workers were reported.
Retail Trade
Retail activity apparently weakened in most of the nation. All
districts except Chicago reported that sales grew more slowly or
declined. Many noted slower sales of durable goods, particularly
autos, and some indicated that retailers had laid off workers.
Retailers generally believed their inventories were at satisfactory
levels, although some had begun to trim their stocks.
Most districts reported that retailers were generally pessimistic about their sales prospects in coming months. The retailers blamed lower consumer confidence brought on by greater uncertainty and higher fuel prices for the current and expected weakness in their sales. Some worried that they would have to discount prices significantly to move merchandise.
Industrial Activity
Conditions in the manufacturing sector apparently weakened somewhat.
Chicago reported relatively strong activity, but most other
districts gave mixed reports or indicated declines. Weakness was
evident across most industries, although several districts reported
boosts in energy- or defense-related production. Reports received
from six districts indicated that, on balance, manufacturing
employment declined. No district indicated serious manufacturer
concern over inventory levels, although Philadelphia and Kansas City
noted that producers were reducing inventories. Exports from the
Richmond and Cleveland Districts rose but those from the Chicago and
Boston Districts fell. Scattered reports on producer prices
suggested that prices of raw materials rose while finished goods
prices were relatively stable.
Manufacturers in several districts were concerned about their business prospects in the coming months. Some planned further reductions in employment and were cautious about their capital spending plans.
Construction and Real Estate
Most districts reported slower construction activity. Scarce
financing and earlier overbuilding were associated with abrupt
declines in starts of commercial buildings and residential
developments in several metropolitan areas. New York observed that
reduced commercial construction was expected to help ease the
vacancy rate in midtown Manhattan.
Housing starts were reported to be down in most districts, but home sales registered increases in several. Six districts noted general weakness in residential construction, although multi-family activity was higher in the Dallas district. Home sales rose in at least parts of five districts, but Atlanta and San Francisco reported general declines.
Some districts commented on home prices. Atlanta and San Francisco indicated that the median home price had declined from a year ago. New York attributed unsold homes to unrealistic pricing.
Financial
Activity in the financial sector was generally softer. Several
districts reported that sane financial institutions had tightened
their lending standards, especially for real estate loans, because
of uncertain economic prospects or higher capital requirements.
Total loan demand was unchanged to lower in most districts. The
demand for commercial and industrial loans was weak across the
nation, while the demand for consumer loans was mixed. Many
districts indicated that loans to commercial real estate developers
were down.
Agriculture
The agricultural sector was generally strong across the country.
Several districts noted that yields of most crops are expected to be
good, and Minneapolis and Kansas City indicated that higher
livestock prices and low feed costs would help support farm income.
In the St. Louis and Richmond Districts, recent rains and cold
weather caused some delays in harvest activity and damaged soybeans
somewhat. Also, several districts reported that low crop prices or
higher production costs might limit the incomes of some farmers in
their areas.
Three districts reported on farm lending activity. Kansas City reported that the demand for agricultural loans rose, and Chicago and Richmond reported a good pace of repayments on agricultural loans.
Energy
Several districts reported on energy-related developments. Kansas
City noted increased oil drilling activity, and Dallas and San
Francisco expected an increase soon. Atlanta and San Francisco
indicated shortages of skilled labor in their oil-producing regions.
St. Louis observed that higher fuel prices were being blamed for
cutbacks in the transportation sector, and Boston and Chicago noted
transportation surcharges resulting from these higher prices.
Richmond and St. Louis indicated that coal production was up,
although coal prices were mostly unchanged.