October 23, 1991
Sources contacted by the Federal Reserve banks generally described the economy in September and early October as weak or growing slowly. In most districts there has been little improvement in retail sales, and a few reported some slowing. Auto sales have generally been weak. Expected crop yields vary, but agricultural prices remain low. Manufacturing output is still improving although at a slower pace in some areas. Several districts reported some increase in home sales, but residential construction is still at low levels. Loan demand has been weak for commercial, industrial, and consumer loans. Some districts noted a pickup in real estate loans, especially refinancings.
Consumer Spending
Retail sales were reported to be slow or sluggish in most districts.
Dallas and San Francisco cited weakness in the retail sector, and in
Boston and Philadelphia sales have been flat to slightly below last
year's levels. In Atlanta they have been flat to slightly above
year-ago levels but have improved little since August. Cleveland and
Richmond reported that sales have slowed in the last month. Two
districts indicated improvement in retail sales. Kansas City
reported sales increased somewhat, and Minneapolis reported "fairly
strong" sales.
New York, Philadelphia, and Dallas indicated that retail inventories were under control, but some contacts in Cleveland and most in Kansas City considered inventories too high.
In general the outlook for the holiday sales season is cautious. In Kansas City, however, some retailers are expecting relatively strong sales for the holiday season, and in Richmond they are optimistic about their business over the next six months.
Auto sales were reported to be flat or down from last year in many districts although the Cleveland District indicated that sales rose in late September and early October, and Minneapolis noted a recent surge in truck sales. Several contacts in the Cleveland District said dealers' orders for new models are slightly above year-ago levels: but Atlanta indicated that orders have been mixed and dealers there do not expect an acceleration of demand. Dealers in the Philadelphia District are also pessimistic about prospects for the 1992 model year.
Manufacturing
In most districts output and shipments in the industrial sector have
been stable to slightly higher. Philadelphia noted that the pace of
advance had slowed recently. There was also some indication of
slower growth in the immediate Chicago area. San Francisco mentioned
that conditions were still worsening in California and in the
Pacific Northwest while the industrial sector in Idaho and Utah
remained stable. Cleveland and Chicago reported that autos and steel
have been most responsible for the recent increases in
manufacturing. Boston and St. Louis noted weakness in the defense
industry.
Boston and Cleveland mentioned that manufacturing inventories are at satisfactory levels while Kansas City noted that firms are still trying to trim inventories.
Reports about new orders were mixed. Richmond noted an increase in new orders, and some manufacturers in the New York District have seen an improvement, but new orders were weak or declining in Boston and Philadelphia. Orders for defense goods in St. Louis and for oil field machinery in Dallas were reported to be down.
Philadelphia and Richmond said that, on balance, manufacturers expect improvement over the next six months. Boston, however, noted concern about renewed softness.
Real Estate and Construction
Reports on housing were also mixed. New York, St. Louis, and Kansas
City reported some increase in home sales, and Atlanta and
Minneapolis reported mixed conditions with increases in some parts
of their districts and declines in other parts. Richmond said that
housing markets in the district are sluggish. Likewise, San
Francisco reported that home sales in California and the Pacific
Northwest, which had rebounded earlier in the year, were now
sluggish. New home construction is still slow in those districts
that mentioned it.
In the commercial leasing market, the New York District said rents were still falling, and San Francisco reported plummeting commercial rental rates in the Los Angeles market.
Agriculture and Natural Resources
In the agricultural sector, expected yields compared to last year
vary by crop, but prices generally remain low. Drier than normal
weather has reduced yields for corn according to several district
reports. The Chicago District added that corn yields, although lower
than last year, are turning out to be much better than earlier
estimates. In the Dallas District and in parts of the Minneapolis
District, excessive precipitation hurt crop production although
yields are still good. In North Dakota, corn and dry bean yields are
sharply higher than last year; in the Richmond District they are
slightly lower. The wheat crop forecast for Montana is the highest
in many years. Prices for many crops, livestock, and dairy products
are weak. San Francisco reported that high production of fruits and
vegetables in California's Central Valley has lowered prices for
those products.
Low natural gas prices have reduced drilling activity in the Kansas City and Dallas districts. Dallas also reported that some energy firms have announced layoffs.
Finance
In general, loan demand has been weak. Overall demand has decreased
in the New York District, and total loan volume continued to decline
in Philadelphia. In Kansas City demand for commercial and industrial
loans is down, and demand remains soft in Chicago. New York and San
Francisco specifically mentioned that consumer loan demand was
sluggish. Atlanta, on the other hand, reported moderate improvement
in loan demand in September. And in the last two months, total loans
outstanding have increased in the St. Louis District. A number of
districts have experienced increased demand for mortgage loans,
especially refinancings spurred by lower interest rates.
Several districts reported that the majority of banks have not raised credit standards in the past few months. Cleveland noted that some banks appear to be less aggressive in seeking loans.