March 18, 1992
Most Federal Reserve Districts report some improvement in economic conditions. Business sentiment is described as modestly more optimistic in many parts of the country, though it remains cautious. Representative of many Federal Reserve Districts, Chicago notes "a slow but increasingly widespread advance in the economy since the end of January." Or as St. Louis puts it, "Most sectors ... are reporting growth." Most-often mentioned as improving are residential construction and home sales, auto sales, and other retail sales. There are few indications of significant upward pressures on retail and wholesale prices of goods.
Most-often mentioned as flat or weak are manufacturing and nonresidential construction; bank loan demand is described as little changed. The manufacturing sector remains generally flat, with layoffs and rising unemployment often noted. Yet several districts report glimmerings of recovery in manufacturing, with improving expectations for future activity. Commercial construction remains moribund. Bank loan demand is best described as flat, although residential mortgage lending is often mentioned as a bright spot. Mortgage refinancing activity appears to be tapering off somewhat.
Wages and Prices
Continuing the trend of recent reports, wage and price pressures
appear generally quite moderate, An exception is a survey of Buffalo
(New York) purchasing managers: the percentage reporting higher
input prices jumped markedly in February. In addition, several
districts mention lumber prices. These are up sharply in some areas,
due to increased construction activity and restricted supply. San
Francisco observes that some grades of lumber are selling at
historically high price levels. As reported in the last Beige Book,
oil and gas prices remain low.
Consumer Spending
Most Federal Reserve Districts report some improvement in retail
sales so far in 1992 and guarded optimism on the part of
merchandisers. An exception is San Francisco, which notes that
retail sales remain soft in that district. Perhaps more
representative is Boston, which reports improvement for retailers of
all types. Richmond notes that consumer spending improved in late
January and February after a flat December and early January. And
Cleveland observes that consumer spending exceeded expectations in
both January and February.
Automobile sales have exhibited widespread (if often modest) improvement. Districts reporting at least some increase in car sales include Boston, Philadelphia, Cleveland, Atlanta, Chicago, Minneapolis, Kansas City, and San Francisco. Only Dallas notes declining auto sales. Several districts also mention strength in light truck sales.
Manufacturing
The manufacturing sector is probably best described as "mixed." A
number of districts report continuing layoffs and rising
unemployment in manufacturing (for example, New York, Minneapolis,
and San Francisco). But other districts describe modest gains in
manufacturing shipments or output (Philadelphia, Richmond, and
Dallas). St. Louis notes that several outside manufacturers are
relocating in that district. Those areas reporting some strength in
manufacturing often attribute it to Improved demand from the retail
sector and residential construction. Several districts, including
Richmond and Kansas City, report declining inventories, but
Cleveland notes that inventory liquidation may have ended.
Real Estate Sales and Construction
Continuing the trend noted in the last Beige Book, all Federal
Reserve Districts report at least modest improvement in real estate
sales or residential construction or both. In a few areas, gains
have been quite substantial. In Chicago, building material sales to
homebuilders were quite strong, and Dallas reports that the
inventory of houses has fallen to a low level. In many parts of the
country, demand is apparently strongest for moderately priced homes.
Richmond, San Francisco, and Chicago report that home prices are
generally flat, but Minneapolis and Dallas note some increases. As
has been true for some time, nonresidential construction is moribund
in most parts of the country. San Francisco notes a decline in
commercial building sales prices, and New York mentions rising
vacancy rates for commercial office space.
Banking and Finance
Loan demand is generally flat, with most districts reporting little
change in demand for consumer or commercial loans and commercial
real estate lending remaining in the doldrums. Credit standards are
described as largely unchanged. Although most districts note that
the wave of mortgage refinancing has continued, it appears to have
slackened in response to the recent rise in mortgage rates. New
residential mortgage lending is mentioned as a bright spot by a
number of districts.
Agriculture and Resource-Related Industries
Conditions in agriculture are varied, depending on the product and
the weather. Richmond reports that weather and crop conditions were
excellent in January and February. However, Kansas City cites a
recent downturn in farm incomes and a slight rise in problem
agricultural loans. Dallas and Minneapolis comment that declines in
livestock prices have hurt some ranchers. Recently, much-needed
rains fell in the Kansas City and San Francisco districts.
Dallas, San Francisco, and St. Louis note continued low oil and gas prices. Minneapolis and Dallas report that as a result of these low prices energy exploration and development expenditures are down.