June 17, 1992
Economic activity continues to improve. The manufacturing sector appears to be strengthening in all districts. The Chicago, Dallas and St. Louis districts report gains in nonmanufacturing sectors as well. All districts except Boston, New York and San Francisco report moderate increases in consumer spending. Residential construction activity remains well above year-ago levels in most districts, and new home prices have risen in several regions. Loan demand appears to be increasing in most districts. Price stability in the retailing and manufacturing sectors seems to be the rule across districts. Adverse weather has affected agricultural prospects in many districts.
Manufacturing
All districts report improving manufacturing conditions, except for
the defense and aerospace industries. The Boston, Cleveland, Dallas,
Philadelphia, St. Louis and San Francisco districts report that
orders are increasing modestly, while Atlanta and Chicago note much
sharper gains. Most of the increases come from durables-producing
industries within each district. Employment at manufacturing firms
continues to rise in the Chicago, Philadelphia and Richmond
districts. The Atlanta district reports that some firms have
increased hours in response to increased demand. The Boston, New
York, Philadelphia and Richmond districts also report that at least
one-fourth of the surveyed firms will hire new employees during the
next six months. The Chicago district adds that an increase in
orders for new cars is expected to require additional shifts and/or
overtime. The St. Louis district reports employment declines because
of plant closures and relocations, while the San Francisco district
reports significant declines because of defense industry cutbacks.
Reported inventory levels are mixed. San Francisco district firms report no inventory concerns, while firms in the Kansas City district find their inventories either satisfactory or slightly high. Richmond district firms experienced no changes in inventories or backlogs and foresee no changes in the next six months.
Demand for exports of manufactured goods seems to be waning because of weakening foreign economies. For example, the Boston, Minneapolis, Richmond and San Francisco districts report a drop-off in the volume of durables exports, especially electronics to Japan and appliances to Canada. The San Francisco district, however, reports that exports of electronic components to other Pacific-Rim nations remain strong.
Nonmanufacturing
The St. Louis district reports strengthening in the growth of
nonmanufacturing employment. Southern California, on the other hand,
has experienced a large loss of retail and service-related jobs in
the aftermath of the Los Angeles riots, and the New York district
will post significant retail job losses by this fall when 15 major
department stores in the New York metropolitan area are closed.
Outside of retailing, the Chicago and Dallas districts report
increased activity in business-related services. The San Francisco
district indicates growth in advertising but declines in
telecommunications.
Consumer Spending
Most districts report increases in non-auto merchandise sales. All
districts except Boston, Cleveland, New York and San Francisco
report modest gains in April and May, while the Minneapolis,
Philadelphia and St. Louis districts note year-over-year gains as
well. Much of this growth is attributed to the late Easter season.
The Dallas, Philadelphia and Richmond districts identify big-ticket
items as slow movers, and Atlanta concurs by stating that
nondurables are selling better than durables. The Dallas district
notes greater improvement at mid- to upper-scale stores than at
discounters, while San Francisco indicates increases at both
department and discount stores. Contacts in the Boston and New York
districts blame unseasonably cool weather and the news of potential
additional layoffs for their poor sales. Auto dealership traffic and
sales are increasing steadily in most districts; the Dallas and San
Francisco districts, however, report slower or "spotty" growth.
Construction and Real Estate
Residential construction activity continues to be a source of
strength in most districts. While construction has stabilized or
dropped off slightly in some districts since its first-quarter
surge, contacts in the Atlanta, Kansas City, Minneapolis, Richmond
and St. Louis districts describe the pace of residential building
activity as strong. New home prices are reportedly higher in the
Dallas, Kansas City and Richmond districts because of increased
lumber costs and low inventories. New and existing home sales are
mixed, with the Atlanta and Minneapolis districts reporting a slight
downward trend in sales and the Kansas City and Richmond districts
reporting a continued increase in sales. No appreciable improvement
in commercial real estate markets is reported.
Banking and Finance
Loan demand appears to have increased slightly in most districts.
Contacts in the Atlanta, Dallas, Kansas City, New York, Richmond and
San Francisco districts report stable-to-stronger loan demand. The
Philadelphia district describes loan demand as soft, and the St.
Louis district reports that loan demand appears to have weakened in
recent weeks. The source of increased demand varies by district;
some report increases in consumer loan demand, while others note
improvements in business loan demand. The Kansas City and San
Francisco districts report increases in both categories.
Prices
Inflationary expectations in retailing and manufacturing remain
relatively subdued. Contacts in the Boston, Dallas and Philadelphia
districts report retail prices as stable, while contacts in the
Chicago, Kansas City, Minneapolis, Richmond and San Francisco
districts report slight-to-moderate price increases. Manufacturing
and retailing wage pressures remain moderate-to-low across most
districts. Manufacturing materials prices remain relatively stable
across districts, although steel producers in the Chicago district
report higher input prices.
Agriculture, Energy and Natural-Resources-Related Industries Many districts report that unseasonably cool weather and inadequate soil moisture have hampered the planting and development of many crops. In the Chicago, Kansas City and St. Louis districts, adverse weather has affected the corn, cotton, soybean and winter wheat crops. Declining livestock prices have recently led cattle and pork producers in the Kansas City district to curtail production. The San Francisco district reports that, except for grains, agricultural exports to Mexico and the Pacific Rim (excluding Japan) have been strong lately. Despite the recent firming of oil and gas prices, the Dallas, Kansas City, Minneapolis and San Francisco districts indicate that the energy sector remains weak. Lumber production is up significantly in the St. Louis district, but down in the San Francisco district.