August 5, 1992
Economic activity has been uneven in recent weeks across the nation. Manufacturing increased moderately in most districts and showed no discernable direction in others, with considerable variation by industry. Retail sales also varied widely, but apparently rose modestly overall. Lower interest rates sparked another round of mortgage refinancing, but evidently provided little impetus to residential and commercial real estate activity. Consumer and business loan demand strengthened in only a few regions while remaining weak in most of the country. Agricultural conditions improved slightly as recent rains helped crops in many areas.
Consumer Spending District reports suggested that retail activity improved somewhat in recent weeks. Sales activity varied by product and region. Apparel sales were reported to be strong by New York and Kansas City, but weak by Philadelphia. New York and Kansas City also noted increased sales of home furnishings; Minneapolis and Atlanta indicated depressed appliance sales. Automobile sales evidently were weak in most districts except Atlanta and Dallas, where they were strong. Tourist activity was flat in the Richmond district but showed some strength in the Minneapolis district.
The expectations of retailers varied from district to district. Philadelphia, Richmond, Chicago, Kansas City, and Dallas indicated that their contacts were optimistic about prospects for sales in the months ahead, while San Francisco said retailers were less optimistic than earlier this year. Survey respondents from the New York district were cautious but hopeful in their outlooks, and Cleveland reported retailer uncertainty about sales prospects. Retailers in the Boston district anticipated no substantial change in activity in the months immediately ahead.
Manufacturing
Manufacturing continued to improve moderately in most districts,
while the direction of activity was unclear in the Boston and St.
Louis districts. Cleveland and Chicago noted that manufacturing
continued to lead their regions' economic recoveries. Philadelphia,
Richmond, Atlanta, and Chicago indicated that new orders had risen.
Philadelphia and Richmond added that shipments had risen as well and
that manufacturers expected activity to increase further in the next
six months. Cleveland and Chicago anticipated increased automobile
production in the current quarter. Manufacturing employment
apparently changed little in the Boston, Philadelphia, Richmond, and
St. Louis districts, but Atlanta reported some increases in
production workers.
Some industries performed better than others. Atlanta and Dallas noted strong gains in activity among apparel manufacturers and among producers of goods for residential construction. Boston and San Francisco reported weakness in defense-related and aerospace industries, but Boston found strength in demand among suppliers to the automobile industry.
Residential Real Estate
Home sales and home building activity in recent weeks varied by
region but appeared on balance unchanged for the nation as a whole.
Cleveland and St. Louis reported decreased sales, and Richmond
indicated that sales were flat. Atlanta, Chicago, and Minneapolis,
however, reported increased sales, as did San Francisco for all
states except California, where sales were weak.
Residential construction activity rose in the Chicago and Dallas districts, and in the San Francisco district outside of California. Homebuilding activity decreased in the St. Louis district and was generally unchanged in the Atlanta and Kansas City districts and in California. New York and Minneapolis indicated mixed activity in their districts.
Cleveland, Richmond, Kansas City, and Dallas said that lower interest rates were not spurring home buying, although Chicago indicated that lower rates were helping. In the New York and Richmond districts, real estate agents mentioned that the job security concerns of potential home buyers were continuing to dampen sales.
Nonresidential Construction
Nonresidential construction activity generally remained sluggish.
Atlanta noted that most activity stemmed from either private custom-
built or government projects. New York and Richmond, however,
indicated that some new commercial projects were underway.
Minneapolis, Dallas, and San Francisco reported continued depressed
commercial real estate prices. Office building vacancy rates in the
New York district, while still high, evidently fell in recent weeks
as rents became more competitive. Dallas and San Francisco indicated
that commercial property was selling far below construction costs.
Lower interest rates apparently had had little effect on commercial real estate loan activity. The demand for these leans was reported to be flat or down by Richmond, Kansas City, and San Francisco, and steady to somewhat higher by New York.
Financial
On balance, financial conditions improved slightly across the nation
over the past six weeks. Loan demand was characterized as stronger
by Richmond, Chicago, and Kansas City and described as stable by New
York, Philadelphia, Cleveland, Atlanta, St. Louis, Dallas, and San
Francisco. Commercial loan demand continued to exhibit weakness,
although Richmond and Kansas City cited some improvement. Among
districts consenting on consumer loan demand, Philadelphia, Atlanta,
and Kansas City registered increases, while New York, Richmond, and
St. Louis reported no change. Among loan categories, home mortgages
exhibited the greatest strength in most districts, but the bulk of
the activity was attributed to refinancing, which picked up somewhat
in early July. Atlanta and Chicago noted that some banks were more
aggressive in seeking new loans, but Boston found that small
businesses were still choosing to obtain credit from nonbank
sources.
Lenders in the Philadelphia and Dallas districts expected loan demand to be flat over the next few months. Boston, Philadelphia, and Chicago cited the continuing reluctance of bank customers, particularly businesses, to take on new debt.
Inventories
Inventory conditions varied across the country. Reports of retail
inventories were especially disparate. Philadelphia and Chicago
reported levels below and in line with plans, respectively. Atlanta
reported retail inventories to be at historically low levels.
Inventories in manufacturing edged up in the Philadelphia district,
and were unchanged in the Richmond district. Dallas district
manufacturers described their inventories as high. Both Kansas City
and Dallas respondents expected inventory levels to fall in the
weeks ahead.
Prices and Costs
Richmond and Kansas City indicated small increases in the prices
charged by retailers and manufacturers in recent weeks, while other
districts reported little change. Manufacturers' input prices were
stable, although Richmond, St. Louis, and Dallas noted increases in
business and production costs. Construction costs rose in the Kansas
City and Minneapolis districts. St. Louis, Dallas, and San Francisco
reported recent declines in lumber prices, while Kansas City
reported increases. Dallas indicated increases in the prices of
chemicals, petroleum, and steel. Minneapolis and San Francisco
reported greater-than-average increases in health care costs.
Agriculture and Natural Resources
Conditions in agriculture were slightly improved. In the Richmond,
Chicago, and St. Louis districts, and in areas of the Kansas City
district, recent rains have brought relief to heat- and drought-
stressed crops. Dallas reported that crops in the district had
benefited from a return to more normal weather. Damage to wheat was
reported in the San Francisco district, however, where dry
conditions in the Pacific Northwest reduced yields, and in the
Chicago district, where too much rain harmed the crop. Minneapolis
and Kansas City reported that hail had harmed some crops and that
crop development had been slowed by unseasonably cool weather. In
the livestock sector, Chicago indicated increased hog production,
and Kansas City reported that cattle herds were expanding slowly.
Movements in farm prices varied. Crop prices were reported to be above last year's levels by Minneapolis but declining in the Dallas district. Livestock prices were lower in the Chicago, Minneapolis, and Kansas City districts but stable in the Dallas district. Chicago indicated that milk prices were up.
Energy activity in the nation evidently continued to contract in recent weeks. The drilling rig count declined substantially in the Kansas City district, where activity was near historically low levels, but rose somewhat in the Dallas district. Oil industry respondents in the Dallas district indicated that they were cutting domestic exploration spending.