November 4, 1992
Economic activity has continued to increase in most of the districts, but at a slow and uneven pace. Boston, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, and Dallas all reported some improvement, ranging from a slightly more positive tone in Boston to a modest expansion in St. Louis. Developments in New York, Philadelphia and San Francisco were described as mixed, with improvement in some sectors and sluggishness in others. Retail sales grew in most districts though the extent of the gain varied. Activity in the manufacturing sector apparently lost some momentum in much of the nation as several districts noted a slower pace of expansion or declining demand. An improvement in residential construction and sales was noted in several districts, with gains generally concentrated in the low-to- middle-income range of single-family housing. Several districts have reported a slight increase in overall loan demand. Cool and damp weather continued to delay harvests in much of the nation although yields on many crops were very good. The few reports received this time on wage and price developments referred to generally stable conditions, though with scattered price increases reported on a few individual items.
Consumer Spending
District reports indicate that retail sales improved in most areas
in recent weeks, though the extent of the gain varied. Moreover,
some retailers stated that the selling climate remained difficult
and that discounting and other promotional efforts were needed in
order to achieve the latest increases. Sales gains varied from
slightly improved in Boston and Philadelphia to markedly improved in
Cleveland. Sales of nondurables were strong in New York, Atlanta,
and Kansas City while Philadelphia and Cleveland registered gains in
most items. Retail activity remained sluggish in California,
however, as defense-related employment cutbacks continue. Districts
reporting on automotive sales were evenly divided between those
experiencing some softness and those with a pickup in demand. With
the exception of some excess auto stocks, retail inventories remain
at generally satisfactory levels in most districts at this time.
Respondents in four of the districts expect at least somewhat higher
holiday sales this year than last. Tourist activity has slowed in
the Richmond District, primarily because of fewer convention
bookings, but remains a bright spot in Atlanta and Minneapolis.
Manufacturing
Activity in the manufacturing sector apparently lost some momentum
in much of the nation as several districts, including Atlanta,
Chicago, Cleveland, New York and Philadelphia, noted a slower pace
of expansion or declines. Richmond, St. Louis, Dallas and the San
Francisco District outside of California noted some improvement,
however. Aircraft and defense goods, nonelectrical machinery, rubber
and plastic products and primary metals were cited as products for
which demand has slowed. Respondents pointed to the weakness in
foreign economies and dampened consumer confidence in this country
as sources of concern. On the other hand, manufacturers of building
supplies, carpeting and other home furnishings have seen an increase
in demand as a result of the post-hurricane rebuilding in the South
and an uptick in housing demand in some other areas. Dallas reports
strong demand for fabricated metals and electrical and electronic
machinery and San Francisco notes that demand from Latin America and
Pacific Basin countries is supporting manufacturing activity in that
district. St. Louis reports that manufacturing employment gains
continue to outnumber reports of losses. With regard to the outlook,
Boston states that manufacturers are cautiously optimistic, and
those in Philadelphia believe that the upturn which began last
spring is still on track. Manufacturers in Cleveland are optimistic
about the next six months.
Construction and Real Estate
An improvement in residential construction and sales was noted in
several districts with gains generally concentrated in the low-to-
middle-income range of single-family housing. Boston reported that
the real estate market has stopped declining in most New England
states and that the volume of sales is up substantially from a year
earlier. Cleveland and St. Louis noted that residential contracts
and permits were well above the year-earlier pace and Richmond
reported strong sales to first-time homebuyers. Single-family
homebuilding is providing the only source of strength in the Dallas
construction industry as was also the case in Kansas City. In
Florida, a good deal of hurricane-related residential rebuilding is
now taking place. San Francisco reported sluggish sales and
declining prices, particularly on more expensive homes, in
California and a big jump in foreclosures in the southern part of
the state where defense-related job cutbacks are still occurring.
However, stronger residential markets exist in other district states
such as Oregon, Utah and Idaho. A majority of districts noted that
multi-family housing starts have been flat. Most banks report
relatively slow nonresidential construction activity, a major
exception being Minnesota where there has been a substantial
increase in awards for infrastructure such as roads, bridges, and
water/sewer construction and where the building of casinos and new
motel space is underway.
Financial Institutions
Several districts have reported a slight increase in overall loan
demand in recent weeks. Mortgage refinancing activity, however,
seems to have peaked in a number of areas. Philadelphia noted that
some banks saw a recent pickup in commercial and industrial loans
and that consumer lending was level or increasing. Atlanta banks
reported loan demand as flat or slightly higher with some increase
in consumer loan activity. A few large banks in Cleveland saw a
step-up in business loans in recent weeks though, as in several
other districts, the most active part of the market continued to be
residential mortgages. St. Louis and Kansas City also reported a
recent increase in loans outstanding with business, real estate and
consumer loans up in St. Louis and most categories stronger in
Kansas City. Overall loan demand remained sluggish in New York where
demand for business loans declined, and Dallas noted a softening of
loan demand that some bankers attributed to business borrower
caution about the near-term economic outlook. Financial conditions
were mixed in the San Francisco District. There was weakness in
California, where consumer loan demand continues to drop and
commercial loan demand is weak, but brisk demand for mortgage loans
in Utah from consumers upgrading their housing and from continued
migration into the state. With regard to the outlook, bankers in
Dallas expect business loan demand to rise slowly and Miami
anticipates some increase in loan demand from the process of
hurricane rebuilding. Philadelphia bankers say the outlook is
uncertain and none predicted accelerated growth.
Agriculture and Resource-Related Industries
Cool and damp weather continued to delay harvests in much of the
nation. In Richmond the harvesting of summer crops and the planting
of small grains were slower than normal as unseasonably cool weather
delayed the maturing of corn and soybeans. Minneapolis notes that an
unusually cool and wet growing season delayed crop maturity and
continues to retard harvest operations, but that yields for all
major crops except soybeans are generally excellent. Cool weather
also impaired the growth of late-planted crops in Dallas and
production estimates have been reduced slightly as a result. In
Kansas City, however, corn, soybean and milo yields are generally
larger than normal while cotton and peanut yields are near normal.
In addition, the planting of winter wheat is nearly complete in that
district and the crop is generally in good condition. The soybean
harvest was at a near-normal pace in the Chicago district except in
Michigan where rain slowed harvesting. Progress with the corn
harvest has been considerably slower than normal due to the high
moisture content of this year's crop. The cotton harvest in St.
Louis was hampered by adverse weather conditions, but good to
excellent yields are reported for corn, soybeans and rice.
California reports that while parts of the district are experiencing
drought, sunny weather has helped tree crops such as apples and
cherries whose production is well above last year's levels.
Mining has been lackluster in Minneapolis with low prices for gold and copper and slack demand for iron ore. Aluminum production remains high in California despite sharply falling prices but the output of forest products continues low. The surge in domestic demand for plywood resulting from recent hurricane damage has apparently subsided and shipments to Japan and other Pacific Basin countries remain down.