August 4, 1993
Most Federal Reserve Districts reported that economic activity continued to expand slowly to moderately in June and the first half of July. Flooding inflicted considerable damage in parts of the Chicago, St. Louis, Kansas City and Minneapolis Districts, but the effects of flooding were said to be highly concentrated and were not seen to threaten overall economic expansion in any District. Single- family home construction continued as a source of strength for many areas of the country. Retail sales grew across most Districts although the rate of increase varied widely. Auto sales rose in many areas of the country. Price pressures in the markets for materials and finished products were reported to be mixed.
Manufacturing
Manufacturing output growth was described as generally sluggish in
most Districts although conditions varied. Most Districts said that
manufacturers have not increased employment and do not plan to for
the remainder of the year. Several Districts noted weak sales to
Europe, but strong exports to developing countries. The Cleveland
District reported strong demand for steel and heavy truck
components, but softening orders in several other industries.
Respondents in the Chicago District cited a modest slowdown in
industrial expansion, although auto and heavy truck production
remained high. The Atlanta and Dallas Districts noted modest growth
in overall output, but found strong growth among sectors tied to
residential construction. Rates of expansion for manufacturing
output in the Philadelphia and Richmond Districts were unchanged.
Growth in Boston and Minneapolis was generally considered sluggish.
The San Francisco District reported weakness in aerospace and
defense-related industries, and strength in textiles and apparel and
in computer-related industries located outside of Silicon Valley.
Agriculture
Agricultural conditions were said to be generally favorable,
although flooding and drought have destroyed crops in several
Districts. Overall, agricultural conditions were seen as favorable
in the Dallas and San Francisco Districts. Kansas City and St. Louis
reported that, in areas not affected by wet weather and flooding,
crops were mostly in good condition and farmers were benefiting from
higher grain prices. Kansas City also noted that a large wheat crop
was expected and many farmers anticipated strong earnings. In the
Minneapolis District, above-normal precipitation has been a boon to
cattle raisers, and pasture and range conditions in the Dakotas and
Montana were said to be the best in many years.
Several Districts reported too much rain, too little rain, or both. Crop prospects are uncertain in many of these areas and will be determined by conditions between now and the frost. Atlanta, St. Louis and Richmond reported that hot dry weather has damaged crops in their Districts. High temperatures and drought have weakened rangeland and pastures in the Dallas District. Heavy rains and flooding ruined crops in portions of the Chicago, St. Louis, Minneapolis and Kansas City Districts. The Minneapolis and Kansas City Districts noted that corn and soybean crops were particularly hard hit by heavy rains and flooding. Minneapolis reported that unseasonably cool weather slowed crop development across the District. Chicago also reported that crops have been slow to develop.
The Richmond and San Francisco Districts said seafood production has declined.
Retail Trade and Services
Retail sales were reported to have increased somewhat in most
Districts, although Atlanta, Cleveland, New York, and Philadelphia
reported that sales weakened slightly in July. Overall sales
strengthened in the last month in Kansas City and Minneapolis, but
both the Minneapolis and Chicago Districts noted slow sales in
flooded areas. Apparel demand was reported to be higher in the
Atlanta, Chicago, New York, and Philadelphia Districts and weak or
sluggish in the Cleveland, Dallas and Kansas City Districts.
Atlanta, Cleveland, Dallas and Kansas City all reported increased
auto sales. Philadelphia reported that, while growth of auto sales
slowed somewhat in July, sales were expected to be above last
summer's rate. Retail and auto sales were said to be mixed in the
San Francisco District.
In Atlanta, Richmond, San Francisco, and portions of the Minneapolis District, tourism was strong and the New York District reported minor gains in tourism.
Real Estate and Construction
Residential construction and real estate activity remained strong in
most Districts. Minneapolis reported that residential and commercial
construction was perhaps the strongest component in the region's
economy. Housing activity continued to increase in the Chicago
District, but growth was thought to have slowed somewhat. San
Francisco reported strong housing markets for most of the District,
although southern California and western Washington were exceptions.
Commercial real estate activity remained sluggish or weak in most areas of the Atlanta, Dallas and Richmond Districts.
Natural Resources
The Dallas, Kansas City and Atlanta Districts reported that higher
natural gas prices have led to increased drilling, and a rise in
activity for related service companies. Although drilling is
generally expected to continue its upturn, Dallas respondents said
that lower oil prices have clouded the drilling outlook for the
second half of the year. In the San Francisco District, recent
Alaskan oil discoveries were said to have improved the prospects for
economic activity.
Mineral mining activity was mixed. The San Francisco District noted weaker mining activity in Utah, Idaho and Alaska, while iron output increased slightly in Minneapolis. Timber and logging activity was also cited as weakening in the San Francisco District.
Banking
Many Districts reported that business loan demand was unchanged, and
that demand for mortgage refinancing was strong. According to
respondents in the New York District, commercial and industrial loan
demand continued to rise. Bankers in the Philadelphia District
indicated that lending was generally unchanged although borrowing
increased slightly among middle market companies. The Atlanta and
St. Louis Districts noted recent strength in auto loans. The
Cleveland District reported that business loans had softened and
that consumer loans had leveled off, after a surge last spring. In
the Kansas City District, consumer loans have increased, while
business loans were flat to slightly up. Dallas said that overall
loan demand had declined. Respondents in the San Francisco District
said that banking conditions in California continued to improve.
Prices
District reports suggested that price pressures were mixed. The San
Francisco and Richmond Districts saw some increased prices for
building materials and other raw materials. New York and Minneapolis
Districts reported that lumber prices have declined. Manufacturing
input prices were stable to slightly higher in Kansas City. Chicago
mentioned higher prices for auto parts. Boston reported that auto
parts suppliers are under much pressure to freeze or reduce prices,
and that they will try to offset higher material prices with
productivity gains. Retail prices were reported to be very
competitive in New York. Chicago, Cleveland, and Dallas mentioned
that several retailers have lowered their prices. Kansas City
District retailers said they were holding prices steady. The
Richmond District reported that retail prices were rising. Atlanta
and Minneapolis noted stable price levels.
Higher prices were reported for natural gas, but lower prices for oil. Several Districts reported higher agricultural prices, particularly in areas affected by flooding.