May 10, 1995
Most Federal Reserve District Banks reported continuing gains in economic activity from March through April, but at a somewhat slower pace. Overall business conditions were described as improving solidly in the Cleveland, Chicago, Kansas City, and Minneapolis Districts. Growth was reported to be continuing at a somewhat slower pace by Boston, Richmond, Atlanta, St. Louis, Dallas, and San Francisco. Business activity was described as mixed in New York and less strong in Philadelphia. Most Districts reported sluggish growth in retail sales and declines in automobile sales, while manufacturing was up by varying degrees in most Districts.
Although reports of rising commodity and industrial prices remain widespread, except for construction materials, reports from many Districts described these increases as moderate or not accelerating or indicated that they were not being passed through to finished goods prices. In addition, despite tight labor markets in some sectors or regions, wage pressures were described as moderate in most areas.
Retail
Most Districts reported sluggish growth in general merchandise
sales, although Chicago and Minneapolis reported improved sales and
a few Districts (New York, Cleveland, and Atlanta) noted some
improvement in April compared to March. Richmond indicated that
sales growth was slowing. In the Boston and Philadelphia Districts
sales were mixed and generally below expectations. Store inventories
were on the rise, according to Philadelphia, Atlanta, Dallas, and
San Francisco. Auto sales softened in all Districts except Dallas.
Some weakening in sales of home furnishings and consumer durables
was also reported.
Manufacturing
Manufacturing activity remained strong in Cleveland, Kansas City,
Minneapolis, and Dallas. Continuing, but smaller, gains were
reported by Boston, Richmond, Atlanta, Chicago, and St. Louis.
Demand was strong for capital goods, electronics, and
petrochemicals. However, even in Districts with increases in overall
manufacturing, demand for construction materials was easing.
San Francisco District manufacturers reported mixed results. Aerospace and lumber companies experienced declining demand, while producers of electronic goods, machinery, and aluminum increased output. Overall manufacturing activity declined in the Philadelphia District.
Real Estate and Construction
Commercial real estate activity was improving in most Districts.
Office leasing and construction were reported on the rise by
Richmond, St. Louis, and Minneapolis. Dallas and Minneapolis noted
increased construction of warehouses. Nonresidential construction
was mixed in the San Francisco District, moving up outside of
California, particularly in Nevada and Alaska, but easing in the Los
Angeles area. Boston and New York gave mixed reports; gains in some
parts of those Districts were offset by declines in others.
Residential construction or sales were up somewhat in the Chicago and Kansas City Districts, but were slipping in the Atlanta, St. Louis, Minneapolis, and Dallas Districts. San Francisco reported slower growth in residential construction. Multifamily construction was increasing, according to Atlanta and Dallas, but real estate contacts in those Districts expressed concern that apartments were approaching an overbuilt situation.
Banking
Overall bank lending was increasing moderately in most Districts,
with gains most often noted in commercial and industrial lending.
All five District Banks that reported on consumer lending
(Philadelphia, Richmond, Cleveland, St. Louis, and San Francisco)
noted drops in the demand for consumer loans. New York, Richmond,
and St. Louis reported increased real estate lending. Lending terms
in April were reported to be substantially the same as earlier in
the year, but competition for business loans remains strong.
Agriculture
Several Districts noted some concern in agricultural areas about the
outlook for summer crops because planting has been delayed. Cold and
wet weather has caused postponements in planting in the Cleveland,
St. Louis, Minneapolis, and San Francisco Districts, while dry
weather has affected parts of the Richmond and Dallas Districts.
According to agricultural contacts in Minneapolis, the delay could
curtail crop yields later this year regardless of weather conditions
during the summer. But the winter wheat crop is in good condition,
according to reports received by St. Louis and Kansas City. Floods
in California have damaged vegetable, fruit, and nut crops,
according to information obtained by San Francisco, and some crop
prices are expected to remain high through mid-summer. Both Kansas
City and Dallas report falling livestock prices.
Tourism
Spring tourism business has picked up in the Boston, Richmond,
Minneapolis, and San Francisco Districts, and part of the Atlanta
District. Tour agencies and hoteliers in these regions expect a good
summer. Boston and Atlanta both noted an increase in international
visitors to some tourist regions. Atlanta also noted, however, that
a weakening of tourism in southern Florida has been attributed to
the drop in the value of the peso. Boston also was told that
spending by domestic tourists appears to be off from prior years.
Energy and Mining
Recent increases in oil prices have boosted drilling activity a bit,
according to the Kansas City, Dallas, and Minneapolis Districts. But
a relatively mild winter depressed demand for natural gas, and
natural gas prices and production remain weak.
Minneapolis reported that rising demand for gold and copper was prompting output and employment increases in the District. San Francisco also reported increased production from gold and silver mines.
Prices
Except for prices of materials used in residential construction,
reports of rising commodity and industrial prices remain widespread,
although many Districts described these increases as moderate or not
accelerating (including Philadelphia, Chicago, Atlanta, and
Richmond) or indicated that they were not being passed through to
finished goods prices (including Philadelphia, Cleveland, Atlanta,
and Dallas). Chicago was the only District that reported that input
price increases were more frequently being passed through to final
goods prices. While some business contacts told District Banks that
the rise in commodity prices appeared to be slowing, Boston,
Chicago, and Cleveland reported the range of commodities affected by
the increases was expanding. Cleveland and Kansas City contacts said
retail prices were steady, while Richmond contacts reported higher
retail prices.
Wages
Tight labor markets in some sectors or regions were reported by
Cleveland, Atlanta, Chicago, Richmond, Minneapolis, and Dallas, but
wage increases were described as moderate in most of these areas,
and Kansas City noted few reports of wage increases. Demand in some
Districts for both skilled and semi-skilled workers, as well as
technical and managerial workers, was strong. Labor markets appeared
to be less tight in the Philadelphia District, where manufacturers
reduced work forces in April, and in the Boston District, where
business contacts gave no reports of labor shortages or growing wage
pressures.