Beige Book: National Summary
June 19, 1996
Reports from the twelve Federal Reserve Districts suggest economic
activity continued to advance at a moderate pace in May and early
June. Nearly all districts report expanding activity, and several
indicate the pace of growth accelerated recently. The retail and
service industries generally strengthened, and manufacturing
activity improved in several districts. Residential and commercial
construction activity also picked up in most districts, although wet
weather hampered homebuilding in some areas. Loan demand increased
in most districts, despite a decline in mortgage lending. In the
natural resource industries, agriculture was hurt in several
districts by unfavorable weather and low cattle prices, while energy
activity increased in regions producing oil and natural gas.Several districts note rising prices for some raw and intermediate
products, especially building materials, petroleum products, and
grain. Evidence of rising prices for retail products, however, was
much less widespread. Most districts continued to report tight labor
markets for both entry-level and skilled workers, although
indications of rising wages remained scattered.
Retail
Retail sales strengthened in nearly all districts, with sales
generally exceeding year-ago levels. The only exceptions were the
Boston and New York districts. In the Boston district, retailers
indicated that recent sales were disappointing, especially in off-
price discount stores, but they were generally optimistic about
sales prospects during the remainder of the year. In the New York
district, sales slowed slightly in early June after exceeding
expectations in May.Recent sales gains followed normal seasonal patterns in most
districts. Retailers in the New York, Philadelphia, Cleveland,
Atlanta, Kansas City, and Dallas districts report strong sales of
seasonal items such as air conditioners, men's and women's apparel,
and lawn and garden products. In the Cleveland and Chicago
districts, however, unusually wet weather slowed sales of home
improvement products and other seasonal items.Automobile sales remained strong in most districts. Dealers in the
Philadelphia, Cleveland, and St. Louis districts attribute part of
the recent sales strength to various sales incentive programs. Some
popular models were in short supply in the Cleveland and Kansas City
districts. The Philadelphia district, however, reports weak sales of
heavy trucks.
Manufacturing
Manufacturing activity improved in several regions, while pockets of
weakness remained in some districts. Districts reporting generally
improved manufacturing activity include Boston, New York,
Philadelphia, Richmond, Chicago, Minneapolis, Kansas City, Dallas,
and San Francisco. Reports from the Cleveland, Atlanta, and St.
Louis districts indicate manufacturing activity was uneven or flat.Activity improved in a wide range of industries. Both consumer and
capital-goods industries improved in the Boston district. In the
Richmond, Chicago, and San Francisco districts, industrial machine
and tool manufacturing strengthened. Construction-related industries
were strong in the Dallas and San Francisco districts. Conditions in
the oil field equipment industry improved in the Dallas district.Some districts report weak spots in manufacturing activity, however.
In the Boston district, demand for hospital equipment was weak,
reportedly due to lower cost health care plans. The heavy truck and
construction equipment industries remained soft in the Cleveland and
Chicago districts. In the Dallas district, the semiconductor
industry remained weak, due to a slump in demand for computers and
related products.
Services
Service activity continued to expand in districts reporting on this
sector. In the Boston district, demand for temporary workers
continued to strengthen. Service producers in the Richmond district
indicate that employment rose in May, although revenues declined
slightly. The San Francisco district reports strong demand for
computer-related services, telecommunications, and long-distance
trucking. The tourism industry remained robust. The New York district reports
hotel occupancy in New York City remained at a 16-year high. In the
Richmond district, tourism activity picked up in May despite wet
weather. The Atlanta district reports strong gains in attendance at
Florida hotels and theme parks and rising gambling revenues in
Mississippi. Also, the approaching Olympic Games have apparently
boosted passenger traffic at Atlanta's Hartsfield International
Airport. In the Minneapolis district, the tourism industry holds
optimistic expectations for the summer, even though the season's
start was delayed by cold, wet weather.
Construction and Real Estate
Residential real estate activity generally strengthened in most
districts, including New York, Philadelphia, Atlanta, St. Louis,
Minneapolis, Kansas City, Dallas, and San Francisco. Signs of
sluggishness emerged in some districts, however. Housing sales
slowed in some parts of the Boston and New York districts. Builders
in the Richmond district report declining buyer interest in new
homes, although housing sales rose. In the Chicago district, wet
weather slowed homebuilding and sales, but builders expected a
stronger third quarter.Commercial real estate activity continued to improve in most
districts. The Philadelphia, Richmond, and Atlanta districts report
declining office vacancy rates, higher rents, and gains in
commercial construction activity. The Minneapolis district reports
solid gains in contracts for large projects. In the Dallas district,
the tightest supply of suburban office space in a decade was pushing
up rents. A few districts report a weakening in commercial activity.
The New York district reports office vacancy rates edged up in New
York City in May. In the St. Louis district, commercial construction
slowed in some areas of Tennessee and Arkansas.
Banking and Finance
Overall loan demand rose in most districts, although demand for
commercial loans and consumer loans varied among the districts.
Demand for commercial and industrial loans was strong in the New
York, Chicago, Kansas City, Dallas, and San Francisco districts, and
was flat to down slightly in the Philadelphia, Cleveland, Richmond,
Atlanta, and St. Louis districts. Demand for consumer loans was
strong in the Cleveland, Richmond, Atlanta, Chicago, Kansas City,
and Dallas districts, and flat to down slightly in the New York,
Philadelphia, St. Louis, and San Francisco districts. The Cleveland
and Chicago districts report intense competition among lenders.
Mortgage lending and refinancing declined in most districts. In the
Boston district, assets managed and employment at investment
management firms strengthened.
Agriculture and Resource-Related Industries
Agriculture was hurt in several districts by unfavorable weather and
low cattle prices. Wet weather delayed the planting of spring crops
and slowed crop development in the Cleveland, Chicago, St. Louis,
Minneapolis, and Kansas City districts. The Cleveland and Chicago
districts report that more favorable weather recently enabled corn
and soybean planting to progress. Recent rains improved crop
conditions in some parts of the Richmond district. The wet weather
arrived too late in the Kansas City district, however, to avert an
expected sharp decline in winter wheat production caused by drought
earlier in the year. In the Dallas district, drought sharply reduced
the expected size of the winter wheat crop and trimmed pasture and
forage supplies. The St. Louis, Minneapolis, Kansas City, and San
Francisco districts report unfavorable conditions in the livestock
industry, due to low cattle prices and high feed costs.Energy activity improved somewhat in the Minneapolis, Kansas City,
and Dallas districts, despite declining energy prices. The
Minneapolis district reports stronger iron mining activity and mixed
conditions in the forest products industry.
Prices and Wages
Prices advanced for some raw and intermediate materials in several
districts, especially for building materials, petroleum-based
products, and agricultural commodities. Evidence of rising prices
for finished products and at the retail level was less widespread.
The Boston, Kansas City, and Dallas districts report higher prices
for building materials, including lumber. Prices for packaging
materials, some plastics, machinery, and steel were up in the
Atlanta district. Higher wheat prices pushed up flour prices in the
Minneapolis district, but otherwise had little effect on retail food
prices. Manufacturers in the Boston and Richmond districts report
rising product prices, but flat to slightly lower materials prices.
In the St. Louis district, some manufacturers report difficulty in
raising product prices due to highly competitive markets. Retail
prices held steady in the Boston, St. Louis, and Kansas City
districts and rose more slowly in May than in April in the Richmond
district. Retailers in the New York district, however, indicated
that a decline in price discounting was boosting effective retail
prices. Most districts continued to report tight labor markets for both
entry-level and skilled workers. The Cleveland, Atlanta, St. Louis,
and Kansas City districts report a tight market for retail workers.
In the Boston and Chicago districts, the number of temporary workers
shifting to permanent assignments was increasing. Markets for
skilled laborers remained tight in the Chicago, St. Louis,
Minneapolis and Kansas City districts. The Boston district reports
that a tight local labor market has prompted area businesses to
recruit professional workers from other parts of the country.
Reports of rising wages are scattered, despite widespread tightness in labor markets. The Boston district reports rising wages in manufacturing. In the St. Louis district, some fast-food establishments offer wages above the minimum wage and include a signing bonus. The approaching Olympic Games were pushing up entry-level wages in the Atlanta district.