December 4, 1996
Moderate economic growth continues to be reported in nearly all Federal Reserve Districts. Labor markets in most Districts remain tight, although wages pressures are generally not increasing except for some technical occupations and skilled workers. Retail prices are stable in most Districts although some firming, mainly in prices for materials and intermediate goods, is noted by Richmond, Atlanta, Kansas City, and Dallas.
Consumer Spending
Retail sales have increased in most
Federal Reserve Districts. Sales have moved up
in Boston, New York, Philadelphia, Minneapolis,
Kansas City, and Dallas in the past four to six
weeks, and San Francisco reported moderate
improvement in recent months. Atlanta and St.
Louis have had year-over-year increases. Chicago
reported that retail sales have been flat in the past
month but above last year?s level. The only reports
of weaker sales come from Cleveland, where sales
were down compared to a year ago, and
Richmond, where sales have moderated in the
past month.
By product line, apparel sales have been relatively strongest in New York, Cleveland, Atlanta, St. Louis, Minneapolis, Kansas City, and Dallas. Home products were also selling well in Atlanta and St. Louis. Electronic products were selling strongly in Minneapolis and Kansas City but poorly in New York, Cleveland, and Chicago. Appliances were not selling as well as other types of products in New York, Chicago, and Minneapolis.
All Districts that obtained information on inventories reported that stocks were in line with merchants? current or expected sales. Price discounting was increasing in Boston, New York, Philadelphia, and Cleveland.
Retailers? expectations for sales in the upcoming holiday season are modestly optimistic. In the Boston, New York, and Philadelphia Districts, merchants forecast gains ranging from 2 to 6 percent, year-over-year. Atlanta merchants expect a slight increase. In St. Louis, Kansas City, Dallas, and San Francisco the season is expected to be strong.
Auto sales were mostly steady in Districts that got reports from dealers. In Philadelphia, St. Louis, Kansas City, and San Francisco, sales were roughly unchanged in recent weeks but at a high level. The sole negative report came from Dallas where sales were characterized as sluggish.
Tourism has been strong in the nation?s coastal states. Richmond, Atlanta, New York, and San Francisco report high hotel occupancy rates. Theme park attendance and bookings for winter stays at coastal resorts have been high in Florida. Minneapolis, however, reported lackluster tourism, although early snow has boosted business in areas popular with skiers and snowmobilers.
Manufacturing
Nearly all Districts reported continued
expansion of manufacturing activity in October
and November. The improvement was generally
modest, although manufacturers in the Boston
District said they were seeing year-over-year
gains in orders and revenue of up to 15 percent.
Less positive conditions prevailed in the
Cleveland District, where production was just
steady, and in the Atlanta District, where "an
increasing number of factories are reporting
decreasing production and shipments."
Boston noted strong orders for consumer durables, furniture, appliances, computers, and medical equipment. Dallas and Atlanta reported stronger demand for electronic products and industrial equipment. Boston and San Francisco indicated that production of aircraft and related equipment was moving up. Dallas noted strong demand for energy equipment and oil machinery. Some disruption in the production of autos and related equipment because of strikes was reported by New York, Cleveland, and Chicago; Cleveland also noted that lost production was not scheduled to be made up.
Inventories were described as "normal" in the Cleveland District and "satisfactory" in the Kansas City District. Inventories were declining in Philadelphia. Producers of electronic goods in the Dallas District said their inventories were high but coming down.
Real Estate and Construction
All seven of the Districts reporting on
commercial real estate markets noted
improvement. New York and Dallas indicated
continued improvement in office markets, and
Richmond and Atlanta noted increases in rental
rates and drops in vacancy rates. Commercial
construction activity increased in the Districts of
Richmond, Atlanta, St. Louis, Minneapolis, and
Dallas. Richmond and Atlanta received reports of
increased speculative construction of office
buildings. Development of light industrial and
retail space was also under way in Atlanta and
Minneapolis. Minneapolis reported robust public
infrastructure construction, and Dallas reported
strong construction of extended-stay hotels in that
city.
Districts reporting on residential real estate mainly observed slowing sales, although sales levels remained high. Richmond, Chicago, Minneapolis, and Kansas City reported slower sales. In the San Francisco District sales fell back somewhat in Arizona, Idaho, and Utah but increased in Washington, Oregon, and the San Francisco Bay area. Home prices were steady in Boston and New York, falling in Richmond, and rising in St. Louis and the stronger markets in the San Francisco District mentioned above.
Agriculture
In general, Federal Reserve Districts that
surveyed agricultural conditions received good
reports. Minneapolis noted that grain yields were
"excellent and better than had been expected
through the growing season." St. Louis said that
"initial reports suggest that yields were generally
above average." The soybean crop was plentiful in
the Cleveland and Dallas Districts. Minneapolis
and Cleveland received positive reports on the
potato crop. Other crops for which yields were
said to be good were rice, peanuts, and sugar beets.
Kansas City reported an excellent corn harvest,
but Cleveland said the corn harvest in Ohio was
about 20 percent below normal. Minneapolis and
Kansas City reported that recently planted winter
wheat was in good condition in their Districts, but
Cleveland said seeding was hampered by muddy
field conditions.
Dallas described livestock conditions as "good overall," and Kansas City and Minneapolis said higher cattle prices have led to an increase in cattle at feedlots.
National Resource Industries
The current level of oil prices is prompting
high and growing oil-field activity. Dallas noted
that "high prices continued to boost demand for oil
services," and Kansas City reported that the
District?s rig count rose 2.4 percent in October and
was above the year-ago level. Minneapolis
reported that "iron ore mining and oil drilling
continue at the brisk pace that has prevailed for
several months."
Financial Services and Credit
Credit demand varied among Districts.
Only Cleveland and San Francisco indicated
growth in overall bank lending. In other Districts,
lending was mixed. Competition for new lending
was characterized as aggressive for business
loans in Philadelphia and St. Louis, for consumer
loans in Richmond, and in general in Cleveland.
In New York, Philadelphia, Cleveland, Atlanta, and San Francisco, banks reported deterioration in credit quality, especially for consumers. Tightening of credit standards was mentioned in New York, Philadelphia, Chicago, St. Louis, and Kansas City. No Districts reported easing credit standards.
Employment and Wages
Labor markets were characterized as tight
in a majority of Districts. Districtwide labor
market tightness persisted in Richmond, Chicago,
Minneapolis, St. Louis, and Kansas City. Atlanta
and Cleveland said labor markets were tight in
many parts of their Districts. In most Districts
employers said skilled trades workers and
specialized technical workers were in particularly
short supply. Boston reported that "demand for
highly skilled temporary workers continues to
outpace supply." Richmond, Chicago, and San
Francisco also noted strong demand for skilled
construction workers. Chicago and Minneapolis
said retailers were having difficulty hiring
temporary help for the holiday season.
Reports from District banks do not indicate a generalized acceleration in wage increases despite growing reports of labor shortages. Cleveland, for example, said that its contacts see "few signs of any significant rise" in wages, and Atlanta said "reports of increasing wages are infrequent in the region." Minneapolis reported that "many employers say there is no generalized upward pressure on compensation." Nonetheless, there appear to be more instances of stepped up compensation, especially for highly skilled technical workers. Boston reports that in the area around that city "compensation packages to attract key technical employees are said to be escalating rapidly." Richmond contacts reported more pronounced wage pressures in October than in September. A large temporary help agency reported to Chicago that wages in the Midwest were rising. Also in the Midwest, Kansas City noted "continued evidence of wage pressures," especially in manufacturing.
Prices
District reports on prices suggest there
has been virtually no change in trend recently.
Boston contacts said "prices remain generally
stable." New York indicated "there has been little
change in price pressures." Cleveland and
Richmond characterized price increases as
"modest." Chicago reported that "price pressures
remained largely in check." Minneapolis received
"few reports of price increases for raw materials,
consumer goods, or services." Most
manufacturers in Philadelphia and Cleveland
indicated that both input costs and output prices
were steady. Manufacturers in Chicago said their
input costs were flat, and firms in St. Louis said
the cost of materials were "stable to up somewhat."
Exceptions to the relatively steady price picture are petroleum products and fuels, whose prices rebounded after falling in early November. Also, there were more reports of rising industrial prices in recent surveys in Richmond and Atlanta. Kansas City observed rising costs of "some manufacturing and construction materials," and Dallas noted that "several industries reported a general firming in prices."