December 4, 1996
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Prepared at the Federal Reserve Bank of Philadelphia based on information collected before November 23, 1996. This document summarizes comments received from businesses and other contacts outside the Federal Reserve and is not a commentary on the views of Federal Reserve officials.
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.
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 merchantsí current or expected sales. Price discounting was increasing in Boston, New York, Philadelphia, and Cleveland.
Retailersí 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 nationís 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.
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
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.
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
Financial Services and Credit
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
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.
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."