November 3, 1999
Federal Reserve Districts
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Manufacturing and Other Business Activity
Contacts report that upward wage pressures have picked up recently-in some cases, wage increases are approaching 6 percent. Contacts also note that health care costs are rising dramatically, and hikes of 10 to 15 percent are common. Rising pharmaceutical costs are a primary reason.
Strong sales growth has been reported in the plastics and building-materials industries. Computer hardware- and software-support companies are also flourishing, with many high-tech firms moving into, and expanding within, the District. Truck producers continue to enjoy a boom, with year-to-date sales through September topping 1998 totals.
Despite the overall robust economy, several plant closings and downsizings have also been reported. Declining demand for major household appliances has led to ongoing workforce reductions at General Electric. Even though the poultry market has recently rebounded somewhat, poultry prices are still off about 20 percent from a year earlier. Cutbacks in the industry are expected. Because of poor conditions in the agricultural sector, farm equipment dealers have seen demand fall off sharply and inventories rise to unusually high levels.
Real Estate and Construction
After a moderate decline in July, monthly residential building permits rebounded sharply in August, spurred by strength in the multi-family housing market. Year-to-date residential permits are above their year-earlier levels in almost all District metropolitan areas. Many contractors are still concerned, though, that ongoing shortages of skilled workers and certain materials will continue to delay some projects.
Commercial real estate markets remain strong. However, some commercial real estate agents report that the demand for industrial space is not being met because rental rates in some areas have not yet risen enough to justify new construction.
Banking and Finance
Agriculture and Natural Resources
Persistently dry conditions in August and September, however, have reportedly reduced soybean yields below last year's levels in most District states. Cotton growers are experiencing lower-than-average cotton yields. In addition, they are worried that below-average crop quality will exert downward pressure on revenue. Corn yields in Arkansas, Illinois, Mississippi and Tennessee, on the other hand, are up from a year earlier. Early reports suggest that rice yields will be either average or slightly below average this season. A shortage of subsoil moisture in Illinois may hinder the emergence of the winter wheat crop.