The Federal Reserve Board eagle logo links to home page

Beige Book logo links to Beige Book home page for year currently displayed August 5, 1998

Federal Reserve Districts

Fourth District - Cleveland

Skip to content

New York
St. Louis
Kansas City
San Francisco

Full report

The District's economy seems to have slackened a bit, partly as a result of rising imports and the growing effects of the General Motors strike. Nevertheless, business activity remains strong overall, and labor markets are still unusually tight. Shortages of skilled workers remain a problem at many firms, especially in the communications industry. An electronics firm indicated that labor shortages there have been eased by in-migration from other regions.

Temporary employment agencies in the District report that labor demand has leveled off after several months of rapid growth. Still, the demand for workers remains well above year-ago levels. Moreover, temp agencies report that a high proportion of placements become permanent hires before the standard 90-day contract has expired. Most firms report a small rise in the rate of wage growth, and retention bonuses have become common.

Collective bargaining settlements in the District reveal mixed wage patterns. About half of the union contacts report a slight increase in wage growth from this time last year, while others see wages holding steady.

Crop development varies throughout the District, depending on soil conditions. Dry soil is reported in the northwest Ohio and Pennsylvania regions, while flooding has been a problem in southeast Ohio and Kentucky. Nevertheless, the District's crops are generally ahead of schedule. The condition of roughly 66% of the region's corn and 65% of its soybean crop is rated good to excellent—about 15 to 20 percentage points better than in 1997. And although wet weather has encouraged the spread of blue mold disease, the District's tobacco crop is also rated as improved from last year.

In Ohio, corn plantings are down 7% from last year, acres planted in soybeans are unchanged, and winter wheat acres harvested increased 6%. Still, corn inventories are 70% above this time last year, soybeans are up 16%, and wheat stocks have risen 156%.

Residential construction has continued at a rapid pace in Ohio, while western Pennsylvania has shown signs of diminished activity. In central Ohio, new housing starts were reported up 35% between the first and second quarters, and June starts this year were 70% higher than year-earlier numbers. Commercial construction is continuing at a very strong pace throughout the District.

Construction costs are holding steady, with the exception of a slight increase in labor costs and land prices. Cost increases are somewhat higher in central Ohio, where one source indicated that building costs rose 3% to 5% overall during the first half of 1998. A few large construction companies are reported to be buying land in this region in anticipation of future building.

Industrial Activity
Manufacturing activity remains relatively strong although the GM strike and further deterioration in foreign economies appear to have taken some of the momentum out of production growth.

Steel producers report a drop in sales resulting from the GM strike and a record increase in foreign imports. These developments have combined to cause a buildup in steel inventories and to put downward pressure on steel prices.

Sales have also fallen somewhat in the chemical industry. Prices of many products are being driven down and profit margins are said to be narrowing due to increased pressure from Asian competitors. A few companies also report that raw materials prices are decreasing. Some chemicals and plastic producers also report a drop-off in sales due to the GM strike.

The transportation and shipping industry remains very strong. Ports and railroads see increased volumes related to the recent strength in imports. Trucking companies are also reporting an increase in business from year-ago levels. Some firms expressed concern that the impact of the GM strike, whose influence on the industry has been only minor until now, is increasingly being felt in the supplier network.

Consumer Spending
The retail sector continues to show strength, with some discount stores noting double-digit increases in sales year-over-year. Other retailers report high single-digit sales growth. Among the various retail categories, women's apparel, especially casual wear and sportswear, has shown substantially improved sales growth. Sales of men's apparel, however, has softened relative to a year ago.

The furniture category saw modest sales increases, as did home electronics. Strength in the electronics segment came from sales of digital satellite systems, home office equipment, and major appliances. Audio equipment has seen a sales decline.

Inventories for every category of retailer appear to be "on plan." Owing to sales strength and store growth, retail outlets continue to add staff. Most report "no more difficulty than usual" in acquiring personnel. Retail prices remain flat, with the exception of electronics, where prices have been declining.

After posting record sales volumes in June, District auto dealers note a drop in new-car sales in July. GM dealers indicate that inventories have eroded and sales have dropped dramatically as a result. Other dealers, however, remain generally optimistic about continued sales strength. Used vehicle sales have been relatively stable, although prices at auctions are reportedly rising again after many months of decline.

Banking and Finance
Lending activity in the District is strong for both commercial and consumer loans, and demand for the latter category is continuing to strengthen. However, mortgage refinancing activity has moderated somewhat following many months of strong gains. Consumer delinquencies have improved, and commercial delinquencies are holding at a very low level.

Competition for borrowers is still vigorous in the District. The spread between borrowing and lending rates continues to narrow.

Return to topReturn to top

Previous Philadelphia Richmond Next

Home | Monetary Policy | 1998 calendar
To comment on this site, please fill out our feedback form.
Last update: August 5, 1998