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New York
St. Louis
Kansas City
San Francisco

Full report

Prepared at the Federal Reserve Bank of Philadelphia based on information collected before November 30, 1999. This document summarizes comments received from businesses and other contacts outside the Federal Reserve and is not a representation of the views of Federal Reserve officials.

Reports from most Federal Reserve Districts indicated continued moderate to strong economic growth in October and November. Growth was described as strong in the New York, Richmond, Dallas, Minneapolis, and San Francisco Districts, and moderate in the Boston, Philadelphia, and Atlanta Districts. Further growth was reported in the Chicago District but at a slower rate than earlier in the year. In the Cleveland, St. Louis, and Kansas City Districts, business conditions were little changed.

Consumer spending picked up over the Thanksgiving weekend, after being hampered by warm weather earlier in November. Manufacturing activity continued to advance in most Districts. Commercial real estate markets remained strong in most parts of the country. Home sales have slipped. Agricultural conditions were mixed, and low prices persist for grains and some other commodities. Oil and gas drilling has increased. Bank lending has declined for residential mortgages but risen for consumer loans. Lending to businesses has risen in some Districts but declined in others.

Labor markets remain tight in all Districts. The pace of wage and salary increases did not appear to be accelerating generally, although there were some reports of larger recent salary increases in some industries and regions. Prices appear to be mostly steady at the retail level. Reports from manufacturers have been mixed. Although prices of industrial goods were reported to be mostly steady in a majority of Districts, prices of some goods have been on the rise.

Consumer Spending
Retail sales slowed somewhat in most of the country in November prior to the Thanksgiving holiday. Store executives said warmer-than-normal weather in many regions resulted in slow sales of winter clothing and other seasonal merchandise. Only Boston, Richmond, and San Francisco reported strong sales continuing into the month from October. However, sales picked up significantly in most Districts over the Thanksgiving weekend, and retailers expressed confidence that the brisker pace of sales will continue throughout the holiday shopping period. In Districts where merchants have made sales forecasts for the holidays, estimates of gains for this year compared to last year range from 5 to 6 percent in Philadelphia, Cleveland, and St. Louis to over 6 percent in Minneapolis. Listed as top selling merchandise are apparel (other than winter outerwear) and jewelry in Philadelphia, Richmond, and St. Louis; consumer electronics in Boston and Chicago; and furniture and home furnishings in Boston, New York, St. Louis, and Kansas City.

Auto sales slipped in November in Philadelphia, Chicago, St. Louis, Kansas City, and Dallas. Dealers in several of those Districts think the slowdown has been seasonal and that car and truck buying will pick up in January. Cleveland reported an increase in motor vehicle sales.

Manufacturing activity rose in November in most Districts and capacity utilization was said to be high in St. Louis and Kansas City. Continued growth was reported in Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, St. Louis, and Kansas City. In San Francisco and Dallas, growth accelerated. San Francisco manufacturers attributed the pickup to reviving foreign demand, and makers of telecommunications and computer equipment provided much of the boost in Dallas. Manufacturers in Chicago and Minneapolis indicated that production remained strong.

The advance in manufacturing activity has been broad-based. Boston reported strong demand for pharmaceuticals and instruments; Cleveland noted rising activity among steel manufacturers; Richmond indicated rising output of processed food products; and Atlanta and Dallas saw increases in production of chemicals. Other products said to be growing in demand were plastics and automotive parts (St. Louis) and furniture (Boston and Richmond). Some sectors have lagged, however. Output of industrial equipment was down in Boston and Richmond, aerospace production slowed in Philadelphia and San Francisco, and demand for textiles and apparel weakened in Richmond and Atlanta.

Real Estate and Construction
Commercial real estate markets were described as strong in most Districts, although there were some scattered indications of slowing demand for office space. Office vacancy rates were moving down in Boston and Philadelphia but rising in Atlanta and Dallas. Nonresidential construction was on the rise in Cleveland and Minneapolis, steady in Chicago and Richmond, and falling in Philadelphia. In the San Francisco District construction was described as robust in most markets except Oregon, Utah, and Arizona, where activity was down and vacancies were rising.

Residential construction activity was mixed around the nation, with more regions experiencing slowdowns than increases. Reports of declining rates of housing construction came from Philadelphia, Cleveland, St. Louis, and Chicago, and New York indicated a sharp drop. The Kansas City District reported continuing growth in homebuilding, but contractors in the District expect a slowdown in coming months. Several Districts said real estate agents noted declines in existing home sales as mortgage interest rates rose, but some agents also said sales had eased because fewer houses were being put on the market.

Agricultural markets still exhibit low grain prices, although there appears to be some improvement in foreign demand. San Francisco reported improved exports of some agricultural commodities, but low sales revenues for cotton, grains, and vegetables. This year's harvests of corn, soybeans, and sorghum exceeded last year's. Chicago and St. Louis noted that corn harvests were so large that storage facilities in those Districts have been inadequate.

Some agricultural commodities have been disappointing. Richmond and St. Louis indicated that cotton yields and quality declined compared with last year. Recently planted winter wheat was said to be suffering from dry soil conditions in the Cleveland, Chicago, and Dallas Districts, and in parts of the St. Louis District. However, Kansas City reported that winter wheat in that District was in good condition. Low levels of soil moisture were also said to be adversely affecting field conditions and forage generally in the Richmond, Minneapolis, and Dallas Districts.

Natural Resource Industries
Oil drilling and production have increased with the rise in oil prices. In the Minneapolis and Kansas City Districts, the increase in oil drilling was strong, but Dallas reported only a slight increase. Dallas reported greater gains in gas drilling. Metal mining was said to be running at a steady pace in the Minneapolis District.

Financial Services and Credit
Bank lending was mixed across Districts as well as within Districts. Growth in commercial and industrial loans was reported in Richmond, Atlanta, Chicago, and Kansas City but St. Louis and Dallas indicated recent slowdowns in borrowing by businesses. Commercial and industrial loans were steady in New York and Philadelphia. Mortgage lending for home purchases and refinancings generally fell in November from October. Drops were recorded in Philadelphia, Richmond, Atlanta, Chicago, St. Louis, Kansas City, and San Francisco. Dallas reported an increase. Consumer lending remained on an upward trend in most Districts. New York indicated slowing in all categories of lending except commercial and industrial loans, and Cleveland reported declines in all categories except auto loans.

Interest rate margins were said to be tightening at commercial banks in the Cleveland and St. Louis Districts. Bankers in the San Francisco District said margins remained narrow. Credit standards have remained unchanged in most Districts, although Cleveland bankers were imposing stricter conditions for consumer loans and Chicago bankers indicated that standards for commercial loans have been eased. Consumer credit quality was reported to be improving in the New York, Atlanta, and Chicago Districts. Dallas noted a rise in commercial loan delinquencies.

Employment and Wages
Tight labor markets were reported in all Districts. Workers that have been in especially high demand include high technology workers in Boston and Atlanta, carpenters in Cleveland, skilled workers in St. Louis, and entry level employees in a variety of industries in Kansas City. Stores in Boston, Philadelphia, Chicago, Minneapolis, and San Francisco said they were having difficulty finding temporary workers for the holiday shopping period.

Wage increases were described as persistent in most Districts. Reserve Banks received reports of increases ranging from 3 to 10 percent on an annual basis. Although the rate of increase did not appear to be accelerating generally, there were some reports of higher recent salary increases in some industries and regions. Richmond District employers noted substantial wage increases recently. Atlanta noted significant increases in compensation for health-care workers. The use of signing bonuses has spread, according to reports from several Districts.

Prices at the retail level have been nearly steady in most Districts, but some moderate increases were noticed in Richmond and San Francisco. Boston District retailers indicated that list prices have been steady but price markdowns have become less frequent.

Reports from goods-producing industries have been mixed. Boston and Richmond reported generally flat prices during November in the manufacturing sector. New York and Philadelphia reported increases. Other Districts indicated mostly steady prices with some increases. Products for which price increases were particularly notable included paper (Boston and Atlanta), building materials (Atlanta, Minneapolis, Kansas City, and Dallas), and chemicals (Kansas City and Dallas).

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Last update: December 8, 1999