| Skip to content
|
Reports from Beige Book contacts indicate continued strong expansion in most Twelfth District states toward the end of 1996. Retailers reported a good holiday selling season, although adverse weather conditions in late December and early January held down post-Christmas retail activity. Early January flooding in Northern California and Nevada also caused extensive damage to homes, farms, highways, and tourism facilities. Some efforts to repair damage began immediately, boosting residential and non-residential construction, which have generally been strong in District states other than California and Hawaii. Manufacturing activity continued to increase in recent months, putting some pressure on wages for skilled workers, particularly in the Pacific Northwest and the San Francisco Bay Area.
Business Sentiment
District respondents expect continued expansion of the national economy and their respective regional economies. Most respondents expect U.S. GDP to continue to grow at its long-run average pace of 2 to 2 � percent in 1997, leaving the national unemployment rate near its current level. A majority of respondents expect inflation to remain near the current rate this coming year, although some anticipate a slight pickup in inflation. With regard to regional conditions, over three-quarters of the respondents expect growth in their area to outpace national growth in the coming year, with business investment, housing starts, consumer spending, and foreign trade all expected to post solid gains in most regions.
Retail Trade and Services
Respondents from most District states reported a high level of retail sales in recent months, despite the shortened holiday selling season. Although somewhat below original projections, holiday season sales compared with one year ago reportedly posted good gains in California, the Pacific Northwest, and the Intermountain states. Retailers faced reduced pressure to discount most items prior to Christmas, given the level of sales and relatively lean inventories going into the season. However, sales at electronics and computer specialty stores reportedly were lower than expected, leading to some aggressive discounting. Heavy snow in the Seattle area immediately after Christmas reportedly held down retail activity there near the end of the year.
Service industries generally reported further growth in recent months. Respondents from California and the Pacific Northwest reported increasing demand for telecommunications services, and efforts to keep up with this growing demand reportedly are putting upward pressure on wages of some types of skilled workers. In Southern California, port traffic was strong, and tourism activity was brisk. Tourism-related airport traffic and hotel occupancy rates also increased in several other states, including Utah, where pre-Olympic advertising increased downhill skiing business. However, heavy rains and flooding constrained tourism in Nevada and Northern California, largely due to highway and park closures.
Manufacturing
The manufacturing sector continued to expand in most areas of the District. Manufacturing growth was particularly strong in the Pacific Northwest, owing largely to the resurgence of the aerospace industry and expansions at manufacturers of high technology components and equipment. Wood product sales in the Pacific Northwest also were high, boosted by demand for materials to repair storm-damaged homes and businesses.
Agriculture and Resource-Related Industries
District agriculture conditions have been mixed in recent months. Early rains and warm temperatures created favorable California grassland conditions, benefiting the range cattle industry and creating favorable conditions for the new planting season. However, declines in many agricultural commodity prices combined with increasing production costs reportedly have caused some farmers to delay purchases of new equipment and other discretionary inputs. Also, in Northern California and Nevada heavy rains and flooding damaged some crops in fields and orchards and forced ranchers to move livestock to higher, less attractive grazing areas.
Real Estate and Construction
Residential and commercial real estate markets continued to be strong in most areas of the District. In the Pacific Northwest and Intermountain states, strong demand for single-family residences has resulted in considerable home price appreciation, although the pace of gains in the Intermountain states slowed in recent months. In California, building in the state as a whole continued to be weak. Within California, San Francisco and Silicon Valley continued to outpace the rest of the state in the residential real estate market recovery with continued price appreciation for single-family homes and declining vacancy rates for rental properties. Southern California's housing market also showed signs of improvement in recent months, as home prices began to rise and sales increased.
Financial Institutions
District financial institutions generally reported that strong economic conditions continued to boost loan demand. Despite increasing consolidation of banks, the lending environment was said to remain highly competitive, both among banks and from nonbank competitors.
|
Dallas