| Skip to content
|
Most Twelfth District contacts reported robust economic conditions in the recent survey period. Providers of business, legal, and financial services benefited from strong demand. Retail sales were moderate overall, with automobile and light truck sales falling below year-earlier levels. District manufacturing activity was high, with signs of tightening capacity constraints in some industries. Prices for real estate rose noticeably in many areas, and construction activity continued at a rapid clip. Although respondents noted shortages of skilled labor, yearly wage gains mostly were in the 3-3� percent range, albeit with scattered reports of larger increases. Reports of upward price pressure were limited.
Business Sentiment
Survey respondents remained sanguine regarding economic prospects for the nation and the District. Two-thirds of the respondents predicted that national economic growth will proceed at its long-run trend rate over the next year, and nearly all of the remaining respondents expect growth to be above trend. Most also predicted unchanged national unemployment and inflation, although slightly over one-third expect inflation to rise. Respondents remained particularly optimistic regarding growth rates in their respective regions, with 93 percent expecting it to exceed the national growth rate over the next year.
Retail Trade and Services
Sales of retail goods were moderate overall. Automobile and light truck sales were weak, falling substantially below year-earlier levels in Utah and Idaho. Sales of most smaller retail products, such as groceries and pharmaceuticals, were moderate, but a respondent for a sporting goods manufacturer noted weak retail sales in its product lines. Respondents' characterizations of retail inventories ranged from "lean" to "higher than planned." They also noted downward price pressure on grocery products such as produce and meat, and reductions in effective prices of new automobiles and light trucks due to the impact of manufacturers' sales incentives on consumer financing charges.
Service providers benefited from healthy business conditions, as demand for business, legal, and real estate development services was strong in most areas. Energy demand was high; supply conditions varied across states in the District, due in part to energy industry restructuring. Recent tourist traffic was weak in Hawaii, but in Southern California it met normal summertime expectations and produced high hotel occupancy rates.
Manufacturing
District manufacturing activity continued at a rapid pace, although expansion has slowed slightly following an earlier surge in the aircraft and related sectors. Boeing and its suppliers have faced some constraints in attempting to meet the very high level of existing aircraft orders; the primary supply constraint in this industry has arisen from a shortage of skilled labor rather than physical plant capacity and availability of raw materials. Demand for machine tools remained strong in the District, although vigorous competition precluded significant price increases. West coast logging operations and timber mills expanded at a good clip in the first half of 1997. Light manufacturing activity grew at a strong pace in the Los Angeles area, and one respondent reported labor shortages among garment manufacturers there. Although capacity utilization reportedly rose in many industries in the District and was particularly high among paper and pulp producers, survey responses suggest only limited capacity constraints and order backlogs overall.
Agriculture and Resource-related Industries
Agricultural conditions in the District remained mostly favorable in recent weeks, with reports generally indicating good yields and sufficient demand to keep prices firm for many crops. Recent California fruit and nut yields�particularly for table and wine grapes�were enhanced by a wet January and dry weather since then. However, this weather pattern substantially reduced wheat production in the state. Sales of Idaho potatoes remained weak, although other crops did well there. Cattle prices firmed further, due largely to demand that exceeded 1996 levels. District seafood yields were low.
Real Estate and Construction
Real estate markets and construction activity reportedly were healthy in most areas of the District. Although residential housing markets in the San Francisco Bay Area remained hot and markets in most other areas of California firmed further, markets in Los Angeles and a few inland areas in the north and south remained favorable to buyers. Nonresidential construction activity was strong in many areas of California. However, in the San Francisco Bay Area (outside of Silicon Valley), prices for commercial property have not yet been sufficiently attractive to generate substantial new commercial construction, and in Los Angeles the departure of several corporate headquarters from the area has offset factors working to firm commercial markets there. Reduced construction and sales were evident in Utah and Idaho, although activity remained at high levels. In Washington, Oregon, Arizona, and Alaska, residential and commercial construction, sales, and prices rose, particularly in major urban areas. In several areas of the District, sustained expansion of building activity has led to shortages of skilled construction labor and rising construction costs.
Financial Institutions
District banking conditions were healthy in recent weeks. Loan demand growth remained strong overall, picking up in Southern California but slowing in several states where economic growth has slowed. Credit quality was stable. Deposit growth reportedly has been limited by favorable returns in equities markets.
|
Dallas