BEIGE BOOK SHOWS SLOWER EXPANSION AND CONTROLLED PRICES

CONSUMER BORROWING RATE HAS DECREASED

JOBLESS CLAIMS INDICATOR TRENDS DOWN

Yesterday, at noon, the Board of Governors of the Federal Reserve System published the latest edition of its Summary of Commentary on Current Economic Conditions, commonly known as the Beige Book. This document describes the status of economic conditions within each of the 12 Federal Reserve districts and presents an overview of the economic status of the nation as a whole.

Here's the text of the National Summary section of the report:

"The economy continued to expand in June and July, though in some areas the pace of growth has moderated since the last report. A number of districts report tight labor markets, especially for entry-level workers; however, wage pressures remained subdued. Retail sales slowed in most districts, particularly for non-auto durables. Many districts report continued expansion in the manufacturing sector, and a number have seen a pickup in hiring. Most manufacturers and retailers report that inventories were roughly on target. Housing markets remained fairly strong in most districts, though a few areas report a slowdown; a number of districts note particular strength in the multi-family segment. Commercial and industrial real estate markets continued to firm in almost all districts. A number of districts note brisk tourism activity especially on the east and west coasts."

"Crop conditions have generally improved since the last report, although late plantings across the Midwest raise the potential for damage in the event of an early frost. While there are scattered reports of rising commodity prices, most districts report that input prices, as well as prices for finished goods, were essentially flat. Most districts report increased demand for commercial and industrial loans, but softer demand for consumer and mortgage loans."

~~~~~~~~~~~~~~~~~~~~~

Later in the afternoon, yesterday, the Federal Reserve Board released its June report on consumer credit. During June, the amount of outstanding consumer credit grew at an annualized rate of 8.7 percent.

The preceding Beige Book summary noted that, in the past couple months, retail sales had slowed and the demand for consumer loans had softened. The data in yesterday's consumer credit report provides dramatic evidence of this falloff in consumer activity. In the second quarter of 1996, consumer credit grew at an annualized rate of 7.34 percent. In the first quarter, it grew at a rate of 10.77 percent -- about the same as the 10.61 percent growth rate in the fourth quarter of 1995. In the third quarter of last year, the growth rate was 14.54 percent. So, in less than a year, the rate of expansion of outstanding consumer credit has been cut in half.

~~~~~~~~~~~~~~~~~~~~~

Moving up to the present, the Labor Department's Employment and Training Administration announced today that, in the week ending Aug. 3, initial claims for state unemployment insurance benefits rose to 318,000, an increase of 24,000 from the previous week's revised figure of 294,000.

The 4-week moving average was 325,000, a decrease of 13,000 from the previous week's revised average of 338,000. The 4-week moving average is one of the eleven components of the Commerce Department's Composite Index of Leading Economic Indicators (LEI). Even though the week-to-week claims number rose by 24,000, the large declines in claims in the two preceding weeks were still sufficiently large to cause the 4-week moving average to decline. So, the trend of the 4-week moving average is presently down.

Pat Lafferty (MF Merlin)

Transmitted: 8/8/96