Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: THURSDAY, January 19, 1995                   TAG: 9501190095
SECTION: BUSINESS                    PAGE: B-8   EDITION: METRO 
SOURCE: Associated Press
DATELINE: WASHINGTON                                LENGTH: Medium

WHAT'S UP? PRICES, FED BEIGE BOOK SAYS

In its Report on Current Economic Conditions, called the beige book for the color of its cover - the U.S. central bank said, ``Price increases seemed somewhat more widespread than were reported in early December, while higher inflationary expectations were apparent in business surveys'' conducted in the San Francisco and Chicago districts.

But while the report said prices for manufacturing and construction raw materials continued to rise, and manufacturers cited less resistance among their customers to higher prices, they said they still were unable to pass on their higher costs.

As a result, most prices remained stable at the retail level. ``Price discounting during the holiday season ran heavier than many retailers had anticipated, particularly in apparel,'' the Fed said.

The Fed beige book is released every six weeks, shortly before the policy-making Federal Open Market Committee meets. The next FOMC meeting is scheduled for Jan.31 and Feb.1.

The Fed said ``strengthening and/or increasingly tight labor markets were widely noted.'' Increasing wage pressures were reported in the Atlanta, St. Louis, Minneapolis, Dallas and San Francisco districts.

However, the New York district reported significant job cut announcements in the financial services sector.

Growth in Christmas retail sales was moderate. But, the Fed said, ``Weather effects and other factors point to stronger underlying momentum in spending growth.''

Strong sales growth was reported in nearly every district for hard goods and big-ticket items, including personal computers, other consumer electronic goods, home furnishings and appliances. Auto sales were also quite good.

Warm weather depressed clothing sales in the North and many clothing stores reported heavier-than-anticipated discounting. Still, ``there was underlying strength even in the apparel category,'' the Fed said.

The Fed said, ``Manufacturers continued to provide some of the strongest reports within the districts, although the growth rate may have slowed modestly.''

Durable goods continued to lead the growth in manufacturing. Auto parts suppliers in Atlanta announced construction of new production facilities. Increased exports to Europe boosted manufacturing in the Cleveland district, the beige book said.

Manufacturers in a number of districts predicted that their output would continue to grow this year. However, ``uncertainty over Mexican developments clouded expectations in several regions,'' the Fed said.

Higher interest rates have slowed home sales and construction, despite the unusually warm weather, the report said.

``Multifamily and commercial construction were stronger than single-family homebuilding in nearly every district,'' the Fed reported. Growth in both sectors is expected to continue this year.

Lower commercial vacancy rates were reported in much of the country. However, more contacts were expressing ``concern about the future impact of higher interest rates on real estate and commercial construction activity,'' the Fed said.

The weakness in housing has caused the growth in bank loans to slow. Commercial and industrial loan demand remains fairly strong, it said, although some districts reported slower growth or declines in business loan demand.

Some slowing of consumer loan demand was noted even in districts where retail sales have been strong.

Delinquency rates continued to drop. But banks in several districts reported tighter lending margins, the beige book said.