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Some Glimmers of Hope for California in 'Beige Book' : Economy: State still lags rest of U.S. But spending, tourism, computers are bright spots.

March 10, 1994|From Times Staff and Wire Reports

California's economy continues to lag that of the rest of the nation, which grew modestly at the beginning of 1994 with little sign of rising prices despite bad weather, the Federal Reserve Board said Wednesday.

California's weakness remains centered in the Los Angeles area, home to the beleaguered defense and aerospace industries, said the Fed's "beige book" report on economic activity from mid-January to Feb. 28.

Here, the worst news concerned continuing declines in aerospace manufacturing and sluggishness in construction and real estate. In addition, the oil industry in Kern County remains depressed.

But other parts of the state are showing signs of bottoming out or modestly improving, the report said. And January's Northridge earthquake, which resulted in a "significant loss in quality of life" in the Los Angeles area, nevertheless should provide a short-term boost to construction.

There were other glimmers of hope in the report:

* Consumer spending showed signs of improvement in San Francisco, San Diego and other parts of the state, with the exception of Los Angeles.

* Tourism in Southern California was reportedly improving, despite the earthquake.

* While manufacturing remained weak in aerospace, defense and wood products, computers were up over the last three months and much better than a year earlier.

* The pace of layoffs in aerospace and defense declined from a year earlier, and the recent purchase of commercial aircraft by Saudi Arabia should preserve some jobs here.

*

In the rest of the nation, "the economy expanded moderately in January and February despite unusually severe weather in the East and the Midwest," the Fed said.

"The weather adversely affected consumer spending and construction, delayed shipments, interrupted some production and boosted selected tourism and energy markets, but these effects were largely temporary," the Fed said.

The report was generally optimistic about prices. "Retailers in only one district, Richmond (Va.), expect retail prices to rise slightly; others anticipate stable prices because of competitive pressures," the Fed said.

The central bank pushed short-term interest rates higher at the beginning of February and has indicated it will do so again when necessary to keep inflation restrained.

Manufacturing activity picked up in most industries across the country, notably auto makers and their suppliers, as well as producers of building products.

While merchants in some areas said winter weather hurt retail sales considerably at the beginning of 1994, the Fed said, "almost all district reports suggest that merchants expect solid sales growth in coming months."

Real estate markets continued to improve nearly everywhere from a year ago, except in Connecticut and Southern California. But rising interest rates slowed mortgage refinancings in several regions.

Financial distress to farmers from extensive flooding last summer, especially in the Midwest, was easing by early 1994, the Fed said.

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