The opening summation of the page book follows. Overall, the report is fair. Consumers are still spending, manufacturing is doing well, the auto industry is good and real estate has rebounded. However, we're still not as "escape velocity"
Begin the report:
Reports from the twelve Federal Reserve Districts suggest overall
economic activity expanded at a moderate pace during the reporting
period from early April to late May. Activity in the New York,
Cleveland, Atlanta, Chicago, Kansas City, Dallas, and San Francisco
Districts was characterized as growing at a moderate pace, while the
Richmond, St. Louis, and Minneapolis Districts noted modest growth.
Boston reported steady growth, and the Philadelphia District indicated
that the pace of expansion had slowed slightly since the previous Beige
Manufacturing continued to expand in most Districts. Consumer
spending was unchanged or up modestly. New vehicle sales remained strong
and inventories of some popular models were tight. Sales of used
automobiles held steady. Travel and tourism expanded, boosted by both
the business and leisure segments. Demand for nonfinancial services was
generally stable to slightly higher since the last report, and several
Districts noted strong growth in information technology services.
Conditions in residential and commercial real estate improved.
Construction picked up in many areas of the country. Lenders in most
Districts noted an improvement in loan demand and credit conditions.
Agricultural conditions generally improved, and spring planting was well
ahead of its normal pace in most reporting Districts. Energy production
and exploration continued to expand, except for coal producers who
noted a slight slowing in activity.
Wage pressures overall were modest. Hiring was steady or
increased slightly, and contacts in a number of Districts reported
difficulties in finding qualified workers, particularly those with
specialized skills. Price inflation remained modest across Districts,
and overall cost pressures eased as the price of energy inputs declined.
Economic outlooks remain positive, but contacts were slightly more
guarded in their optimism.
Manufacturing continued to expand, and most Districts reported
gains in production or new orders. The only exceptions were from the
Philadelphia, Richmond and St. Louis Districts, where factory activity
was mixed or had softened slightly. Demand appeared to be the strongest
in auto and steel manufacturing. Reports from the Cleveland, Atlanta,
Chicago, and St. Louis Districts noted vibrant activity for auto
manufacturers, and an auto maker in the Atlanta District reported plans
to add a third shift to keep up with increased global demand. Steel
manufacturing remained robust, with contacts in the Chicago District
reporting the highest capacity utilization rates since the end of the
recession and firms in the St. Louis and Minneapolis Districts noting
plans to upgrade or expand operations. Producers of semiconductors and
high-tech equipment saw continued growth in orders in the Dallas and San
Francisco Districts. Aircraft and parts makers noted further increases
in orders according to reports from Boston, Richmond, and San Francisco,
while the Dallas District reported steady demand. Demand for
agricultural and construction equipment remained strong according to the
Chicago District report, and industrial machinery manufacturers in the
Philadelphia District noted gains. Food producers in the Philadelphia
and Dallas Districts noted solid demand for their products, and
pharmaceutical manufacturers in the San Francisco District reported
robust activity. Activity at refineries and petrochemical manufacturing
facilities expanded further. Demand for construction-related products
improved in the Dallas District, and orders for lumber and wood products
increased in most reporting Districts.
Hiring at manufacturing firms was mixed, but manufacturers in
some Districts reported difficulty finding qualified workers such as
welders. Capital spending plans in most reporting Districts were
positive. Ongoing capital investments and plans for future capacity
expansions were reported by various manufacturers in the Chicago, St.
Louis, Minneapolis, and Kansas City Districts. Firms in the Cleveland
District noted spending on capital outlays was on track, while producers
in the Philadelphia District reported a decline in future spending
plans since the previous report. Manufacturers' outlooks were positive
in the Philadelphia, Cleveland, Chicago, and Kansas City Districts;
however, contacts in a number of Districts were concerned that a
slowdown in Europe and domestic political uncertainty may affect future
Consumer Spending and Tourism
Retail spending was flat to modestly positive in nearly all
Districts. Firms in the Richmond, Chicago, and Minneapolis Districts
noted sales increased at a more modest pace than in the previous report,
as unseasonably warm weather and an earlier Easter holiday had shifted
sales into the previous reporting period. By contrast, warm spring
weather continued to boost traffic and sales for retailers in the
Philadelphia and Cleveland Districts. Sales of household goods increased
in the Boston and Kansas City Districts, and gains in apparel sales
were reported by the Boston and Dallas Districts. Sales of big ticket
items declined in the Richmond and Chicago Districts, and there were a
few reports of high fuel prices affecting consumer spending and
sentiment. Inventories were generally at desired levels and were being
managed carefully. Outlooks were optimistic, and retailers in several
Districts expect modest sales growth in the near term. In particular,
contacts in the Kansas City District expect stronger sales growth in
coming months, while some retailers in the Chicago District plan to add
inventories in expectation of higher back-to-school sales compared with
Automobile sales generally remained strong, although the pace of
growth moderated in a few Districts. Sales of used vehicles held steady,
and a slight decline in prices was reported. Inventories of popular
vehicles were tight. Outlooks were positive and contacts across several
Districts expect steady growth in sales in coming months.
Reports from most Districts pointed to continued strength in
travel and tourism, bolstered by both the business and leisure segments.
Favorable spring weather spurred tourism in the Minneapolis and Kansas
City Districts. Time-share rentals were strong in the Richmond District,
and foreign visitors boosted activity in Florida as well as at theme
parks in the Philadelphia District. Restaurants and food service
contacts in the Richmond, Kansas City, and San Francisco Districts noted
increased sales. Ticket prices and attendance at Broadway theaters
strengthened in the New York District, boosting revenues to well above
year-ago levels. Business travel picked up in the Boston, New York, and
Atlanta Districts, and convention bookings were strong according to the
Atlanta District. Hotel bookings were strong in the Boston and New York
Districts, and solid gains or high levels of occupancy and room rental
rates were noted by hotel contacts in most reporting Districts.
Atlanta's report noted that hospitality-related projects were underway
in several areas of the District.
Demand for nonfinancial services was generally stable to slightly
stronger since the previous report. Several Districts noted some growth
in information technology services, including Boston, Richmond, Kansas
City, Dallas, and San Francisco. Solid demand for healthcare services
was also noted by some Districts.
A few Districts said that activity expanded for professional and
business services, such as accounting, engineering, advertising, and
legal services. The Boston District noted some renewed activity in the
financial sector, although engineering and accounting demand remained
weak. The Richmond District said architectural engineering firms
reported stronger revenues, and Minneapolis noted strength in
engineering near oil producing areas, in part due to planned future
construction. Responding firms in the Dallas District noted strength in
legal services and accounting.
Advertising sales picked up in the Philadelphia and San Francisco
Districts, and air travel improved in the Dallas and San Francisco
Districts. Freight transportation volumes moved higher in Cleveland, and
railroad contacts in the Atlanta District noted continued growth.
However, Kansas City's report noted flat activity in transportation, and
the Dallas report noted mixed results from shipping firms.
Real Estate and Construction
Activity in residential real estate markets improved in most
Districts since the previous report. Several Districts noted consistent
indications of recovery in the single-family housing market, although
the recovery was characterized as fragile. The apartment market
continued to improve, and multifamily construction increased in several
Home sales were above year-ago levels in most areas of the
country and several Districts noted sales had improved since the
previous report, although some noted that the pace was well below the
historical average. In particular, the New York, Cleveland, and Richmond
Districts noted a pickup in the pace of distressed sales. Residential
brokers and some builders in the Philadelphia, Atlanta, and Dallas
Districts said home sales were exceeding expectations. Contacts in the
Richmond District said homes were being snapped up as investors become
more confident in the housing recovery, and the Atlanta report noted
stronger sales to cash buyers and investors in Florida. Chicago said
more sales had multiple offers. Apartment rental markets improved in the
New York, Atlanta, and Dallas Districts. One contact from the New York
District noted rising apartment rents have made buying more attractive,
contributing to a slight uptick in sales.
Most Districts reported that home inventories decreased. Overall,
home prices remained unchanged in many Districts, although reports were
mixed. There were a few reports that sellers were lowering asking
prices, leading to downward pressure on housing prices.
New home construction increased in a number of Districts,
including Cleveland, Atlanta, Chicago, St. Louis, Minneapolis, and San
Francisco. Contacts in the Philadelphia District said demand for new
home construction eased slightly. Builders in Kansas City noted housing
starts were down, but they expected an increase in the next three
months. The Boston, Atlanta, and Chicago Districts reported an increase
in multifamily construction, and the Minneapolis District noted numerous
multifamily projects were in the pipeline.
Commercial real estate conditions improved in most Districts, and
there were some reports that commercial construction picked up.
Commercial leasing remained steady or increased in most Districts
including Philadelphia, Richmond, Atlanta, Chicago, St. Louis,
Minneapolis, Kansas City, Dallas, and San Francisco. The New York,
Dallas, and San Francisco Districts noted growth in the technology
sector was prompting the absorption of commercial space. Energy activity
was helping boost demand for space in the Richmond and Dallas
Districts. Boston's relatively strong commercial market continued to
generate robust investor interest, although commercial property sales in
the New York District remained slow.
Build-to-suit construction was noted by the Boston and
Philadelphia Districts. The New York District reported new office
development projects in the pipeline, and St. Louis' report noted a
pickup in speculative industrial projects. The Richmond District said
expansion in manufacturing led to a pickup in construction. Reports from
the Cleveland and Chicago Districts suggested an increase in hotels and
higher education projects, and a New York contact noted that interest
in luxury hotel development increased. Outlooks were positive overall,
although there were a few reports of increased uncertainty from still
unknown U.S. fiscal changes and Europe's debt situation.
Banking and Finance
Most Districts that commented on lending noted steady or slightly
stronger loan demand. Small and medium-sized banks in the New York
District reported the most broad-based increase in loan demand since the
mid-1990s. Several bankers in the Richmond District said the volume of
small business loan applications was markedly higher. Drivers of
business loan demand included energy, healthcare, and commercial real
estate. Several Districts noted increased demand for capital spending
Reports on mortgage lending generally indicated slow improvement.
The New York District noted stronger mortgage lending, although growth
in refinancing eased. The Cleveland District indicated strong mortgage
demand and a shift from home refinancing to new purchases. The Richmond
District cited continued improvement in mortgage demand, although
refinancing still dominated much of the mortgage lending. The Atlanta
District said that more applicants had ample cash for down payments or
enough equity in their homes to meet refinancing requirements. Demand
for commercial real estate loans was generally reported to be stronger.
A number of Districts, including Cleveland, Atlanta, Chicago,
Dallas, and San Francisco, said loan pricing remained quite competitive.
New York District respondents noted a decrease in spreads of loan rates
over the cost of funds, particularly for commercial mortgages. Lending
standards were relatively unchanged to slightly easier across Districts
and loan types. Bankers reporting on deposit growth indicated that
deposits were steady or continued to increase. Credit quality remained
solid, and there were several reports of improved loan quality. Most
District banks said loan delinquencies continued to decline.
Agriculture and Natural Resources
Agricultural conditions generally improved since the previous
report. Rainfall provided much needed moisture in several parts of the
Richmond, Minneapolis, and Dallas Districts. Spring planting and crop
emergence was well ahead of the normal pace in most reporting Districts,
and corn producers in the Chicago District were hopeful that this
promising start may result in a record harvest. Producers in the St.
Louis, Kansas City, and Dallas Districts noted that the winter wheat
crop was in fair-to-good condition. Farm incomes rose further in the
Minneapolis and Kansas City Districts, and the San Francisco District
reported further sales growth for most crop and livestock products.
Producers in the Chicago and San Francisco Districts expressed concern
that persistent dry conditions may undermine crop production. Although
prices of most agricultural commodities declined, hog and cattle prices
rose since the previous report.
Energy activity remained robust, with drilling expanding further
in the Cleveland, Atlanta, Minneapolis, Kansas City, and Dallas
Districts. Atlanta's report noted that increased investment in
transportation infrastructure was needed to accommodate the recent rise
in domestic and Canadian energy production. Exploration and production
continued to shift away from dry-gas to wet-gas or oil-directed drilling
in the Dallas and San Francisco Districts in part due to low natural
gas prices. Firms in the Kansas City District said they would like to
expand payrolls but reported difficulty finding engineers and
experienced field workers. Iron-ore and rock mining continued to expand
at a strong pace according to the Minneapolis District report. In
contrast, demand for coal slowed in the Cleveland and St. Louis
Districts, and contacts noted that production was below year-ago levels.
Limestone quarries in the Minneapolis District continued to report
Employment, Wages, and Prices
Hiring was steady or showed a modest increase. Reports of hiring
were most prevalent in the manufacturing, construction, information
technology, and professional services sectors. Staffing firms in the
Cleveland and Dallas Districts noted a pickup in orders, and contacts in
the Boston and Philadelphia Districts reported steady growth in orders.
Demand for temporary workers rose in the Richmond District, and several
employers in the Minneapolis District noted a tightening labor market.
New York's report indicated that demand for staffing services was mixed,
but manufacturers and other business contacts expect hiring to pick up
in coming months. Atlanta's report pointed to positive employment growth
in the District. Hiring remained limited in the Chicago District, and
modest employment increases were noted in the San Francisco District
report. There were widespread reports that firms continued to face
difficulty finding highly trained or skilled workers--especially in
information technology, engineering, and manufacturing fields--and
manufacturers in the Chicago District said they were easing job
requirements or using interns to fill open positions. Overall upward
wage pressures continued to be fairly modest. There were reports of
slight wage increases for skilled workers in the Boston, Cleveland,
Minneapolis, Dallas and San Francisco. Contacts in the Philadelphia and
Chicago Districts noted increases in healthcare costs.
Price inflation was modest across most areas of the country.
Reports from several Districts, including New York, Philadelphia,
Richmond, Chicago, Minneapolis, and Dallas indicated selling prices were
stable or had softened somewhat since the previous report. Some
Districts, including Philadelphia, Chicago, Minneapolis, Dallas, and San
Francisco noted cost pressures eased as the price of energy inputs
fell. However, Atlanta's report noted some firms had implemented price
increases tied to previous increases in energy costs, and firms in the
Kansas City District noted higher input and final goods prices.