April 17 - Reports from the 12 Federal Reserve Districts suggest overall economic activity expanded at a moderate pace during the reporting period from late February to early April. Activity in the Cleveland, Richmond, St. Louis, Minneapolis, and Kansas City Districts was characterized as growing at a moderate pace, while the Boston, Philadelphia, Atlanta, Chicago, and San Francisco Districts noted modest growth. The New York and Dallas Districts indicated that the pace of expansion accelerated slightly since the previous Beige Book.
Most Districts noted increases in manufacturing activity since the previous report. Particular strength was seen in industries tied to residential construction and automobiles, while several Districts reported uncertainty or weakness in defense-related sectors. Consumer spending grew modestly, and firms in some Districts cited higher gasoline prices, expiration of the payroll tax cut, and winter weather as factors restraining sales growth. Retailers in several Districts expect continued sales growth in the near term. Overall vehicle sales remained strong or increased, but sales of used automobiles declined in some Districts. Travel and tourism expanded across most reporting Districts, boosted by both business and leisure travel.
Demand for nonfinancial services increased at a modest pace, and several Districts noted growth in freight and transportation services. Most Districts said residential and commercial real estate improved markedly since the last report. Home prices were rising in many areas of the country. Loan demand was steady to slightly up in most Districts. Reports on agricultural conditions were mixed, as drought or cold weather adversely impacted some Districts while others reported a strong agricultural sector. Oil and natural gas activity remained robust over the reporting period, with contacts in the Cleveland, Kansas City, and Dallas Districts expecting a rise in activity in coming months, while coal production continued to decline.
Employment conditions remained unchanged or improved somewhat, and reports of hiring were most prevalent in the manufacturing, residential construction, information technology, and professional services sectors. Wage pressures were generally contained, although several Districts cited upward pressures in occupations experiencing labor shortages, such as information technology, construction, and engineering. Aside from reports of increases in home prices and residential construction materials, price pressures remained mostly subdued across Districts.
Outlooks among respondents remained optimistic across sectors and Districts, with growth mostly expected to continue at the same or a slightly improved pace. Some uncertainty remained, primarily regarding fiscal policy and health care reform.
Manufacturing activity held steady or increased in most Districts since the previous Beige Book. The pace of growth picked up in the Cleveland, Atlanta, Minneapolis, Dallas, and San Francisco Districts, while the Richmond and Chicago Districts noted that the pace of growth in production was slower than earlier this year. Contacts in the Boston District reported mixed conditions, and manufacturing activity held steady in the New York District. Manufacturing conditions in the Kansas City District continued to soften, driven by weaker durable goods production, although factory managers project a rebound in coming months. Firms in the New York, Philadelphia, and Dallas Districts were broadly optimistic about prospects for 2013, while cautious optimism was expressed by manufacturers in the Cleveland District, and mixed outlooks were expressed in the Boston District. Contacts in the Atlanta District do not expect future production to be as high as previously projected.
Strength in residential construction spurred manufacturing increases in several Districts. There were widespread reports of growth in demand for wood products; a contact in the Philadelphia District noted the best growth prospects in five years, a sawmill in Montana restarted production after idling for more than four years, and a Dallas District lumber firm noted a seasonal demand increase for the first time in several years. The auto industry remained a source of strength for several Districts, including Philadelphia, Cleveland, Chicago, St. Louis, and Minneapolis. Gains were reported by food manufacturers in the Philadelphia and Dallas Districts, and food contacts in the St. Louis and Dallas Districts plan to expand operations or make significant capital expenditures.
In the Cleveland District, suppliers to the shale gas industry cited strong activity, and increased activity in natural-gas related industries was seen in the Chicago District. Electronic equipment and instruments manufacturers in the Philadelphia District and high tech firms in the Kansas City District noted gains over the reporting period, while reports on high tech orders in the Dallas District were mixed across customer groups, and semiconductor firms in the Boston District said sales continued to languish.
Numerous Districts reported uncertainty or weakness in military or defense-related sectors. San Francisco District defense-related manufactures noted furloughs, layoffs, and plant closures at some production facilities, and military customers in the Chicago District were taking measures to lower costs in anticipation of tighter future defense budgets. Lower activity was indicated by makers of primary metals in the Philadelphia District, and Chicago District specialty metal manufacturers noted declines in new orders. Demand for steel was relatively flat in the Cleveland and Chicago Districts, while firms in the San Francisco District saw an increase in demand for steel products used primarily in transportation infrastructure and nonresidential construction projects. Reports from fabricated metals producers were mixed across Districts, with increases noted in the Philadelphia and Dallas Districts while weaker production was noted in the Kansas City District.
Consumer Spending and Tourism
Most Districts reported increases in retail spending. Firms in the New York, Philadelphia, Cleveland, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco Districts noted sales increased at a modest to moderate pace. Most retailers in the Boston District said demand was slower than expected. Sales activity was mixed according to the Atlanta District's report, and retail spending declined in the Richmond and Chicago Districts. Demand for apparel rose in the Boston, Cleveland, Kansas City, and San Francisco Districts, and sales of furniture and appliances in the Chicago District were buoyed by improvements in the housing market. Sales of electronics rose in the Cleveland District, and the San Francisco District report indicated strong demand for mobile computing devices.
Contacts in some Districts cited higher gasoline prices, expiration of the payroll tax cut, and winter weather as factors restraining sales growth. Looking ahead, retailers in several Districts expect modest sales growth in the near term. In particular, the St. Louis District reported new store openings, and some retailers in the Dallas District said they have added employees in line with expanding operations.
Overall, automobile sales remained strong or increased moderately since the last report. The exception was a slight decline in sales of used vehicles in the New York and Cleveland Districts. A number of contacts in the St. Louis District reported plans to open new dealership locations, and dealers in the Chicago District were building inventories for the spring selling season. Used vehicle prices remained high. Outlooks were mostly positive, and contacts in the Cleveland, Chicago, Minneapolis, Kansas City, and Dallas Districts expect sales to increase in coming months. However, some auto dealers in the Cleveland District expressed concern about the potential negative impact of fiscal policy on consumer spending.
Reports from most Districts pointed to continued strength in travel and tourism, bolstered by both the business and leisure segments. Business travel remained robust in the Boston, Atlanta, and Minneapolis Districts, and foreign visitors continued to boost convention travel according to the Atlanta District. The Minneapolis District noted that winter tourism activity was stronger than last year, and spring-break related travel bolstered tourism in the Richmond District. Restaurants in the Minneapolis and Kansas City Districts noted increased sales.
Bookings were strong at some resorts in the Philadelphia and Richmond Districts, and hotels in Manhattan, Hawaii, and the Kansas City District noted solid gains in occupancy rates. In contrast, business at restaurants and museums in the Boston District softened in part due to unfavorable weather conditions. Attendance and revenues were slightly lower at Broadway theaters, casino revenues fell in the Philadelphia District, and tourism activity weakened in Southern California during the reporting period.
Demand for nonfinancial services expanded at a modest pace since the previous report. The Kansas City and San Francisco Districts noted solid growth in information technology services, and contacts expect demand to remain robust through year-end. The Boston District reported strong demand for healthcare consulting services partly due to changes resulting from the Affordable Care Act, while healthcare firms in the San Francisco District indicated plans to freeze hiring and scale back capital expenditures in response to federal spending cuts. Defense-related and other firms dependent on the federal government in the Philadelphia District said they expect a decline in activity for the remainder of the year.
Activity expanded for professional and business services, such as accounting, advertising, marketing, consulting, and legal services. Consulting services remained strong in the Boston District, and firms in the Dallas District noted strength in accounting services. Advertising and marketing firms in the Boston District said an uptick in growth for their services was buoyed by stronger financial positions of clients. The St. Louis District noted plans for hiring and expansion in social and legal services, while the Dallas District report indicated weaker-than-expected growth in demand for legal services.
Transportation service activity increased since the previous report. Air travel improved in the Dallas District, in part due to spring-break related activity. Intermodal cargo volumes moved higher in the Atlanta and Dallas Districts, and activity at logistics and transport firms in the Philadelphia District grew at a moderate rate. Trucking traffic picked up in the Kansas City District, and trucking cargo volumes were above year ago levels according to Atlanta's report. Railroad contacts in the Dallas District said shipments grew, particularly for petroleum and construction-related products, and freight transportation volumes were higher than expected in the Cleveland District.
According to Richmond's report, container traffic increased at larger ports in the District because of continued strength in shipments of auto parts. Air freight volumes rose in the Atlanta District, and small parcel shipments grew strongly in the Dallas District. However, railroad shipments were flat to slightly down in the Atlanta District, and a contact in the Richmond District said that European-bound vessels were leaving the port lighter than in the past, particularly due to a decline in construction and agricultural equipment exports.
Real Estate and Construction
Residential real estate activity continued to improve in most Districts, and some Districts, including Cleveland, Richmond, Chicago, Minneapolis, Kansas City, Dallas, and San Francisco, noted increased momentum since the last report. The New York District, in particular, noted especially strong improvement in residential real estateóboth in for-sale housing and apartment markets.
Home sales continued to rise in most Districts. Although homebuyer demand was high in the Boston District, low home inventories were restraining sales, keeping growth modest. Home sales were reportedly strong in both the Atlanta and Dallas Districts. The Richmond District noted low inventories were pushing up contracts to well above listing prices, and the Boston and New York Districts said multiple bids on properties have become more common. Tight inventories and strong sales led to rising home prices in many Districts, including Atlanta, Minneapolis, Kansas City, Dallas, and San Francisco. Within the New York District, condo sales volumes strengthened and low inventories have begun to drive up selling prices in New York City and surrounding areas, while New Jersey home prices were rising modestly and inventories were shrinking with a marked reduction in the number of distressed properties. Contacts in the Boston District also noted a decline in the stock of distressed properties.
New home construction continued to pick up in most Districts, although the Richmond District said that a low supply of residential building materials had stalled construction. Only the Philadelphia District noted that residential construction decelerated somewhat, although home sales were still growing moderately. Multifamily construction increased in several Districts including Boston, Chicago, and San Francisco. The New York District noted apartment rents accelerated in early 2013, due to stronger demand coupled with historically low inventories. The Cleveland, Dallas, and San Francisco Districts said apartment demand remained strong.
Commercial real estate and construction activity improved in most Districts. Office vacancy rates declined in the Boston District and contacts said the construction of mixed-use projects was picking up. The New York District reported that office vacancy rates continued to decline and rents rose in Manhattan. The Philadelphia District commented that there was not much change in nonresidential activity during the reporting period, but that contracts for repair work from Hurricane Sandy have yet to be approved. Contacts in the Richmond District cited a tight supply of class A office space and said there were several large projects under construction in the Washington D.C. area.
Commercial construction saw widespread improvement with the New York, Atlanta, St. Louis, Minneapolis, and Kansas City Districts noting increases. Both commercial real estate development and leasing activity increased across the San Francisco District, mostly fueled by growth in the technology industry. Several Districts, including Boston, Richmond, Atlanta, and Kansas City said commercial property investment sales activity increased during the reporting period.
Contacts in the Philadelphia and Kansas City Districts were somewhat optimistic in their outlooks for the commercial real estate and construction markets in general, but contacts in the Cleveland District were cautious about near-term construction activity. Dallas District contacts said office and warehouse markets were improving, and Atlanta District respondents noted growing optimism for the office and industrial sectors.
Banking and Finance
Loan demand was steady to slightly up at most District Banks that commented on lending. The Philadelphia District, however, said loan volumes softened somewhat since the previous report. The New York District noted widespread increases in loan demand, particularly for commercial loans and residential mortgages, and the Cleveland District said business and consumer loan demand picked up since the last report. The Dallas District saw broad-based improvement in loan demand as energy-related lending remained strong and commercial real estate and home equity lending bounced up from low levels. The San Francisco District said increased growth in automobile and mortgage loans spurred overall improvements in loan demand. Several Districts, including Philadelphia, Cleveland, Richmond, Atlanta, Chicago, Dallas, and San Francisco, said loan pricing was very competitive.
Reports on mortgage lending were mostly favorable. Stronger refinancing activity was cited by the New York and Atlanta Districts. The Cleveland and Kansas City Districts noted a shift from mortgage refinancing to new purchases, and the New York, Richmond, Dallas, and San Francisco Districts reported an uptick in residential mortgage loans.
Most District banks said credit conditions remained favorable, with improved credit quality for business and consumer loans.
Agriculture and Natural Resources
Agricultural conditions were mixed across Districts, largely due to varying weather patterns. Drought persisted in the Kansas City District and worsened slightly in the Dallas District, straining the respective winter wheat crops and causing continued losses in the livestock sector. However, drought conditions improved significantly in much of the Atlanta District, and the winter wheat crop in the St. Louis District was largely in good condition. Cold weather delayed field preparation for spring planting in the Richmond and Chicago Districts. The Minneapolis District's agricultural sector remained strong, and producers in the San Francisco District noted increased production as well as higher demand. Farmers in the Chicago, St. Louis, and Minneapolis Districts plan to increase soybean acreage this year but were mixed in their plans for corn and other grain acreage. Contacts in the Chicago District noted that corn and soybean prices dropped over the reporting period based on expectations of a larger crop this year and current stocks not being as tight as anticipated.
Oil and natural gas production generally held steady at moderate to high levels since the last report. Drilling activity was stable over the reporting period, but contacts in the Kansas City and Dallas Districts expect a rise in coming months. Output in some wet gas regions of the Cleveland District is expected to increase later in the year as new gas processing units come online. The energy sector was a bright spot in the Atlanta District, as projects to increase the Gulf Coast's liquefied natural gas export capacity drove capital and labor demand. Across the country, coal production continued to decline, with lower output reported by the Cleveland, Richmond, St. Louis, and Kansas City Districts.
Employment, Wages, and Prices
Labor market conditions remained unchanged or improved slightly, and reports of hiring were more widespread in the manufacturing, residential construction, information technology, and professional services sectors. Several Districts noted robust demand for workers tied to the residential construction sector, including Philadelphia, Cleveland, Dallas, and San Francisco. In particular, a lumber and wood products firm in the Philadelphia District said the firming housing market had resulted in the best growth prospects in five years.
Demand for information technology professionals and engineers was strong in the New York, Richmond, Minneapolis, Kansas City, and San Francisco Districts. Staffing firms in the Cleveland and Chicago Districts noted an increase in orders from the manufacturing sector, and several manufacturers in the St. Louis and Kansas City Districts said they planned on expanding their payrolls. Reports from the New York and Richmond Districts indicated strong demand for temporary workers. The Minneapolis District noted a tightening labor market, and along with the Dallas District cited continued challenges in attracting and retaining workers in areas close to oil-drilling regions. The Chicago District cited a stronger job market for new college graduates and more competition among employers to fill intern positions.
Contacts in several Districts faced difficulties finding highly trained or skilled workers, especially in the information technology and engineering fields. In contrast, hiring activity was limited in the Boston and Cleveland Districts, demand for staffing services softened in the Dallas District, and some Districts, including Richmond and Atlanta, reported restrained hiring due to uncertainty over fiscal policy or healthcare reform.
Overall upward wage pressures continued to be fairly modest. There were a few exceptions, however. Several Districts reported wage pressures in sectors experiencing labor shortages, such as information technology, construction, and engineering. The Kansas City District noted wage increases for commercial truck drivers, and the Richmond District reported widespread wage increases in the service sector. Rising healthcare costs were a concern among contacts in a few Districts, including Philadelphia, Cleveland, and Chicago.
The majority of Districts said overall price pressures remained minimal during the reporting period. Several Districts, including Boston, Philadelphia, Cleveland, Minneapolis, Kansas City, and San Francisco, said prices for some construction materials rose since the last report, but there were few reports of pass-through.
Kansas City District contacts said price increases for raw materials used in manufacturing led to higher selling prices in some instances and retail prices edged up. New York District respondents noted some increased selling prices in the service sector, and the Atlanta District reported that contacts in the transportation sector were able to cover cost increases with fuel surcharges. The Atlanta and Dallas Districts said that cotton prices rose since the last report.
Contacts in the Richmond District noted input and finished goods prices rose at a slower pace since the last report, and Chicago District contacts said commodity prices were down slightly.
Click here for more information from each district.