WASHINGTON (MNI) – The following is the second and final section of
the Federal Reserve’s Beige Book summary of economic activity in the
Fourth District, published Wednesday:

Energy

Reports indicate that oil and gas output from conventional wells
was fairly steady during the past six weeks, with output expected to
remain at current levels in the near term. Production from Marcellus
shale was somewhat higher and is expected to continue to increase. Spot
prices for natural gas are generally flat at a low level, which is
putting downward pressure on capital spending. Oil prices continued on a
slow upward trend. Coal production has been stable since our last
report, with little change expected in the near term. However, one
energy executive noted that international demand for coal is rising as
an economic recovery in Europe builds momentum and traditional supply
sources are being drawn to Asian markets. Spot and contract prices for
coal were mixed but are tending to the down side. Other than a rise in
fuel prices, equipment and material costs have been flat. Employment at
energy companies has not changed recently.

Transportation

Freight transport executives reported that volume generally showed
a modest increase during the past six weeks. Chemical shipments rose,
while a decline was seen in apparel and building materials. Several
carriers characterized their outlook as cautious, with some expectation
for a slight drop in volume due to seasonal factors. Almost all of our
contacts reported rising prices for fuel, with limited success at
passing the increase through to customers. Capital outlays are expected
to remain at relatively low levels until the pace of the recovery picks
up. Although pent-up demand exists to replace aging equipment, high
prices for new tractors and tight credit are limiting purchases. Two of
our contacts said that they are now leasing equipment because of
attractive rates. Wage pressures are beginning to emerge due to a
growing problem with driver turnover and a tightening of the driver
pool.

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** Market News International Washington Bureau: 202-371-2121 **

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