WASHINGTON (MNI) – The following is the first part of the text of
the Federal Reserve’s Beige Book survey Eleventh District summary,
published Wednesday:

Overview

The Eleventh District economy expanded at a more subdued pace over
the past six weeks than during the previous reporting period. The
energy, transportation services and staffing industries which have been
a source of strength in the recovery, saw positive but slower growth.
Business activity was unchanged in most other industries, although
retailers said sales improved and financial firms said lending activity
picked up slightly. Demand continued to be strong for petrochemical
products, and agricultural conditions remained favorable. Firms’
outlooks are positive, but contacts say uncertainty about economic
growth, regulatory reform and public policy has introduced more caution.

Prices

Selling prices held steady at most responding firms, but there were
some reports of increases. Small parcel shipping prices rose slightly
while large parcel shipping prices increased sharply, according to
contacts. Prices for some petrochemicals rose during the reporting
period, and agricultural respondents said commodity prices increased
across the board. Food producers were considering price increases
because of rising costs for dairy and sugar, and retailers noted higher
costs for cotton, corn, wheat, milk and cheese.

After holding steady in a tight range between $74 and $76 dollars
per barrel for most of the reporting period, the price of crude oil rose
to over $80 in early October on stronger demand from China and a weaker
dollar. Retail gasoline and diesel prices held steady since the last
report, and natural gas prices remain under $4 per Mcf.

Labor Market

Most responding firms reported steady employment levels, and some
noted slight hiring activity. Contacts in the airline, primary metals,
transportation manufacturing and auto sales industries said they had
added workers. Staffing firms reported slower growth in demand for their
services, although contacts said direct hire fees for IT and
professional workers had risen. Minor layoffs were reported by some
construction-related manufacturers and one legal firm. Wage pressures
were minimal, although higher wages were reported by airlines and some
shipping and transportation manufacturing firms.

Manufacturing

Most construction-related producers, including cement, lumber and
fabricated metals firms, said orders remained flat over the past six
weeks. Contacts believe soft demand is related to uncertainty about the
economic and political environment. One glass contact said sales rose
due to a pickup in apartment construction. Primary metals producers
noted a slight uptick in business. Some contacts are selling to new
markets, such as solar panel production. Others indicated that
remodeling activity had boosted sales. Despite the increase, contacts
believe the industry has a long road ahead. Manufacturers of high-tech
products said that sales and orders were growing at the same or slightly
slower pace since the last report. Most respondents said inventories are
below or at desired levels.

Sales are expected to continue to grow at a moderate pace over the
next six months, but there was increased uncertainty in respondents’
outlooks.

Paper manufactures said orders were slightly down, in part because
customers were managing inventories more tightly. Contacts expect sales
growth to be anemic through year-end. Food producers said demand growth
held steady. Sales growth of premium items had picked up, but orders for
value items weakened. Most transportation manufacturers noted steady
demand.

Petrochemical producers noted strong domestic demand for most
products. Export growth continued to slow, reflecting higher prices,
although there were reports of renewed Chinese interest in some
products. Domestic orders for PVC used in commercial construction were
weak, but exports were stronger, according to contacts. Refiners said
conditions continued to weaken. Both margins and operating rates fell
since the last report, and gasoline and distillate inventories have
risen against seasonal expectations.

Retail

Back-to-school spending led to a pickup in sales over the reporting
period, however customers remain extremely price conscious. Consumers
continue to focus on non-discretionary goods, but contacts noted there
was an uptick in spending on medium-priced household goods. Eleventh
District sales trended roughly in line with the nation during the
reporting period. Contacts expressed caution in their outlooks and said
competition remains fierce.

Automobile sales were steady after accounting for seasonality.
Inventories are a little tight, notably for large SUVs. Used car prices
have risen, reflecting elevated demand and short supply. Expectations
are for continued slow growth in sales.

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

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