WASHINGTON (MNI) – The following is the summary of the Beige Book
survey of Federal Reserve districts, published Wednesday:
Reports from the twelve Federal Reserve Districts indicated that
economic activity continued to grow; however, the pace has moderated in
many Districts. The six Districts nearest the Atlantic seaboard reported
a slowdown in activity since the previous Beige Book report; activity
was little changed in the Atlanta District and unchanged or slightly
improved in the Richmond District. Of the other six Districts, the
Minneapolis District reported political and weather-related disruptions
that temporarily slowed growth, and the Dallas District slowed to a
moderate pace of growth. The remaining four Districts continued to grow
modestly. The previous Beige Book reported a slower growth rate for four
Districts, seven Districts growing at a steady pace, and one District
with faster growth.
Consumer spending increased overall, with modest growth of nonauto
retail sales in a majority of Districts. Falling gasoline prices
throughout most of this reporting period may have encouraged a pickup in
shopping trips and some additional spending since the previous Beige
Book. Price pressures from food, energy, cotton, and other supplier
inputs continued to squeeze retail margins. Auto sales slowed a little
since the previous Beige Book, with inventories still lean due to
Japanese supply chain disruptions. The summer tourism season has started
off stronger than last year in most areas unaffected by severe weather.
Activity among nonfinancial service sectors improved overall in
most Districts. Of the five Districts reporting on transportation
services, volumes were mostly up. Manufacturing activity expanded
overall, with two Districts growing at a somewhat faster rate since the
last Beige Book, many Districts reporting steady or slowing growth, and
two Districts reporting little change. Among firms reporting on
near-term expectations, the manufacturing outlook remained generally
optimistic, but capital spending plans were somewhat more cautious.
Most residential real estate activity was little changed and
remained weak, although construction and activity in the residential
rental market continued to improve since the previous Beige Book. For
six Districts, activity in the nonresidential real estate market has
improved slightly for specific submarkets, although conditions generally
remained weak across all twelve Districts. Since the last Beige Book,
overall loan volumes have increased in three Districts, decreased in two
Districts, and were relatively flat, often with mixed trends across the
banks portfolios, in five Districts. Credit quality was steady or
improving.
Drought conditions and severe flooding adversely affected large
portions of the seven Districts that reported on their agricultural
sectors. Districts that reported on their energy and mining sectors
continued to note strong growth for most energy-related products but
some weakness in coal production.
Although most Federal Reserve Districts observed modest hiring
increases, labor market conditions remained soft. Wage pressures
continued to be subdued for all but a few specific occupations in some
Districts. Price pressures moderated somewhat in many Districts,
although some firms indicated that they were able to pass on some cost
increases to their customers.
Consumer Spending and Tourism
Consumer spending increased overall in most Districts since the
last Beige Book. The New York, Cleveland, Chicago, Minneapolis, and
Dallas Districts indicated modest growth of nonauto retail sales, and
the Philadelphia and Kansas City Districts noted relatively strong
growth. Retailers in the Boston, Richmond, Atlanta, and San Francisco
Districts reported mixed results across product lines, while St. Louis
District retailers reported slowing sales. Stronger sales in some New
York City stores were attributed to tourism, while one large mall in
western New York credited Canadian shoppers as the source. A major
Philadelphia District retailer suggested that increased shopping trips
and a greater willingness to spend were due to lower gas prices since
the last Beige Book. Inventory levels were not a strong concern.
Contacts from half of the Districts noted upward pressure from supplier
prices — cotton was often mentioned — and other non-labor inputs,
especially food and energy. Some retailers were able to pass through
some cost increases, but for many, especially restaurants, profit
margins were squeezed. Restaurant contacts in the Atlanta and Kansas
City Districts still managed to report strong sales.
Reports of auto sales were mixed across Districts and varied by
vehicle make, with most Districts indicating that dealer inventories
were lean primarily due to lingering supply disruptions for Japanese
vehicles and parts. Auto dealers in the Kansas City District cited
strong sales despite reduced incentives and credited, in part, continued
low interest rates and tornado damage. The Chicago District noted lower
sales in June as incentives decreased and showroom traffic declined,
followed by improved sales in early July. The New York, Philadelphia,
Richmond, Atlanta, St. Louis, Dallas, and San Francisco Districts noted
varying degrees of lower sales stemming from Japanese supply
constraints. Strong demand for smaller vehicles and used cars continued
in several Districts. The Cleveland District described dealers outlook
as cautious due to uncertainty about gas prices, the economy, and
vehicle availability.
Tourism activity strengthened in most Districts as the summer
season got underway. The Richmond District reported that bookings along
the Mid-Atlantic coast were comparable to the 2010 season, despite last
years increase from additional vacationers who were avoiding the Gulf
Coast oil spill. The New York, Atlanta, and San Francisco Districts also
reported increased tourism. Tourism was also up in parts of the Kansas
and Minneapolis Districts, except for destinations adversely affected by
drought, heavy rains, flooding, and Minnesotas state government
shutdown.
Nonfinancial Services
Growth of nonfinancial services advanced further during this Beige
Book period for the Districts overall. The Boston, St. Louis,
Minneapolis, Dallas, and San Francisco Districts reported the strongest
advances. The Philadelphia and Richmond Districts reported slight
improvements, while activity in the New York District flattened.
Respondents remained optimistic about growth over the next three to six
months in the Boston, New York, Philadelphia, Minneapolis, and Dallas
Districts. However, the New York Districts contacts were less
optimistic than they were when polled for the previous Beige Book.
High-tech firms in the Kansas City District expressed an optimistic
outlook and planned to increase capital spending.
Among the five Districts that reported on transportation services,
freight transport shipping volumes in the Cleveland District, port
activity in the Richmond District, and intermodal cargo volumes in the
Dallas District expanded somewhat. The Kansas City District also
reported increased activity, while Atlanta District firms indicated that
their domestic volumes of freight and parcels were slowing somewhat.
Manufacturing
Manufacturing activity expanded overall, with two Districts
reporting somewhat stronger growth since the last Beige Book, many
Districts reporting steady or slowing in growth, and two Districts
reporting little change. Auto production in the Cleveland District rose
moderately, as supply disruptions caused by events in Japan diminished.
The Kansas City District also reported a rebound in manufacturing
activity from a low level in the prior survey period, while activity at
high-tech firms expanded further. Foreign demand for metal fabrication
and overall demand for semiconductors and other technology products
contributed to slightly faster growth rates in the San Francisco
District. Manufacturers in the Chicago, St. Louis, and Minneapolis
Districts reported continued growth at a relatively steady pace from the
previous reporting period. The Chicago District cited a rebound in auto
production and strong demand for heavy trucks and equipment.
Growth continued among manufacturers in the Boston and Dallas
Districts as well; however, results were more mixed. Contacts in the
Boston District cited stronger growth for products related to foreign
demand, non-luxury consumer goods, and clients addressing deferred
maintenance needs. Softer growth was reported by firms delivering
consumer luxury goods, and products or services to the small business,
banking, and government sectors.
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** Market News International Washington Bureau: 202-371-2121 **
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