Continued:

Manufacturing

Conditions in the manufacturing sector were mixed since the last
report, though on balance, more Districts reported that conditions had
improved than worsened. The Boston, Richmond, Atlanta, St. Louis, Kansas
City, and San Francisco Districts reported that activity expanded,
though growth was generally seen as modest. Activity was reported as
mixed in the Dallas District, while the New York, Chicago, and
Minneapolis Districts reported that activity weakened, though declines
were mild for the latter two. Significant gains in manufacturing related
to the construction, energy, and transportation sectors were reported
across several Districts, with particularly robust gains tied to the
automotive industry. There were exceptions in the Kansas City and Dallas
Districts where manufacturing related to transportation equipment was
reported as mixed.

Steel production was said to be flat in the Cleveland and San
Francisco Districts, and lower in the St. Louis District. Activity
related to machinery and equipment was reported as lower in the
Philadelphia, Chicago, and Kansas City Districts. Weaker sales growth in
the high tech industry was reported by Dallas, and Kansas City said that
growth among high-tech firms remained sluggish in its District. The
Boston District noted some weakness in the semiconductor industry, while
the San Francisco District said that new orders from the semiconductor
industry had improved. Manufacturing contacts in the St. Louis District
were tentative about the outlook for 2013, and contacts in the Dallas
District noted some uncertainty about the outlook due to the upcoming
election.

Nonfinancial Services

Activity in nonfinancial services was stable to slightly stronger
since the last report. The Richmond, Minneapolis, Dallas, and San
Francisco Districts reported that service-sector activity expanded,
while such activity was reported as steady in the New York District and
mixed in the Philadelphia District. Richmond noted that business
activity strengthened for professional, scientific, and technical
service firms, and Dallas noted strength in energy, accounting, and
audit-related services. There was an increase in activity for a wide
range of consulting services in the Boston and Minneapolis Districts.
Activity related to health care was reported to be stable in the San
Francisco District, but increased significantly in the Boston District.
San Francisco reported continued sales growth for a wide variety of
technology services, and noted that demand picked up for restaurants and
other food-service providers.

Reports on goods transportation services generally remained
positive. A pick up in such activity was noted in Cleveland, Atlanta,
Richmond, and Dallas, while such activity was said to be flat in Kansas
City. Contacts in the Cleveland, Atlanta, and Dallas Districts reported
strong shipments of automotive, construction, and energy-related
products. Port activity expanded to record levels in the Atlanta and
Richmond Districts. Air cargo volume increased in the Atlanta District,
but declined in the Dallas District due to weakness in the international
sector.

Banking and Finance

Overall loan demand increased slightly on net since the last Beige
Book report. New York, Philadelphia, Cleveland, Richmond, Atlanta, St.
Louis, and San Francisco reported stronger loan demand on balance, while
Kansas City and Dallas reported flat demand and Chicago reported
somewhat weaker demand. Most Districts reported an increase in mortgage
lending, especially for refinancing purposes. New York, Cleveland, St.
Louis, Kansas City, and San Francisco reported some increase in demand
for commercial and industrial loans, while demand for business loans was
weak in Chicago and Dallas, and was characterized as mixed in Richmond.
Demand for consumer credit, particularly for auto loans, was said to be
strong in the Cleveland, Atlanta, St. Louis, Dallas, and San Francisco
Districts, while consumer loan demand was more limited in New York,
Richmond, Chicago, and Kansas City.

Credit standards were little changed since the last report.
However, New York noted some tightening for consumer loans and
residential mortgages, while Richmond and Chicago reported some easing
for commercial and industrial loans. Still, loans remained difficult to
obtain for many small businesses in the Cleveland, Richmond, and Chicago
Districts. Banking contacts in the Philadelphia, Cleveland, Dallas, and
San Francisco Districts reported stiff competition among lenders.
Philadelphia, Kansas City, and Dallas noted general improvements in loan
quality, and delinquency rates generally held steady or declined in the
New York, Cleveland, and Dallas Districts.

Agriculture and Natural Resources

Agriculture conditions were mixed since the last report. Drought
conditions continued to hurt the agriculture sector in the Chicago
District, parts of the Minneapolis District, and the Kansas City and
Dallas Districts. However, agriculture activity was reported as higher
in the Atlanta and St. Louis Districts, as well as in parts of the
Minneapolis District, and was reported as stable in the San Francisco
District. The Chicago and Dallas Districts noted that increased rainfall
had improved crop conditions. In the Dallas District, crops were
reported to be mostly in fair to good shape, with production levels
ahead of last year but below average due to ongoing dry conditions.
Producers in the St. Louis District reported that crops were generally
in better condition than at the time of the previous report, and harvest
rates for corn and rice were well ahead of their five-year averages.
Contacts in the Atlanta District reported that the rise in some crop
prices related to the drought in the Midwest led to an increase in crop
production in the Southeast. Higher feed prices continued to adversely
affect livestock producers in the Atlanta, Chicago, Minneapolis, Dallas
and San Francisco Districts, though the Chicago District noted some
easing in higher feed prices which provided a bit of relief.

Activity in the energy sector remained strong, with the
Minneapolis, Kansas City, and Dallas Districts reporting robust gains in
activity. The Minneapolis District reported that oil production hit a
new record high in North Dakota, and the Cleveland District reported
that oil and natural gas production held steady. Natural gas exploration
was reported as lower in the Kansas City District and in parts of the
Minneapolis District. Coal producers in the Cleveland District reported
declines in production.

Employment, Wages and Prices

Employment conditions were little changed since the last report.
The Boston, Cleveland, Atlanta, Minneapolis, and Dallas Districts
indicated that employment levels were flat or up slightly, with stagnant
demand and uncertainty related to the upcoming presidential election,
U.S. fiscal policy, and European debt issues cited by some as
restraining hiring. The New York and Chicago Districts noted weaker
labor market conditions, and conditions were described as mixed in
Richmond. Firms in the St. Louis District reported an increase in hiring
plans. Several Districts continued to report that employers were having
difficulty filling highly skilled positions. In response, a few
Districts noted that firms were starting to increase training programs
to meet their staffing needs.

Most Districts reported that wage pressures remained modest since
the last report, though an increase in the cost of employee medical
benefits was noted in Philadelphia, Cleveland, and Chicago. To the
extent that wage increases were observed, they were concentrated among
highly skilled workers in information technology, health care,
professional services, and some of the skilled trades, according to
reports from the Chicago, Minneapolis, Kansas City, and San Francisco
Districts.

Price pressures were said to be contained as most Districts
reported that both finished goods and input prices were little changed
since the last report. Higher prices were cited by some Districts for
agricultural commodities and petroleum-based products, although low or
declining natural gas prices were reported in the Atlanta, Kansas City,
Dallas, and San Francisco Districts. Contacts in the Atlanta, Chicago,
Kansas City, and Dallas Districts noted that drought conditions
continued to result in higher feed prices. There were scattered reports
of higher crop prices starting to show through to food prices at the
consumer level. Atlanta reported an increase in corn and soybean prices,
while Chicago and Kansas City reported that these prices declined
somewhat. Slightly lower prices for some technology-related products
were reported in the San Francisco District.

(3 of 3)

** MNI Washington Bureau: 202-371-2121 **

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