Agriculture and Natural Resource Industries

Dallas reported strength in middle-market and large corporate
lending, and Chicago noted that business loan growth continued at a
moderate pace. On the consumer side, loan demand saw little change in
New York and San Francisco. Cleveland and Atlanta noted increased auto
lending, while Kansas City reported slightly weaker consumer installment
lending. Consumer lending in St. Louis ranged from moderately weaker to
unchanged. Demand for residential mortgage loans increased in New York,
Richmond, and Kansas City; mortgage demand was flat to moderately
stronger in St. Louis and softened in Kansas City. Cleveland noted
increases in requests for commercial real estate lending, while contacts
in Chicago and San Francisco noted improvement in the availability of
credit for this sector.

Meanwhile Philadelphia and Kansas City reported flat or steady
commercial real estate lending. Demand for commercial real estate loans
was flat to moderately stronger in St. Louis. Overall lending standards
remained restrictive in San Francisco and Richmond and were largely
unchanged in St. Louis and Kansas City. Lending standards tightened
further for commercial borrowers in New York. Credit conditions in
Chicago improved slightly, while quality improved in Philadelphia and
Kansas City. Delinquencies were steady or declined in Cleveland.
Mortgage delinquencies were steady in the New York District but
delinquencies decreased in other loan categories.

Drought conditions and warm temperatures affected agricultural
conditions in some Districts. However, recent rainfalls in parts of the
Richmond, Atlanta, Kansas City, and Dallas Districts helped ease the dry
conditions. Crop yields for St. Louis were mixed, with only winter
wheat, rice, and tobacco showing positive gains for 2011. Tobacco and
cotton yields in Richmond were lower than historical averages. San
Francisco reported growth in orders and final sales for agriculture
products. Farm values and incomes were stronger in Minneapolis and
Kansas City, while Richmond saw a slight drop in farmland values. Kansas
City, Dallas, and San Francisco noted higher crude oil extraction
activity. Similarly, Chicago and Minneapolis reported robust activity in
energy and mining, and energyrelated service firms in Dallas reported
very strong demand. Mining for various metals also increased in the San
Francisco District. Cleveland reported flat conventional oil and natural
gas drilling and production, and San Francisco observed lower demand for
natural gas. The Dallas District noted drilling cuts by a few
gas-directed firms, but contacts anticipate that oil-directed activity
will offset losses. Compared with a year ago, current coal production is
lower in St. Louis and higher in Kansas City.

Employment, Wages, and Prices

Of the Districts reporting on hiring, most indicated a slight
increase. Boston, New York, Cleveland, Richmond, St. Louis, and
Minneapolis reported increased hiring in manufacturing, and contacts in
Philadelphia and Kansas City anticipate future hiring in the sector.
Several businesses in the Atlanta District also reported plans to
increase payrolls. Philadelphia, Kansas City, and Dallas noted increased
hiring among auto dealers. Contacts in Boston, Cleveland, Richmond,
Chicago, Kansas City, and Dallas were having difficulties finding
skilled or specialized workers in a variety of industries. In contrast,
Boston manufacturing contacts reported fewer complaints about being
unable to find qualified workers. Chicago noted that hiring remains
selective and long-term unemployment elevated, while San Francisco noted
limited demand for new workers. Staffing firms in Boston noted that the
hiring cycle remains elongated despite stronger demand. Staffing firms
in Dallas also noted high demand, while a major employment agency in New
York indicated flat hiring.

Among Districts commenting on wages, upward pressures appeared
limited. Boston noted limited pay rises in retail and manufacturing.
Richmond reported some upward wage pressures in the service sector and
manufacturing. Dallas and San Francisco reported minimal wage pressures,
although upward pressure for certain specialized positions was reported
in both Districts. Similarly, wage pressures remained largely subdued in
Kansas City except for hightech and energy positions. Wage pressures
were modest or largely contained in Cleveland and Dallas, while
Philadelphia noted flat wages and Minneapolis reported modest wage
increases. New York noted that Wall Street compensation remains under
downward pressure.

Prices of final goods and services were relatively stable in most
Districts. Retail prices increased at a moderate pace in the Richmond
and Kansas City Districts. Contacts in the New York District reported
modest increases in selling prices and prices paid. Contacts in the
Cleveland, Richmond, Kansas City, and Dallas Districts noted rising
input prices with some expectation of pass-through to consumer prices.
Cost pressures were largely unchanged in Chicago and input prices have
stabilized in the Boston District, while business contacts noted some
increase in cost pressures in the New York District. Minneapolis and San
Francisco noted increases in the costs of employee benefits.
Philadelphia noted mixed price pressures among manufacturing firms, with
some firms unable to pass their higher costs along. Atlanta reported
that concerns over increased input costs eased, although several
manufacturing firms noted an increase in commodity prices since the
previous report.

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

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