–Slight Increase in Hiring Reported in Several Districts
WASHINGTON (MNI) – The following is the text of the
summary beginning Wednesday’s Beige Book survey of regional economic
conditions, prepared by the St. Louis Fed through Feb. 17:
Reports from the 12 Federal Reserve Districts suggest that
overall economic activity continued to increase at a modest to moderate
pace in January and early February. Activity expanded at a moderate pace
in the Cleveland, Chicago, Kansas City, Dallas, and San Francisco
Districts. St. Louis noted a modest pace of growth and Minneapolis
characterized the pace of growth as firm. Economic activity rose at a
somewhat faster pace in the Philadelphia and Atlanta Districts, while
the New York District noted a somewhat slower pace of expansion. The
Boston and Richmond Districts, in turn, noted that economic activity
expanded or improved in most sectors.
Manufacturing continued to expand at a steady pace across the
nation, with many Districts reporting increases in new orders,
shipments, or production and several Districts indicating gains in
capital spending, especially in auto-related industries. Activity in
nonfinancial services industries remained stable or increased. Reports
of consumer spending were generally positive except for sales of
seasonal items, and the sales outlook for the near future was mostly
optimistic. Tourism remained strong in some reporting Districts, but
declined in the Minneapolis and Kansas City Districts because of reduced
snowfall. Residential real estate market conditions improved somewhat in
most Districts, with several reports of increased home sales and some
reports of increased construction. Commercial real estate markets also
showed positive results in some Districts. Banking conditions generally
improved across the Districts. Agricultural conditions were mixed, while
extraction activity generally increased.
Hiring increased slightly across several Districts, and contacts in
a variety of industries faced difficulties finding skilled workers. Wage
pressures were generally contained, and prices of final goods remained
stable, although contacts in some Districts anticipate passing rising
input prices through to consumer prices.
Manufacturing and Other Business Activity
Manufacturing has continued to increase across all 12 Federal
Reserve Districts since the previous report. Most Districts reported
gains in new orders, shipments, or production. Contacts reported
increased capital spending in the Boston, Richmond, Chicago, Kansas
City, St. Louis, Minneapolis, and Dallas Districts; contacts in
Philadelphia and Cleveland also anticipate higher capital spending.
Manufacturing contacts in San Francisco also continued to invest in
information technology equipment. Auto-related manufacturers in the
Richmond, Atlanta, St. Louis, and Minneapolis Districts reported
increased activity and announced plans to expand operations and open new
plants. Primary metal manufacturing showed strong growth in the
Philadelphia, St. Louis, and Dallas Districts. Fabricated metal
manufacturing increased in the Richmond, Kansas City, and Dallas
Districts but was essentially flat in the San Francisco District. Steel
producers reported that shipping volume was trending higher in the
Cleveland District and specialty metal contacts reported solid order
bookings in the Chicago District. In contrast to the many positive
reports, contacts in some Districts reported plans to decrease
operations and close plants. Contacts in chemical and paper product
manufacturing in the St. Louis District reported plans to close plants
and lay off workers, while manufacturers of household goods and building
materials reported soft demand on average in the Chicago District.
Manufacturing contacts in the Boston, Philadelphia, and Cleveland
Districts expressed concern about the risks posed by the situation in
Europe.
Nonfinancial services activity was stable or increased in the New
York, Philadelphia, Richmond, Atlanta, St. Louis, Minneapolis, Dallas,
and San Francisco Districts. Transportation services were stable or
trending higher in the Cleveland, Richmond, Atlanta, and Dallas
Districts. In contrast, freight transportation contacts in the St. Louis
and Kansas City Districts reported that business had slowed. Information
technology service firms in the Boston, St. Louis, Kansas City, and San
Francisco Districts have experienced increased demand since the previous
reporting period. Additionally, contacts in health care announced plans
to increase capital spending or expand operations in the Richmond and
St. Louis Districts.
Consumer Spending and Tourism
Retail sales in the Philadelphia, Atlanta, St. Louis, Minneapolis,
and Kansas City Districts were higher than year-earlier sales. The
Boston District reported strong same-store sales in the last few months
of 2011, but mixed results for same-store sales in January. Retail sales
increased in the Richmond and San Francisco Districts, but were mixed in
the New York and Cleveland Districts and weakened in the Kansas City
District. Retail sales growth in the Dallas District was tepid and
consumer spending growth slowed in the Chicago District. The Boston, New
York, Philadelphia, Cleveland, Chicago, and Dallas Districts noted that
mild winter weather had depressed sales of seasonal items. Mark-downs on
winter merchandise to clear inventory were reported in the Boston,
Chicago, and Richmond Districts. Aside from unsold seasonal items,
inventories were more broadly reported to be at satisfactory levels. All
Districts reporting sales expectations for the coming months indicated
optimism among contacts that sales will improve.
Gains in auto sales were reported in the Philadelphia, Atlanta, St.
Louis, and Minneapolis Districts. Chicago also reported sales increases
in January, but noted that sales were down slightly in early February.
Auto dealers in the New York, Cleveland, and Richmond Districts reported
a slowdown in recent auto sales, while auto sales held steady in the
Dallas District and contacts in the Kansas City District reported a
post-holiday lull in sales. All Districts reporting on sales outlooks
conveyed optimism. Dealers in the Kansas City District expect demand for
smaller, fuel-efficient cars to spur sales in coming months, while
contacts in the Cleveland District were optimistic but uncertain that
sales increases in 2011 could be repeated in 2012. Tourism strengthened
or remained strong in the New York, Richmond, Atlanta, and San Francisco
Districts. The Minneapolis and Kansas City Districts reported a decrease
in tourism largely attributed to below-average snowfall.
Real Estate and Construction
Residential real estate activity increased modestly in most
Districts. Boston, Cleveland, Richmond, Atlanta, Kansas City, and Dallas
reported growth in home sales, while New York noted steady to slightly
softer home sales. Philadelphia reported strong residential real estate
activity. In contrast, home sales declined in St. Louis and San
Francisco noted that home demand persisted at low levels. Contacts
outlooks on home sales growth were mostly optimistic. Contacts in
Boston, Philadelphia, Atlanta, and Dallas expect home sales to rise
further. Home prices declined or held steady in many areas. Cleveland
and Atlanta reported little movement in house prices, while contacts in
Boston, New York, Philadelphia, Richmond, Chicago, and Kansas City
reported some declines. Single-family residential construction was weak
in Chicago and declined in St. Louis; Cleveland noted that the year-end
uptick seen in construction has abated somewhat, and Minneapolis noted
increased single-family building permits. In contrast, Boston, Atlanta,
Chicago, Minneapolis, Dallas, and San Francisco reported increased
multifamily construction activity.
Commercial real estate markets displayed positive results in some
Districts, as leasing showed overall improvement. Minneapolis, Richmond,
Chicago, and Dallas noted increased leasing. Boston, however, reported
mostly unchanged leasing fundamentals with some modest improvement since
the previous report. Commercial vacancy rates were mixed in New York,
decreased in Chicago, increased in St. Louis, and stayed high in San
Francisco. Boston and Dallas noted limited levels of nonresidential
construction, while Cleveland and Chicago noted improved nonresidential
construction.
Banking and Finance
Reports on banking conditions were generally positive across
Districts. Lending increased to varying degree in the New York,
Philadelphia, Richmond, Chicago, Dallas, and San Francisco Districts.
Lending was little changed in St. Louis and Kansas City, while loan
demand was described as weak in Richmond and soft at regional banks in
Atlanta. Demand for business credit was flat to slightly higher in
Cleveland and increased slightly in Richmond, San Francisco, and at some
large banks in Atlanta.
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** Market News International Washington Bureau: 202-371-2121 **
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