WASHINGTON (MNI) – The following is the latest Beige Book survey of
economic conditions in the Federal Reserve’s Tenth District, published
Wednesday:
Banking.
In the recent survey period, some District bankers reported modest
improvements in loan demand and loan quality with little change in
deposit levels. In general, loan demand rose moderately, led by gains in
residential mortgage loans and slight upticks in both commercial real
estate and agricultural loan demand. Bankers reported steady commercial
and industrial loan activity at slightly lower interest rates and a few
bankers reported weaker consumer installment loan demand. Some bankers
noted that loan quality improved moderately over the past month with
addition quality improvements expected over the next six months. Credit
standards remained largely unchanged in all major loan categories and
bank deposits held steady.
Agriculture.
Agricultural growing conditions deteriorated substantially since
the last survey period as drought spread across the District. Extremely
hot, dry weather hindered crop development and more than half of the
District’s corn and soybean crops were rated in fair or worse condition.
Crop prices rose sharply as intensifying drought and few prospects of
precipitation cut corn and soybean yield forecasts. The winter wheat
harvest was nearly complete with better than expected yields in some
regions. To preserve drought-stressed pastures, some cattle ranchers
were considering selling feeder calves early, especially with high
feeder cattle prices. Losses mounted for feedlot operators as feed costs
soared. Rising export demand enticed some hog producers to expand
production. Strong farm and nonfarm investor demand drove farmland
prices higher.
Energy.
District energy activity held at historically high levels in June
but was expected to ease in the coming months. The number of active oil
and natural gas rigs in the District held steady with a rise in active
oil rigs offsetting declines in active natural gas rigs. Some business
contacts expected drilling activity to slow with current supplies
adequate to satisfy summer demand, especially if economic uncertainty in
Europe trims global demand and keeps oil prices below spring highs. In
contrast, a few District contacts expected a slight uptick in natural
gas prices as hot weather boosted demand for electric power generated by
natural gas. Wyoming’s coal production fell further as some electricity
production shifted from coal to natural gas. District ethanol production
slowed as rising corn prices and lower gasoline prices cut profits at
ethanol firms.
Wages and Prices.
Wage pressures remained subdued during the survey period, raw
materials prices edged up, and finished goods prices generally held
steady. Many firms were reluctant to increase wages or hire new staff
until economic uncertainty diminishes. Some businesses, however, were
offering higher salaries to recruit workers with specialized skills such
as engineers, software developers, mechanics, and commercial truck
drivers. Some transportation companies charged less for freight hauling
in light of reduced fuel costs. The cost of raw materials for
manufacturing rose at a slower pace compared to previous survey periods
and most finished goods prices remained stable. Retailers held selling
prices steady and did not anticipate raising prices during the next
three months. Restaurant owners, however, planned to increase menu
prices due to high food costs. High occupancy rates prompted hotel
operators to raise average room rates. Builders and construction supply
companies noted rising prices for some construction materials,
particularly drywall and asphalt shingles.
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** MNI Washington Bureau: 202-371-2121 **
[TOPICS: M$U$$$,MMUFE$,MGU$$$,MFU$$$]
