WASHINGTON (MNI) – The following is the summary section of the
Federal Reserve’s Beige Book survey of economic conditions in the 12
Districts, prepared by the Minneapolis Bank on responses up until Nov.
18, published Wednesday:

Summary

Overall economic activity increased at a slow to moderate pace
since the previous report across all Federal Reserve Districts except
St. Louis, which reported a decline in economic activity. District
reports indicated that consumer spending rose modestly during the
reporting period. Motor vehicle sales increased in a number of
Districts, and tourism showed signs of strength. Business service
activity was flat to higher since the previous report. Manufacturing
activity expanded at a steady pace across most of the country. Overall
bank lending increased slightly since the previous report, and home
refinancing grew at a more rapid pace. Changes in credit standards and
credit quality varied across Districts. Residential real estate activity
generally remained sluggish, and commercial real estate activity
remained lackluster across most of the nation. Single family home
construction was weak and commercial construction was slow. Districts
mostly reported favorable agricultural conditions. Activity in the
energy and mining sectors increased since the previous report.

Hiring was generally subdued, although some firms with open
positions reported difficulty finding qualified applicants. Wages and
salaries remained stable across Districts. Overall price increases
remained subdued, and some cost pressures were reported to have eased.

Consumer Spending and Tourism

District reports indicated that consumer spending increased
modestly, on balance, during the reporting period. Kansas City reported
that consumer spending strengthened, while retail sales rebounded in
Richmond. Gains in retail sales were noted in Philadelphia, Cleveland,
Minneapolis, and San Francisco. Boston reported that retailers
estimates of 2011 sales were generally more positive than they were at
the beginning of October, while same-store sales in New York were mostly
on or ahead of plan. Meanwhile, in Dallas, retail sales growth
moderated, and Atlanta and St. Louis reported weaker activity. A few
Districts noted that recent colder weather had spurred apparel sales.
Inventory levels were generally at desired or comfortable levels in New
York and Dallas. Retailers in Atlanta continued with tight inventory
management practices, and retailers in Richmond were cautious regarding
inventory and expansion. In Kansas City, inventories were above
year-earlier levels. Holiday sales were generally expected to be flat or
to increase modestly over a year ago in Cleveland, Atlanta, St. Louis,
Minneapolis, Dallas, and San Francisco. In Philadelphia, high-end,
online, and outlet retailers were the most optimistic for holiday sales,
while retailers in Chicago expected to use extended promotional periods
and heavy discounting to keep traffic volumes steady.

Motor vehicle sales increased in a number of Districts. Gains in
auto sales were noted in Philadelphia, Cleveland, Richmond, Atlanta, St.
Louis, and Minneapolis. Chicago also reported gains in sales during
October, but noted the pace of sales slowed in November and that dealers
suspected consumers may be waiting for potential end-of-year deals.
Upstate New York dealers reported that sales were steady to stronger and
that dealers service and parts departments continued to perform well.
Auto sales were solid in Kansas City, while demand held steady in
Dallas. Inventory levels were generally lean or lower than dealers would
like in Philadelphia, Cleveland, and St. Louis. In Dallas, vehicle
inventories had mostly normalized, while inventory levels increased in
Kansas City. Both Philadelphia and Dallas noted supply disruptions for
some foreign nameplates due to the flooding in Thailand.

Tourism showed signs of strength. New York and Atlanta described
tourism as robust and strong, while activity increased in Minneapolis
and posted moderate improvement in Richmond. Boston noted that the
travel and tourism sector continued to see strength in overseas and
business travel, while discretionary domestic leisure spending was
fueled by the affluent customer. In Richmond, tourism was largely flat,
but some contacts were cautiously optimistic about the winter season.
Airline contacts in Dallas expected to see stable demand through
year-end. Strength in hotel bookings and occupancy were noted in Boston,
New York, Richmond, Atlanta, Minneapolis, and San Francisco.

Nonfinancial Services

Business service activity was flat to higher since the previous
report. Boston, New York, Philadelphia, Minneapolis, and Kansas City
reported increased activity. St. Louis was mixed, while Richmond,
Chicago, and San Francisco indicated overall flat activity. Dallas
reported that demand for staffing services held steady at high levels.
St. Louis reported that firms in business support services, medical
research services, and transportation services announced plans to expand
operations and hire new workers, while contacts in temporary help
services, government services, and education services announced plans to
decrease operations. San Francisco noted that sales continued to grow
for providers of technology services, in particular for software
applications used for mobile computing and communication devices.

Manufacturing

Manufacturing activity grew at a steady pace across most of the
country, with all Districts other than St. Louis reporting increases in
orders, shipments, or production. Chicago, St. Louis, and San Francisco
reported positive results in metals and fabrication, while Cleveland saw
flat steel production and Philadelphia noted decreased demand for
primary metals. Cleveland and Chicago reported increased auto production
year over year, but Boston noted signs of slower auto component
production. Dallas saw steady demand for electronics, computers, and
high-technology goods, but San Francisco reported that demand for
consumer electronics continued to decrease. Philadelphia, Cleveland, and
Chicago saw increased production of energy-related products. For
construction-related goods, Chicago and Minneapolis reported declining
demand, while Dallas said demand was stable. Overall, St. Louis saw more
plant closures than plant openings or expansions. Freight transportation
volumes increased in Cleveland, held steady in Atlanta and Kansas City,
and were mixed in Dallas.

Banking and Finance

Overall bank lending activity increased slightly since the previous
report. New York, Philadelphia, Cleveland, and Kansas City reported
increased loan demand. Several Districts reported an increase in home
refinancing activity. Richmond reported mixed loan activity. Boston
noted plentiful financing and favorable terms for premier properties,
while financing remains harder to obtain for riskier properties and for
those in secondary and tertiary markets. Chicago, St. Louis, Dallas, and
San Francisco noted relatively unchanged loans. Atlanta saw soft loan
demand as companies continued to reduce their debt loads and limit
expansion and capital improvement plans.

Changes in credit standards and credit quality varied across
Districts. Philadelphia noted that credit quality continued to improve
but at a slower rate. Kansas City saw stable or improving loan quality.
Dallas noted that the quality of loans outstanding continued to improve,
with contacts reporting a decline in problem loans. San Francisco saw a
slight improvement in overall credit quality. Cleveland, Chicago, and
St. Louis noted relatively unchanged credit quality. Boston, Richmond,
and Atlanta saw some tightening of standards. In New York, bankers
reported declining delinquency rates for commercial and industrial
loans, but no change in delinquencies for other loan categories.

Real Estate and Construction

Overall residential real estate activity increased, but conditions
were varied across Districts. Philadelphia, Richmond, Minneapolis,
Kansas City, and Dallas noted increased activity. New York, Boston,
Cleveland, and San Francisco reported flat activity at relatively low
levels. Atlanta and St. Louis indicated decreased sales. Residential
construction remained sluggish. Single-family home construction remained
weak, while multifamily construction picked up in New York,
Philadelphia, Cleveland, Chicago, and Minneapolis. San Francisco
remained wanemic, while St. Louis and Kansas City reported decreased
activity.

Commercial real estate markets remained sluggish across most of the
nation. Boston, New York, Chicago, Minneapolis, and San Francisco
indicated roughly unchanged activity. Atlanta and Kansas City noted
slight improvement. Philadelphia and Dallas indicated mixed activity.
However, Richmond and St. Louis noted that vacancy rates increased.
Commercial construction was somewhat mixed. Cleveland saw steady to
slowly improving commercial construction; Chicago and Minneapolis
experienced modest to moderate increases. New York and Philadelphia
noted generally weak conditions; Richmond and St. Louis reported slow
activity, although industrial construction picked up.

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

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