Summary of Economic Reports by Federal Reserve District Banks

Following is a summary of U.S. economic conditions as reported by the 12 Federal Reserve district banks in the central bank’s latest regional survey, also known as the Beige Book.

The Federal Reserve Bank of San Francisco prepared the latest report. Information was collected on or before Aug. 26.

BOSTON: “Economic activity in the First District continued to expand at a modest pace. Most contacts reported low-to-moderate single digit year-on-year growth rates. Higher interest rates appear to have different effects on commercial real estate where some contacts reported upward pressure on capitalization rates and residential real estate where contacts report that the prospect of rising rates ‘‘nudged’’ buyers into the market, increasing demand. No firms report major cyclical layoffs but hiring remains subdued except among fast-growing technology firms. Sequestration has yet to have had any direct effect on contacts with major government businesses but contacts anticipate weakness in the future.”

NEW YORK: “Economic growth in the Second District has continued at a moderate pace since the last report. Contacts indicate that cost pressures remain moderate, while selling prices continue to be steady to up slightly. Labor market conditions have shown further signs of improvement, while wage increases have remained subdued. Retailers report that sales picked up a bit in July and August and were on or close to plan; new automobile sales have strengthened since the last report. Tourism activity has been mixed since the last report. Commercial and especially residential real estate markets have shown signs of firming. Finally, bankers report steady to somewhat softer loan demand, little change in credit standards, some leveling off in loan spreads, and widespread declines in delinquency rates.”

PHILADELPHIA: “Aggregate business activity in the Third District continued at a moderate pace of growth during this current Beige Book period. Moderate rates of growth continued for general services, existing home sales, and home construction. Homebuilders felt their sales may have been partially dampened by rising mortgage rates; however, construction remained well above its level of a year ago. Meanwhile, auto sales continued their strong rate of growth; growth of freight shipping was also strong. An overall outlook for moderate growth has continued since the last Beige Book. Contacts expressed greater confidence in the U.S. economy and in global conditions. However, firms remained cautious in their hiring and long-term capital expenditure plans and expressed concern about a potential fiscal crisis regarding the federal debt ceiling.”

CLEVELAND: “Business activity the Fourth District expanded at a moderate pace since our last report. On balance, demand for manufactured products grew at a moderate rate. Housing market activity has leveled out after a six-month period of strong growth; sales of new and existing homes were above year-ago levels. Nonresidential builders experienced a rise in backlogs and the number of inquiries. Retailers were disappointed with sales during June and July, while new motor vehicle purchases posted robust gains on a year-over-year basis. Shale drilling picked up in regions rich in wet gas and was above year-ago levels. Output at coal mines trended lower. Hiring was sluggish across industry sectors. Staffing firm representatives reported that the number of job openings increased, with vacancies found primarily in healthcare and manufacturing. However, job placements were lower.”

RICHMOND: “Economic conditions in the Fifth District improved moderately since our last report. Manufacturing shipments and orders rose, and capital spending increased. Retail weakened, with the exception of robust auto sales. Revenue growth was strong among non-retail services firms and tourist destinations reported good attendance. In banking, lending activity slowed somewhat under the pressure of higher interest rates. Residential real estate and construction activity varied, while commercial real estate and construction markets were little changed. Heavy rains in the Mid-Atlantic hindered harvests and raised concerns about crop damage. In energy markets, natural gas production increased sharply as more infrastructure came online; in contrast, coal mining declined. Conditions in District labor markets improved modestly. Growth in manufacturing prices for inputs and finished goods slowed; service sector price increases also slowed.”

ATLANTA: “According to reports from Sixth District contacts, economic conditions modestly improved from July to mid-August. Most businesses noted a positive outlook for the remainder of the year. Merchants indicated a slight pickup in retail sales and automobile sales were strong. The travel and tourism sector remained a bright spot across much of the District. Residential real estate continued to recover at a solid pace as sales and prices stayed ahead of last year’s level. However, low housing inventories were still restraining sales growth. Manufacturers cited a decrease in new orders and production. Bankers noticed very little pickup in loan activity, overall. District payrolls improved slightly.”

CHICAGO: “The pace of economic activity in the Seventh District improved in July and August, and contacts generally expected moderate growth for the rest of the year. Growth in consumer and business spending picked up. Manufacturing production increased, as did construction. Credit conditions tightened some. Cost and wage pressures were modest. Abnormally dry weather hurt crop prospects in many areas of the District, but to a much lesser degree than during last year’s drought.”

ST. LOUIS: “The economy of the Eighth District has expanded at a moderate pace since the previous report. Recent reports of planned activity in manufacturing and services have been positive. Reports of retail and auto sales over the past three months have also been positive. Residential real estate market conditions have continued to improve, and commercial and industrial real estate markets have also improved. Lending activity at a sample of large District banks was little changed during the second quarter of 2013. Prices, wages, and employment levels over the past three months have stayed the same or increased for a majority of contacts across the District.”

MINNEAPOLIS: “The Ninth District economy grew at a moderate pace since the last report. Increased activity was noted in consumer spending, tourism, residential and commercial real estate and construction, manufacturing, energy and agriculture. Growth in residential real estate and construction has slowed somewhat, but is still strong. The mining sector was flat, and professional services were mixed. Hiring announcements were more prevalent than layoff announcements since the last report. Wage increases were moderate. Prices were relatively level since the last report.”

KANSAS CITY: “The Tenth District economy expanded moderately in July and early August with further gains anticipated during the coming months. Strong retail and auto sales fueled consumer spending with positive expectations for future sales. District manufacturing activity picked up, and some plant managers were hiring additional workers. Residential and commercial real estate markets continued to strengthen with an upswing in construction and a rise in sales. Agricultural growing conditions were affected by drought, but lower farm income expectations did not dampen farmland prices. District energy activity remained solid with stronger natural gas exploration offsetting a slight drop in oil drilling. More contacts commented that difficulty finding qualified labor, particularly in highly skilled fields, was placing modest upward pressure on wages. Most firms reported little or no effect on business activity from sequestration budget cuts, though some manufacturers reported a decline in defense orders and hotels noted fewer government employees were traveling.”

DALLAS: “The Eleventh District economy expanded at a moderate pace over the past six weeks. While many respondents noted steady demand, there were more noting improving versus declining demand. Sales grew for firms in residential construction, retail, accounting, fabricated metals, food and kindred products, and automobile dealerships. Financial firms and paper producers reported a decline in demand. The energy sector noted some flattening of activity at high levels. Drought continued to plague the region although recent rains have slightly improved growing conditions in some areas.”

SAN FRANCISCO: “Economic activity in the Twelfth District expanded at a modest pace during the reporting period of early July through late August. Price inflation was subdued for most final goods and services, and upward wage pressures were very modest. Retail sales rose on net, while demand for business and consumer services was more mixed. District manufacturing activity edged up. Agricultural production and sales expanded. Demand for housing strengthened, and commercial real estate activity firmed. Reports from financial institutions indicated that loan demand increased slightly.”

To contact the reporter on this story: Vince Golle in Washington at vgolle@bloomberg.net

To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net

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