The following is the summary text of the Federal Reserve’s Summary of Commentary on Current Economic Conditions. For the full report text: www.federalreserve.gov/monetarypolicy/beigebook/default.htm
All twelve Federal Reserve Districts report that economic activity expanded during the current reporting period. The pace of growth was characterized as moderate in the Boston, New York, Richmond, Chicago, Minneapolis, Dallas, and San Francisco Districts, and modest in the remaining regions. Compared with the previous report, the pace of growth picked up in the Cleveland and St. Louis Districts but slowed slightly in the Kansas City District.
Consumer spending expanded across almost all Districts, to varying degrees. Non-auto retail sales grew at a moderate pace across most of the country: Although improved weather generally gave a boost to business, lingering wintry weather in the Northeast continued to weigh on sales in parts of the Boston and New York Districts. Increasingly strong new vehicle sales were reported by more than half the Districts, with most other regions seeing steady sales; demand was generally reported to be less robust for used vehicles than for new vehicles. Tourism was steady to stronger across most of the country -- particularly in most of the eastern seaboard Districts.
Activity in the service sector, excluding finance, grew across most reporting Districts, though New York and San Francisco reported a mixed performance. Boston, Kansas City, and San Francisco noted particular strength among technology firms. Transportation activity strengthened in most Districts reporting on that sector, with Richmond and Atlanta observing brisk growth in port activity, and Cleveland noting a rebound from weather-related weakness in the prior report. Manufacturing activity expanded throughout the nation, and at an increasingly strong pace in a number of Districts -- notably along the East Coast, as well as in the St. Louis and Kansas City Districts.
* Prepared at the Federal Reserve Bank of New York and based on information collected on or before May 23, 2014. This document summarizes comments received from businesses and other contacts outside the Federal Reserve and is not a commentary on the views of Federal Reserve officials.
Residential real estate activity was mixed across the country, with some reports of low inventories constraining sales -- specifically in the Boston, New York, and Kansas City Districts. Still, home prices continued to increase across most of the country, while the markets for both condos and apartment rentals were mostly robust. Residential construction activity was mixed, with half the Districts reporting increases but a few indicating some weakening in activity; multi-family construction remained particularly robust. Both non-residential construction activity and commercial real estate markets were generally steady to stronger since the last report.
Overall lending activity increased throughout the nation. Roughly two-thirds of the Districts reported rising loan demand, with particular strength reported in New York and San Francisco. Credit quality and delinquency rates generally improved, while credit standards were mostly unchanged.
Among Districts reporting on agriculture, drought conditions caused problems in the Dallas and San Francisco Districts, and, to a lesser extent, in the Chicago District; conversely, Atlanta and Minneapolis reported that excessive moisture delayed plantings. Energy industry activity strengthened in most Districts, though coal production was steady in Cleveland and declined in the Richmond District.
Labor market conditions generally strengthened in the latest reporting period, with hiring activity steady to stronger across most of the country, and several Districts reporting shortages of skilled workers. In most Districts, wage increases have remained generally subdued, though Chicago and Dallas noted increased costs for health benefits. Prices of both inputs and finished goods and services were mostly steady to up slightly.
Consumer Spending and Tourism
Consumer spending grew at a moderate pace over the latest reporting period, with a mixed performance among non-auto retailers but brisk growth in vehicle sales and moderate growth in tourism. Non-auto retail sales were characterized as mixed and generally lackluster in the Boston, Atlanta, and San Francisco Districts, but growing modestly or moderately across the rest of the country. Kansas City noted some deceleration in sales. While lingering cold and wet weather was cited as somewhat of a negative factor in the Boston and New York Districts, it was characterized as less of a restraint than earlier in both these Districts and in the Cleveland, Chicago, and Dallas Districts. A number of Districts also noted that the later Easter combined with the late arrival of warm weather had the effect of delaying the spring shopping season. Chicago, Kansas City and San Francisco reported relative strength in spending on home-related merchandise, while St. Louis mentioned strong restaurant business.
New vehicle sales were generally described as robust in the latest reporting period, while sales of used cars and trucks continued to lag. New York, Philadelphia, Cleveland, Atlanta, St. Louis, Dallas and San Francisco reported moderate to robust growth in new vehicle sales, while Richmond, Chicago, Minneapolis, and Kansas City described sales as generally steady or mixed. Cleveland and San Francisco reported some growth in sales of used vehicles, while New York reported a mixed performance. Auto dealers generally expressed optimism about the near term outlook.
Tourism was seen as fairly strong across most of the country in recent weeks. The Boston, New York, Richmond, Atlanta, Minneapolis Districts reported increasingly robust tourism activity, and Philadelphia noted slight growth; Dallas observed a pickup in passenger airline demand. On the other hand, tourism activity was seen weakening somewhat in the Kansas City and San Francisco Districts. New York and Philadelphia attributed some of the pickup to the marked improvement in weather driving pent-up demand, Boston credited the 2014 Marathon for much of the strength in April, and Atlanta cited strength in international visitors.
Nonfinancial services activity generally strengthened since the previous report. The Philadelphia, Richmond, Minneapolis, Kansas City, and Dallas Districts reported that service-sector activity expanded, on balance, while such activity was reported to be mixed in the New York and San Francisco Districts. St. Louis noted that reports of planned service sector activity have been positive. Business activity strengthened for technology service firms in the Boston, Kansas City, and San Francisco Districts, while Dallas reported that demand for accounting services remained steady at a high level. Activity in the food services industry continued to decline in the San Francisco District.
Reports on goods transportation services were largely positive. Increased shipments and cargo volumes were noted in the Cleveland, Richmond, Atlanta, Minneapolis, Kansas City, and Dallas Districts. Following a difficult winter, contacts in Cleveland reported strengthening demand for shipments of motor vehicles, chemical products, and construction-related materials. Port activity grew briskly in the Richmond and Atlanta Districts, particularly for auto-related products and containerized cargo. Railroad shipments increased in the Atlanta and Minneapolis Districts, while intermodal traffic expanded in the Atlanta and Dallas Districts. Airline passenger demand improved in the Dallas District.
Manufacturing activity expanded in all twelve Districts since the previous report, with a pickup in the pace of growth reported in several Districts. Activity expanded robustly in the Boston, New York, Atlanta, and Kansas City Districts, while a more modest pace of growth was reported by Chicago, St. Louis, Philadelphia, Cleveland, Dallas, and Minneapolis. Activity expanded more slowly in the Richmond and San Francisco Districts. Growth was especially strong for several Districts in activity related to motor vehicles, aerospace, and metals. By contrast, construction-related manufacturing activity was mixed. Philadelphia reported weakness in this sector, and Chicago and Kansas City noted some strength, while demand for construction-related materials was mixed in the Dallas District. Demand for semiconductors increased modestly in the San Francisco District. Chicago and Cleveland noted strength in energy-related industries, and refinery utilization rates rose in the Dallas District. Steel production was up slightly in Cleveland, where activity related to oil and gas was also reported to be strong. The Richmond District noted declining sales for machinery, textiles, rubber and plastics, and San Francisco noted a slowing in the pace of new orders among defense-related manufacturers.
Real Estate and Construction
Residential real estate activity has been mixed since the last report, with a lack of inventory at times cited as a constraining factor. Boston, New York, and Kansas City indicated that existing home sales were being held back due to low or dwindling inventories. Sales rose modestly in the Cleveland, Richmond, Atlanta, Chicago, and Dallas Districts, with inventories described as low in Richmond and Chicago and declining in Cleveland. Sales activity, however, softened in the Philadelphia, St. Louis, Minneapolis, and San Francisco Districts, though Philadelphia did note some signs of improvement in May. San Francisco attributed some of the weakness to severe weather. Home prices continued to increase across most of the Districts; Boston reported some pullback in prices of single-family homes, though condo prices in that District, as well as in New York, rose. New York, Chicago, and Dallas reported strengthening demand for apartment rentals, whereas Boston noted some slackening in demand.
Homebuilders gave mixed reports on new home sales and construction in recent weeks: Residential construction strengthened, to varying degrees in the New York, Richmond, Atlanta, Chicago, Kansas City, and Dallas Districts. However, Philadelphia, St. Louis, and Minneapolis indicated some weakening in new home sales and construction. Overall residential construction activity was mixed across the San Francisco District, though contacts there expect activity will increase over the next year. Both Boston and New York reported a good deal of recent multi-family development at the high end of the market, while Cleveland, Richmond, Atlanta, Chicago, and Dallas noted strength in multi-family construction more generally.
Non-residential construction activity was steady to stronger in most Districts over the latest reporting period, with strengthening reported in the Boston, St. Louis, and Kansas City Districts. Cleveland described pipeline activity as strong, and San Francisco noted that a number of public and commercial high rise projects have been announced or are underway. In contrast, Minneapolis reported a decline in non-residential construction activity, and Philadelphia characterized it as steady at a low level; Chicago described activity as mixed -- with office construction weak but industrial and some segments of retail fairly strong. The commercial real estate market was mostly stronger since the last report. Leasing activity and vacancy rates improved in the Richmond, Atlanta, Chicago, Minneapolis, Kansas City, Dallas, and San Francisco Districts, and were generally steady in the Boston, New York, Philadelphia, and St. Louis Districts. Dallas described market conditions as robust.
Banking and Financial Services
All Districts reporting on banking noted that lending activity increased. Loan demand was reported as strong by New York and San Francisco, while more modest growth was reported by Philadelphia, Richmond, Chicago, St. Louis, Kansas City, and Dallas. Commercial and industrial loans grew in the Philadelphia, Richmond, Chicago, and Kansas City Districts. On the consumer lending side, several Districts noted that the demand for auto loans was particularly strong, including Cleveland, Atlanta, Chicago, Dallas, and San Francisco, though such lending was reported to be up only slightly in the St. Louis District. Residential real estate lending increased in the Chicago, Kansas City, and Dallas Districts, while mortgage lending activity was reported as holding steady in the Atlanta and San Francisco Districts. By contrast, both Cleveland and Richmond reported slightly weaker mortgage lending activity, and New York and Richmond reported a decline in mortgage refinancing.
Credit quality was reported as strong in the San Francisco District, loan quality improved in the Philadelphia and Dallas Districts, and delinquency rates were somewhat lower in the New York, Cleveland, and St. Louis Districts. Credit quality was reported as stable by Richmond and Kansas City. Credit standards were seen as largely unchanged in the New York, Philadelphia, Cleveland, and Kansas City Districts, while St. Louis reported that credit standards for commercial and industrial loans had eased slightly.
Agriculture and Natural Resources
Agriculture conditions proved challenging in many Districts, with drought conditions reported by some Districts and excessive moisture reported in others. Drought conditions existed in parts of the San Francisco District, particularly in California and Arizona, resulting in a reduction in crop plantings and reduced herd sizes. Dallas also noted widespread drought conditions, especially in the Texas panhandle, as did the Chicago District in parts of Iowa. On the other hand, rains delayed plantings of crops in parts of the Atlanta and Minneapolis Districts. Planting progressed well overall in the Chicago District and in Idaho as reported by San Francisco. Minneapolis and San Francisco reported a loss of hogs due to a fatal virus, contributing to higher hog prices. More generally, low cattle supplies and strong demand resulted in high beef prices in Minneapolis and Kansas City. Both Kansas City and Dallas reported problems with the quality and quantity of the winter wheat crop, though winter wheat crops were generally in good condition in the St. Louis District.
Activity in the energy industry generally increased since the previous report. Atlanta and San Francisco reported that crude oil production expanded strongly, and Dallas noted that the demand for oilfield services was robust. Natural gas production climbed in the Richmond and Atlanta Districts. Minneapolis highlighted a number of recent or planned projects to expand energy production capacity. St. Louis reported that coal production was up from year ago levels, while coal production held steady in the Cleveland District but fell in the Richmond District.
Employment, Wages and Prices
Labor market conditions generally improved since the previous report. The Boston, New York, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, and Dallas Districts indicated that employment levels were flat to up modestly. Philadelphia reported that some new hiring occurred but noted that firms remain cautious, while improvement in the labor market has led to increased competition for workers in the Kansas City District. Contacts in the Cleveland and Chicago Districts noted an increase in demand for some temporary workers, while the Atlanta District reported a small increase in workers transitioning from temporary to permanent positions. Several Districts continued to report that employers were having difficulty finding skilled workers.
Most Districts reported that wage pressures remained subdued since the previous report, although an increase in the cost of health insurance was noted in Chicago and Dallas. According to reports from the New York, Philadelphia, Richmond, Minneapolis, Kansas City, Dallas, and San Francisco Districts, to the extent that wage increases were observed, they were concentrated among highly skilled workers in information technology, engineering, professional services, and some of the skilled trades.
Price pressures were said to be contained, as most Districts reported that both input and finished goods prices were little changed or up only slightly since the previous report. However, high or rising prices for some agricultural commodities, construction materials, energy products, and precious metals were cited by some Districts. Contacts in the Boston, Cleveland, Chicago, Dallas, and San Francisco Districts noted higher food prices, particularly for meat and dairy products. By contrast, Chicago reported that corn, wheat, and hog prices declined, and Dallas reported that fuel costs declined for a transportation services firm.
SOURCE: Federal Reserve Board