Next Summary

Return to Archive

Moderate economic growth continues to be reported in nearly all Federal Reserve Districts. Labor markets in most Districts remain tight, although wages pressures are generally not increasing except for some technical occupations and skilled workers. Retail prices are stable in most Districts although some firming, mainly in prices for materials and intermediate goods, is noted by Richmond, Atlanta, Kansas City, and Dallas.

Consumer Spending
Retail sales have increased in most Federal Reserve Districts. Sales have moved up in Boston, New York, Philadelphia, Minneapolis, Kansas City, and Dallas in the past four to six weeks, and San Francisco reported moderate improvement in recent months. Atlanta and St. Louis have had year-over-year increases. Chicago reported that retail sales have been flat in the past month but above last year?s level. The only reports of weaker sales come from Cleveland, where sales were down compared to a year ago, and Richmond, where sales have moderated in the past month.

By product line, apparel sales have been relatively strongest in New York, Cleveland, Atlanta, St. Louis, Minneapolis, Kansas City, and Dallas. Home products were also selling well in Atlanta and St. Louis. Electronic products were selling strongly in Minneapolis and Kansas City but poorly in New York, Cleveland, and Chicago. Appliances were not selling as well as other types of products in New York, Chicago, and Minneapolis.

All Districts that obtained information on inventories reported that stocks were in line with merchants? current or expected sales. Price discounting was increasing in Boston, New York, Philadelphia, and Cleveland.

Retailers? expectations for sales in the upcoming holiday season are modestly optimistic. In the Boston, New York, and Philadelphia Districts, merchants forecast gains ranging from 2 to 6 percent, year-over-year. Atlanta merchants expect a slight increase. In St. Louis, Kansas City, Dallas, and San Francisco the season is expected to be strong.

Auto sales were mostly steady in Districts that got reports from dealers. In Philadelphia, St. Louis, Kansas City, and San Francisco, sales were roughly unchanged in recent weeks but at a high level. The sole negative report came from Dallas where sales were characterized as sluggish.

Tourism has been strong in the nation?s coastal states. Richmond, Atlanta, New York, and San Francisco report high hotel occupancy rates. Theme park attendance and bookings for winter stays at coastal resorts have been high in Florida. Minneapolis, however, reported lackluster tourism, although early snow has boosted business in areas popular with skiers and snowmobilers.

Manufacturing
Nearly all Districts reported continued expansion of manufacturing activity in October and November. The improvement was generally modest, although manufacturers in the Boston District said they were seeing year-over-year gains in orders and revenue of up to 15 percent. Less positive conditions prevailed in the Cleveland District, where production was just steady, and in the Atlanta District, where "an increasing number of factories are reporting decreasing production and shipments."

Boston noted strong orders for consumer durables, furniture, appliances, computers, and medical equipment. Dallas and Atlanta reported stronger demand for electronic products and industrial equipment. Boston and San Francisco indicated that production of aircraft and related equipment was moving up. Dallas noted strong demand for energy equipment and oil machinery. Some disruption in the production of autos and related equipment because of strikes was reported by New York, Cleveland, and Chicago; Cleveland also noted that lost production was not scheduled to be made up.

Inventories were described as "normal" in the Cleveland District and "satisfactory" in the Kansas City District. Inventories were declining in Philadelphia. Producers of electronic goods in the Dallas District said their inventories were high but coming down.

Real Estate and Construction
All seven of the Districts reporting on commercial real estate markets noted improvement. New York and Dallas indicated continued improvement in office markets, and Richmond and Atlanta noted increases in rental rates and drops in vacancy rates. Commercial construction activity increased in the Districts of Richmond, Atlanta, St. Louis, Minneapolis, and Dallas. Richmond and Atlanta received reports of increased speculative construction of office buildings. Development of light industrial and retail space was also under way in Atlanta and Minneapolis. Minneapolis reported robust public infrastructure construction, and Dallas reported strong construction of extended-stay hotels in that city.

Districts reporting on residential real estate mainly observed slowing sales, although sales levels remained high. Richmond, Chicago, Minneapolis, and Kansas City reported slower sales. In the San Francisco District sales fell back somewhat in Arizona, Idaho, and Utah but increased in Washington, Oregon, and the San Francisco Bay area. Home prices were steady in Boston and New York, falling in Richmond, and rising in St. Louis and the stronger markets in the San Francisco District mentioned above.

Agriculture
In general, Federal Reserve Districts that surveyed agricultural conditions received good reports. Minneapolis noted that grain yields were "excellent and better than had been expected through the growing season." St. Louis said that "initial reports suggest that yields were generally above average." The soybean crop was plentiful in the Cleveland and Dallas Districts. Minneapolis and Cleveland received positive reports on the potato crop. Other crops for which yields were said to be good were rice, peanuts, and sugar beets. Kansas City reported an excellent corn harvest, but Cleveland said the corn harvest in Ohio was about 20 percent below normal. Minneapolis and Kansas City reported that recently planted winter wheat was in good condition in their Districts, but Cleveland said seeding was hampered by muddy field conditions.

Dallas described livestock conditions as "good overall," and Kansas City and Minneapolis said higher cattle prices have led to an increase in cattle at feedlots.

National Resource Industries
The current level of oil prices is prompting high and growing oil-field activity. Dallas noted that "high prices continued to boost demand for oil services," and Kansas City reported that the District?s rig count rose 2.4 percent in October and was above the year-ago level. Minneapolis reported that "iron ore mining and oil drilling continue at the brisk pace that has prevailed for several months."

Financial Services and Credit
Credit demand varied among Districts. Only Cleveland and San Francisco indicated growth in overall bank lending. In other Districts, lending was mixed. Competition for new lending was characterized as aggressive for business loans in Philadelphia and St. Louis, for consumer loans in Richmond, and in general in Cleveland.

In New York, Philadelphia, Cleveland, Atlanta, and San Francisco, banks reported deterioration in credit quality, especially for consumers. Tightening of credit standards was mentioned in New York, Philadelphia, Chicago, St. Louis, and Kansas City. No Districts reported easing credit standards.

Employment and Wages
Labor markets were characterized as tight in a majority of Districts. Districtwide labor market tightness persisted in Richmond, Chicago, Minneapolis, St. Louis, and Kansas City. Atlanta and Cleveland said labor markets were tight in many parts of their Districts. In most Districts employers said skilled trades workers and specialized technical workers were in particularly short supply. Boston reported that "demand for highly skilled temporary workers continues to outpace supply." Richmond, Chicago, and San Francisco also noted strong demand for skilled construction workers. Chicago and Minneapolis said retailers were having difficulty hiring temporary help for the holiday season.

Reports from District banks do not indicate a generalized acceleration in wage increases despite growing reports of labor shortages. Cleveland, for example, said that its contacts see "few signs of any significant rise" in wages, and Atlanta said "reports of increasing wages are infrequent in the region." Minneapolis reported that "many employers say there is no generalized upward pressure on compensation." Nonetheless, there appear to be more instances of stepped up compensation, especially for highly skilled technical workers. Boston reports that in the area around that city "compensation packages to attract key technical employees are said to be escalating rapidly." Richmond contacts reported more pronounced wage pressures in October than in September. A large temporary help agency reported to Chicago that wages in the Midwest were rising. Also in the Midwest, Kansas City noted "continued evidence of wage pressures," especially in manufacturing.

Prices
District reports on prices suggest there has been virtually no change in trend recently. Boston contacts said "prices remain generally stable." New York indicated "there has been little change in price pressures." Cleveland and Richmond characterized price increases as "modest." Chicago reported that "price pressures remained largely in check." Minneapolis received "few reports of price increases for raw materials, consumer goods, or services." Most manufacturers in Philadelphia and Cleveland indicated that both input costs and output prices were steady. Manufacturers in Chicago said their input costs were flat, and firms in St. Louis said the cost of materials were "stable to up somewhat."

Exceptions to the relatively steady price picture are petroleum products and fuels, whose prices rebounded after falling in early November. Also, there were more reports of rising industrial prices in recent surveys in Richmond and Atlanta. Kansas City observed rising costs of "some manufacturing and construction materials," and Dallas noted that "several industries reported a general firming in prices."