Beige Book: National Summary
Reports from Federal Reserve Districts indicated that overall economic activity expanded at a moderate pace in late April and May. The tone was one of modest but uneven growth, with some major sectors showing signs of improvement while others softened or remained weak. Retail sales were flat in most Districts, and auto sales were mixed. Activity in the services and manufacturing sectors improved overall but varied across regions and segments. Residential real estate markets generally remained robust while weakness persisted in most commercial markets. Districts noted few changes in lending markets. Labor markets remained slack in most Districts, but several Districts reported higher demand for temporary workers. Price pressures were in check for most goods and services, but many Districts noted rising steel prices and continued increases in energy and insurance costs.
Consumer Spending
Most Districts reported that retail sales were similar to year-ago
levels. Richmond, Atlanta, St. Louis, and Minneapolis reported that
recent sales were flat on a year-over-year basis. According to New
York, Chicago, and Dallas, sales were sluggish. Sales in the Boston,
Philadelphia, Kansas City, and San Francisco Districts were improved,
in contrast. Cleveland reported mixed results. Unseasonable weather
reportedly hampered sales in the New York, Chicago, St. Louis, and
Dallas Districts. Most Districts continued to report balanced inventories.
Reports on automobile sales in late April and May were uneven. Sales were robust in the Boston, Chicago, and San Francisco Districts. Reports from Cleveland, Richmond, St. Louis, Minneapolis, and Dallas were mixed. Philadelphia and Kansas City said that sales were down on a year-over-year basis, although Philadelphia noted that sales were at healthy levels. In the Atlanta and St. Louis Districts, some dealers complained about lost sales because potential buyers did not qualify for credit.
Services and Tourism
The services sector posted modest growth. Business was up for financial,
legal, information technology, and trucking firms in the Philadelphia
District. Cleveland reported a significant increase in demand for
trucking and shipping services, and the demand for legal services
was strong in the New York and Dallas Districts. New York, Richmond,
and Atlanta said that computer-related service firms were experiencing
weak demand; San Francisco noted heavy discounting of software and
high-tech services. Boston, in contrast, reported some growth in
demand for software products and services, particularly for health
care-related software.
Reports on the tourism and hospitality industry generally continued to indicate an upward trend. Hotel occupancy picked up slightly in the San Francisco District and remained steady in the New York District. Richmond and Boston said that hotels reported steady demand and were hiring additional staff; sources in South Carolina said that business had "turned the corner" from September 11 effects. Atlanta and San Francisco reported strong forward bookings for summer tourist destinations, and Florida theme parks were adding to payrolls. Chicago noted that a major airline was experiencing strong leisure travel but weak business travel. In the Cleveland District, business conference attendance remained lower than last year.
Construction and Real Estate
Residential real estate activity remained robust in most Districts.
Home sales improved in the New York, Atlanta, and St. Louis Districts
compared with the previous year, and Richmond said that sales were
up overall compared with the last Beige Book. Existing home sales
picked up in the Chicago District, but new home sales were not as
strong. San Francisco reported solid activity in most areas, while
Kansas City noted strong sales of lower-priced homes and weak sales
of high-end homes. Philadelphia reported high sales levels and accelerating
prices. Richmond also noted rising home prices. Dallas, in contrast,
said that builders reported a drop in sales and were offering concessions.
Single-family construction varied across Districts, with activity
up in the St. Louis, Minneapolis, and San Francisco Districts and
remaining solid in most of the Kansas City District. Kansas City
and Minneapolis noted slowing or weakness in the multifamily market,
but the Manhattan multifamily market strengthened, according to
New York.
Most Districts continued to report weak commercial real estate markets, with high vacancy rates and lower rental rates. Boston, Atlanta, St. Louis, Dallas, and San Francisco characterized commercial markets as weak. Commercial markets eased in the Philadelphia District and declined in the Cleveland, Kansas City, and Minneapolis Districts. New York reported that markets were stabilizing in the New York City area. Chicago reported mixed results. Richmond noted an increase in commercial activity, mainly in the office segment.
Manufacturing
Factory production, shipments, and orders were higher in most Districts,
but the gains were uneven across industries. Automakers in the Cleveland
District reported strong activity, and Chicago noted a surge in
heavy truck orders as customers sought to make purchases ahead of
EPA regulatory changes, scheduled to take effect October 1. Richmond
indicated strong growth in shipments and orders for textile products,
and St. Louis reported increased demand for a variety of non-durable
goods. In the Philadelphia District, producers of construction materials
continued to report robust demand. Dallas commented that refineries
were operating near capacity for most of April and May. According
to San Francisco, contacts indicated a pickup in new orders and
sales in the semiconductor industry, which allowed producers to
draw down inventories. More generally, inventories of finished goods
were flat or lower in most Districts, although Kansas City noted
that some plant managers were increasing inventories. Boston and
San Francisco said that orders were down considerably for suppliers
of aircraft components. According to Philadelphia, Atlanta, Dallas,
and San Francisco, demand for telecommunications equipment remained
weak.
Banking and Finance
Demand for bank loans was little changed, with conditions generally
better on the consumer side than on the commercial side. Cleveland,
Atlanta, and Dallas reported robust consumer lending. Cleveland,
Richmond, Chicago, St. Louis, Kansas City, and Dallas said that
business lending was soft or sluggish. Chicago said that firms were
wary of borrowing to make large capital outlays. New York, in contrast,
reported sagging loan demand on the consumer side but rising demand
from commercial borrowers. Improvements in bank earnings, loan quality
and demand were noted at San Francisco District banks. New York
and St. Louis reported tighter or stable credit standards, while
Philadelphia and Atlanta noted that some lenders have become more
cautious in business lending. According to Cleveland and Atlanta,
reports on loan delinquencies ranged from no change to a slight
increase. Contacts in New York and Chicago reported that delinquency
rates were lower or stable, while St. Louis noted a rise in defaults.
Philadelphia reported that the outstanding loan volume has been
moving up somewhat in recent weeks.
Labor Markets and Prices
Labor market conditions improved marginally but remained slack overall.
As a consequence, reports cited little upward pressure on wages.
Labor market conditions were little changed in the Cleveland, Chicago,
Kansas City, and San Francisco Districts. Richmond and Dallas said
that labor market conditions were mixed, whereas New York reported
some improvement. Minneapolis noted that general labor market conditions
eased slightly. Temporary employment agencies experienced increased
demand in the Boston, Philadelphia, Richmond, and Atlanta Districts.
Dallas noted that demand for temps rose in the manufacturing sector
but declined in several service industries. Temporary worker demand
was flat in the Cleveland District. Kansas City and Minneapolis
noted an ongoing shortage of nurses, and skilled tradesmen were
in short supply in the Kansas City District.
Price increases remained subdued overall, but the prices of a few goods and services rose substantially. Most Districts reported steel prices were sharply higher. Dallas said that the prospect of further steel price increases had spurred strong sales for fabricated metal products. Rising insurance costs were noted as concerns in the Boston, Atlanta, Chicago, Minneapolis, and San Francisco Districts. Boston, Richmond, and Dallas reported higher prices for energy and petrochemical products. New York and Dallas reported that manufacturers generally were not able to pass along higher input costs.
Agriculture and Natural Resources
Many Districts noted poor agricultural conditions. Richmond, Kansas
City, Minneapolis, Dallas, and San Francisco reported that a drought
was hurting crops and cattle in at least part of their Districts;
some crops in the Richmond District were stunted by a late frost.
Atlanta, Chicago, St. Louis, and Kansas City also noted problems
resulting from unseasonable weather conditions. Minneapolis, Kansas
City, and San Francisco reported concerns about low livestock prices,
while cattle ranchers in Texas expect to face higher costs because
all livestock leaving the state may have to be vaccinated against
bovine tuberculosis.
Energy-related activities were up in the Minneapolis, Kansas City, and Dallas Districts. Kansas City attributed some of the rebound to anticipated increases in natural gas prices in coming months. Minneapolis noted expansions in the iron ore mining industry.