WASHINGTON (MNI) – The following is the first part of the text
summarizing the latest Beige Book survey of economic conditions in the
twelve Federal Reserve districts:
Summary
Contact reports from the twelve Federal Reserve Districts suggest
that national economic activity expanded at a modest to moderate pace
during the reporting period of late November through the end of
December. Seven Districts characterized growth as modest; of the
remaining five, New York and Chicago noted a pickup in the pace of
growth, Dallas and San Francisco reported moderate growth, and Richmond
indicated that activity flattened or improved slightly. Compared with
prior summaries, the reports on balance suggest ongoing improvement in
economic conditions in recent months, with most Districts highlighting
more favorable conditions than identified in reports from the late
spring through early fall.
Consumer spending picked up in most Districts, reflecting
significant gains in holiday retail sales compared with last years
season, and activity in the travel and tourism sector expanded in most
areas. Demand strengthened further for nonfinancial services, including
professional and transportation services. Manufacturing activity
generally continued to expand, although the pace of growth has slowed
for selected subsectors such as technology products. Agricultural
producers and extractors of natural resources reported generally robust
conditions. Activity stayed sluggish in residential real estate markets,
and conditions in commercial real estate markets remained somewhat soft
overall but showed signs of ongoing improvement in several Districts.
Reports from financial institutions generally indicated a slight uptick
in loan demand by businesses, along with improvements in overall credit
quality. Upward price pressures and price increases remained quite
limited for most categories of final goods and services, as the effects
of prior increases in the costs of selected inputs have eased. Upward
wage pressures were modest overall, although a few Districts noted
substantial compensation increases for workers with specialized skills
in selected sectors and regions.
Consumer Spending and Tourism
Reports on consumer spending were favorable in general. Most
Districts reported that holiday retail sales were up noticeably over
last years season, with New York and Dallas describing sales as “brisk”
and “robust,” respectively. Consumer spending and confidence generally
were characterized as firmer than in recent reporting periods, although
Kansas City reported that spending softened. Items identified as the
strongest holiday sellers by various Districts included consumer
electronics and jewelry, and Chicago noted that luxury items in general
sold well during the holiday season. By contrast, many Districts
reported weak sales and excess inventories of warm clothing, due to
unusually mild weather. Retail inventories more broadly were reported to
be at or near desired levels, consistent with retailers sales
expectations. Boston, New York, and Minneapolis noted exceptional growth
in Internet sales for selected items. Sales of new automobiles continued
to pick up in most Districts. Among the more favorable reports, Atlanta
noted that the pace of auto sales in November and December was “the
strongest in over two years,” and strong demand and sales were reported
as well by New York, Philadelphia, Cleveland, and Minneapolis.
Reports from most Districts pointed to solid gains or high levels
of travel and tourist activity, with pickups evident in both the
business and leisure segments. Tourism activity was reported to be above
the levels from twelve months earlier by Boston, New York, Richmond, and
Atlanta, and Boston contacts expect double-digit growth in hotel
revenues in 2012. By contrast, Minneapolis reported that tourist
activity was down because limited snowfall has stymied outdoor
activities such as skiing and snowmobiling, while Kansas City reported a
decline because winter storms hampered some tourist activity. Business
travel activity also has expanded of late and is above levels from
twelve months earlier, according to Atlanta and San Francisco.
Nonfinancial Services
Demand generally strengthened further for nonfinancial services.
Providers of professional and business services such as consulting,
advertising, engineering, and legal services expanded their activities
according to Boston, Richmond, St. Louis, and Minneapolis. Sales of
technology services to businesses and consumers grew further, according
to Minneapolis, Kansas City, and San Francisco, although the pace of
growth slowed from earlier in 2011. Providers of temporary staffing
services saw strong and rising demand in the Philadelphia, Cleveland,
and Richmond Districts but below-average seasonal hiring in the Chicago
and Dallas Districts. Reports from the health-care sector generally
pointed to growth as well, with Cleveland, Atlanta, Chicago, and St.
Louis highlighting construction activity and bank lending aimed at
health-care providers. The exception to growing demand for health-care
services was San Francisco, which reported an ongoing decline in
hospital admissions. Demand for shipping and transportation services
generally expanded. New York and Atlanta reported a significant increase
in shipping tonnage by truck, and Dallas noted a broad-based increase in
shipments by rail. Atlanta reported that port activity was up over
twelve months earlier due to “notable strength in exports,” while
Richmond reported a decline in port activity that was largely attributed
to reduced imports. Air travel was above year-ago levels in the Atlanta
District but unchanged over the past six weeks in the Dallas District.
Manufacturing
Manufacturing activity expanded in most Districts, generally
continuing its steady overall expansion or, in the case of Atlanta,
reversing a slowdown in prior periods. For the sector as a whole,
further growth or improved conditions were reported by almost all
Districts, except for Cleveland, Richmond, and Dallas, which reported
that activity was largely stable or mixed, and Kansas City, which noted
a slight decline. The strongest reports came from subsectors such as
heavy equipment manufacturing and steel, for which demand has been
boosted by robust growth in the energy, agricultural, and auto
manufacturing sectors. Reports from Cleveland, Richmond, Atlanta,
Chicago, and St. Louis confirmed vibrant activity for auto
manufacturers, primarily for domestic makes. By contrast, demand
remained somewhat weak for firms in housing-related subsectors, such as
a door manufacturer in the Richmond District, furniture manufacturers
there and in the St. Louis and San Francisco Districts, and makers of
lumber and wood products in the San Francisco District. Demand for
computers and related electronic components rose further, according to
Kansas City, Dallas, and San Francisco. However, the pace of growth has
slowed significantly from earlier in 2011, and Boston noted declining
sales of semiconductors, mainly due to weaker demand from Asia.
According to Dallas and San Francisco, aircraft makers saw further
demand increases. Those Districts also noted weak domestic demand for
refined petroleum products that was largely or completely offset by
robust foreign demand. Demand grew smartly for food producers in the
Philadelphia and Dallas Districts, but in the Kansas City District food
processing was one of the weakest performers within the manufacturing
sector. Export sales of assorted manufactured products generally
performed well according to Atlanta and Chicago, although slower
economic growth in China and Europe held back sales for some
manufacturers.
Cleveland reported that capacity utilization remained below normal
in most subsectors, with the notable exception of steel producers, who
were operating at or near normal levels. Similarly, Chicago noted that
some auto suppliers appear to be approaching capacity constraints, which
may limit further production increases in the near term. Atlanta
reported that recent flooding in Thailand was likely to exert modest
restraint on auto production. Ongoing capital investments and increases
in capacity were reported for various manufacturing concerns in the St.
Louis and Minneapolis Districts and for an auto producer in the Richmond
District.
-more- (1 of 2)
** Market News International Washington Bureau: 202-371-2121 **
[TOPICS: M$U$$$,MMUFE$,MGU$$$,MFU$$$,MAUDS$,M$$AG$]