WASHINGTON (MNI) – The following is the first of two parts of the
text of the Federal Reserve’s Beige Book survey from the San Francisco
district, published Wednesday:
Continued:
TWELFTH DISTRICT-SAN FRANCISCO
Manufacturing
Manufacturing activity in the District showed further solid growth
during the reporting period of mid-January through mid-February. Demand
continued to expand for manufacturers of semiconductors and other
technology products, with reports pointing to robust sales, high levels
of capacity utilization, and inventories near targeted levels given the
pace of sales. For makers of commercial aircraft and parts, modest
increases in new orders combined with an existing order backlog to keep
production rates high. Demand grew further for metal fabricators, with
ongoing order backlogs and extended lead times noted. Utilization rates
at petroleum refineries were above their levels from twelve months
earlier, despite elevated gasoline inventories. Demand remained weak for
manufacturers of wood products.
Agriculture and Resource-related Industries
Demand was robust for agricultural products and improved on balance
for natural resources used for energy production. Sales and orders
continued to grow for assorted crops and livestock products, although
revenue growth has been partly offset by rising input costs,
particularly for fertilizer and livestock feed. Rising export sales
boosted activity somewhat for timber companies. Strong global demand
continued to support an increase in oil extraction activity during the
reporting period, and extraction activity for natural gas remained
largely stable.
Real Estate and Construction
Demand for housing in the District appeared to be little changed
from the previous reporting period, and demand for commercial real
estate remained at very low levels. The pace of home sales continued to
be feeble throughout the District. In response to sluggish sales, new
home construction has remained at depressed levels, although a few
reports pointed to tentative signs of a pickup in the planning phases
for new construction. Demand for rental space continued to expand in
some areas, eliminating prior downward pressure on rents in some cases.
Conditions in commercial real estate markets generally remained weak, as
vacancy rates stayed at elevated levels in many parts of the District.
However, further improvements in leasing activity, with tenants
increasingly committing to longer-term leases, were noted for some of
the District’s major markets.
Financial Institutions
Reports from District banking contacts indicated that loan demand
was up somewhat compared with prior reporting periods. Although
businesses reportedly remained cautious in regard to their capital
spending plans, demand for commercial and industrial loans rose a bit.
Demand for consumer credit grew modestly as well. A few reports
indicated that lenders’ willingness to extend credit to small and
medium-sized businesses improved in recent weeks, which respondents
attributed primarily to perceived improvements in the outlook for
existing business plans. Nonetheless, lending standards for consumer and
business lending remained relatively restrictive. Venture capital
financing showed further signs of improvement, with contacts noting
ongoing increases in investor interest and IPO activity.
(2 of 2)
End:
** Market News International Washington Bureau: 202-371-2121 **
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