WASHINGTON (MNI) – The following is the first of three parts of the
text of the summary Federal Reserve’s Beige Book survey of Fed
districts, published Wednesday:
Summary
Reports from the twelve Federal Reserve Districts suggest that
economic activity continued to expand moderately from November through
December. Conditions were said to be improving in the Boston, New York,
Philadelphia, and Richmond Districts. Activity increased modestly to
moderately in the Cleveland, Atlanta, Chicago, St. Louis, Kansas City,
and Dallas Districts. The economy of the Minneapolis District “continued
its moderate recovery,” while that of the San Francisco District “firmed
further” in the reporting period leading up to the close of 2010.
Conditions were generally said to be better in Districts’ manufacturing,
retail, and nonfinancial services sectors than in financial services or
real estate.
Contacts in the manufacturing sector in all Districts reported that
activity continued to recover, with the Richmond and Chicago Districts
citing especially solid gains in orders. However, the Boston, Atlanta,
and Dallas Districts noted that business remained weak for manufacturers
selling into the construction sector. Retailers in all Districts
indicated that sales appeared to be higher in this holiday season than
in 2009 and, in some cases, better than expectations. Nonfinancial
service-sector contacts in the Boston, New York, Philadelphia, Richmond,
Chicago, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco
Districts cited demand increases ranging from slight to “relatively
strong.” Transportation services were more mixed, with the Cleveland,
Atlanta, and Kansas City Districts noting stable to slowing shipping
volumes. Financial conditions were mixed across the Districts reporting
on it, with overall loan demand slowly improving in Philadelphia and
Richmond and weaker in St. Louis and Dallas. The Atlanta, Minneapolis,
Kansas City, Dallas, and San Francisco Districts cited increased
activity in the energy sector, while energy production in the Cleveland
District was stable.
Residential real estate markets remained weak across all Districts.
Commercial construction was described as subdued or slow, while
commercial leasing activity reportedly increased in the Richmond,
Chicago, Minneapolis, and Kansas City Districts.
Most District reports cited comments by both retailers and
manufacturers that costs were rising, but indicated that competitive
pressures had led to only modest pass-through into final prices. Labor
markets appeared to be firming somewhat in most Districts, as some
modest hiring beyond replacement was said to have occurred and/or was
planned in a variety of sectors. At the same time, however, upward
pressure on wages was reportedly very limited.
Most Districts indicated that business contacts were positive about
the outlook, although still generally cautious. The Dallas District
noted modest increases in optimism and positive outlooks across a range
of sectors, Chicago stated that contacts were cautiously optimistic
about the 2011 outlook, and New York cited widespread optimism about the
near-term outlook; The St. Louis, Minneapolis, Kansas City, and San
Francisco Districts all pointed to planned increases in hiring by their
contacts as evidence of expected strengthening in business activity in
2011. Contacts in the Philadelphia District foresaw “improving economic
conditions in 2011, but not strong growth.”
Manufacturing
The manufacturing sector continued to recover across all Districts.
Contacts in the Richmond, Chicago, and St. Louis Districts identified a
strong flow of new orders. Respondents in the Chicago District pointed
to pent-up demand for both light and heavy motor vehicles, attributed to
an aging fleet, as a key driver of activity in the manufacturing sector.
The Cleveland District described orders as above expectations and
respondents in the New York District noted that orders had picked up
since the prior report. Overall, demand was generally characterized as
stable and steady, and no District made mention of lingering fears of a
double-dip recession, in contrast to the summer reporting periods.
Capacity utilization continued to trend higher and is approaching normal
rates for some contacts in the Cleveland and San Francisco Districts,
while production in high-tech manufacturing was reportedly at high
capacity in Dallas; some manufacturers in the St. Louis and Minneapolis
Districts said they have or will soon expand capacity. Production levels
increased in the Cleveland, Atlanta, Chicago, and Kansas City Districts.
On the negative side, the Philadelphia District characterized the flow
of new orders as “erratic,” iii while the Boston, Atlanta, and Dallas
Districts identified construction-related manufacturers as continuing to
show considerable weakness, and makers of wood products in the St. Louis
and San Francisco Districts reported very soft demand.
The Boston, Cleveland, and San Francisco Districts reported
concerns about input prices, particularly of commodities; manufacturers
in the Boston, Cleveland, and Richmond Districts indicated they had
experienced lengthening lead times, shortages, or other difficulty
obtaining supplies of some inputs. Only St. Louis mentioned firms with
substantial investment plans for 2011. Boston, Cleveland, Chicago, St.
Louis, and Kansas City reported that some factories had plans to
increase employment, although these hiring plans were typically
characterized as modest. The Philadelphia, Cleveland, Chicago, Kansas
City, Dallas, and San Francisco Districts described the 2011
manufacturing outlook as optimistic.
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(1 of 3)
** Market News International Washington Bureau: 202-371-2121 **
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