WASHINGTON (MNI) – The following is the second of three sections of
the summary of the Federal Reserve’s Beige Book summary of economic
conditions in the 12 regional bank districts, published Wednesday:
Transportation sector activity was generally mixed since the last
assessment. Dallas noted that intermodal cargo volumes were down.
Declines in rail cargo volumes were led by such products as coal,
metals, and forest materials. Atlanta also cited declines in coal
shipments, due to softening global demand for metallurgical coal and
less demand from domestic utility plants. Cleveland reported fewer
freight shipments, which their contacts attributed to hurricane
disruptions and weakness in Europe, even as freight demand was boosted
by housing, motor vehicles, and retail. Kansas City also noted a pickup
in trucking traffic due to emergency food shipments in the wake of
Hurricane Sandy. Shippers in that District also reported an increase in
their capital expenditures. According to contacts for the Dallas
District, domestic airline demand was flat to down, and in the St. Louis
District, air transportation firms announced plans to reduce operations.
Manufacturing
Conditions in the manufacturing sector were mixed, though on
balance, most Districts reported that conditions had weakened since the
previous report. The Boston, New York, Philadelphia, Atlanta, Chicago,
Minneapolis and Kansas City Districts reported that activity had either
slowed or declined somewhat, with most reports leaning toward the
latter. Activity was mixed in the Dallas and San Francisco Districts,
while reports from the Cleveland, Richmond, and St. Louis Districts were
positive. The Boston, Dallas, and San Francisco Districts noted slower
growth for information technology equipment, while business activity
expanded at high-tech firms in the Kansas City District. Car and auto
parts producers in the Atlanta District said that orders softened
slightly. Similarly, auto production in the Cleveland District declined
somewhat for domestic nameplates but increased for foreign nameplates.
In contrast, heavy equipment and auto industries remained sources of
strength in the Chicago and the Kansas City Districts. Demand was flat
to down for transportation equipment in the Dallas District, and the
Philadelphia District indicated that makers of primary metals,
industrial machinery, and electronic equipment reported further
declines.
Noteworthy gains in manufacturing related to the aerospace industry
were reported in the Richmond and San Francisco Districts, while demand
for aviation equipment held steady in Dallas. Steel production was down
slightly in Cleveland, while the demand for steel in the San Francisco
District improved a bit from low levels. Manufacturing contacts from
five of the twelve Districts expressed concern about the outlook for
2013, in part, due to the uncertainty regarding the outcome of the
fiscal cliff.
Real Estate and Construction
Overall, markets for single-family homes continued to improve
across most Districts with the exception of Boston and Philadelphia.
Residential real estate markets in the New York District were mixed but
generally firm prior to the storm. Selling prices were steady or rising.
Boston, New York, Richmond, Atlanta, Kansas City, and Dallas noted
declining or tight inventories. The Cleveland District indicated that
the number of single-family housing starts had increased since our last
report and from a year ago; most sales contracts were in higher
price-point categories. Similarly, Richmond noted more residential work
in the high-end home category for the first time in three years, and
builders cited significant pent-up demand in the first-time buyer
segment. Atlanta indicated that existing home sales were up slightly
compared to a year ago and reported that investors were more active in
Florida than in the rest of the District. In Chicago, residential
construction increased at a slow but steady pace in October and early
November, and construction increased for single-family as well as
multi-family homes. St. Louis reported that residential real estate
market conditions continued to improve, and Minneapolis indicated that
segments of construction and real estate were growing at a double-digit
clip. Kansas City characterized residential real estate activity as
brisk and noted that a solid rise in home sales had reduced home
inventories. Dallas noted that single-family housing activity remained
strong, with both new and existing home sales activity increasing. San
Francisco reported that home demand continued to strengthen and that
home sales continued to grow on a sustained basis in most areas,
spurring new home construction. However, sales growth generally slowed
for both the condominium and single-family home markets in the
Boston District, and the Philadelphia District noted that October
began as a disappointing month for some Realtors, only to be punctuated
by Hurricane Sandy.
Construction and commercial real estate activity generally improved
across Districts since the last report. Gains, albeit modest in most
cases, were reported by Philadelphia, Richmond, Chicago, and
Minneapolis. The gains among Cleveland’s contacts were tempered by
reports in recent weeks of a slowdown in inquiries and a decline in
public-sector projects. Kansas City described activity as holding firm
and noted that real estate markets remained stronger than a year ago.
Demand for office and industrial space continued to increase in Dallas,
although contacts at some businesses said they were “holding back on
expansions due to uncertainty.” Several Districts noted segments of
little change in commercial real estate activity. Boston described
market fundamentals as flat, and San Francisco depicted market
conditions as stable but with pockets of strength for large
infrastructure projects such as roads and bridges. Commercial and
industrial conditions were mixed in the St. Louis District and
throughout most of New York prior to the hurricane. New York added that,
while office markets across upstate New York were unaffected by the
storm, there were some signs of recent softening.
Banking and Financial Services
Loan demand generally was either mixed or slightly stronger across
most Districts in recent weeks. Among those noting mixed results, New
York reported that demand for consumer and especially commercial and
industrial loans weakened, but commercial and residential mortgage
demand was steady. Richmond said that a small commercial banker was
encountering a slight improvement in overall loan demand but added that
consumer loans were unchanged from “meager” levels and small business
loans were virtually non-existent. Chicago noted that small business
loan demand experienced modest growth, but a decrease in credit demand
occurred among middle-market customers. According to St. Louis contacts,
overall lending activity was essentially unchanged over the period. St.
Louis added that, while credit standards for commercial and industrial
loans were largely unchanged, both the demand for these loans and the
number of inquiries ranged from moderately lower to moderately higher.
Used car loan demand was weak in the Dallas District, although first
mortgage and energy-related lending increased. San Francisco cited
weak-to-moderate business loan demand, but consumer lending expanded
further with the help of auto loans and home mortgage refinancing;
however, San Francisco noted that lending activity as a whole was
unchanged. Most remaining Districts, including Philadelphia, Cleveland,
Atlanta, and Kansas City reported moderate increases in total loan
demand. In the Philadelphia District, banks reported widespread bank and
ATM closings due to Hurricane Sandy.
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** MNI Washington Bureau: 202-371-2121 **
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