WASHINGTON (MNI) – The following is the first of three parts of the
text of the summary of the Federal Reserve’s Beige Book report on
current financial conditions released Wednesday, which was prepared by
the New York Federal Reserve Bank:
SUMMARY*
Reports from the twelve Federal Reserve Districts indicated that
economic activity generally continued to expand since the last report,
though a few Districts indicated some deceleration. Some slowing in the
pace of growth was noted in the New York, Philadelphia, Atlanta, and
Chicago Districts. In contrast, Dallas characterized that region’s
economy as accelerating. Other Districts indicated that growth continued
at a steady pace. Manufacturing activity continued to expand in most
parts of the country, though a number of Districts noted some slowing in
the pace of growth. Activity in the non-financial service sectors
expanded at a steady pace, led by industries related to information
technology and business and professional services.
Consumer spending was mixed, with most Districts indicating steady
to modestly increasing activity. Elevated food and energy prices, as
well as unfavorable weather in some parts of the country, were said to
be weighing on consumers’ propensity to spend. Auto sales were mixed but
fairly robust in most of the country, though some slowing was noted in
the Northeastern regions. Widespread supply disruptions-primarily
related to the disaster in Japan-were reported to have substantially
reduced the flow of new automobiles into dealers’ inventories, which in
turn held down sales in some Districts. Widespread shortages of used
cars were also reported to be driving up prices. Tourism activity
improved in most Districts.
Residential construction and real estate continued to show
widespread weakness, except in the rental segment, where market
conditions have strengthened and construction activity and development
have picked up. Non-residential real estate leasing markets have been
generally stable, while construction activity has remained very subdued.
Loan demand was steady to stronger in most Districts, especially in the
commercial and industrial sector, and widespread improvement was
reported in credit quality.
Agricultural conditions were unfavorable across much of the nation,
largely reflecting unseasonably cool and wet weather; widespread
flooding along the Mississippi River hampered agricultural production in
the Atlanta and St. Louis Districts. In the Dallas District, in
contrast, drought conditions hurt the wheat crop and led to broader
damage from wildfires. The energy industry showed continued strength,
with robust expansion in oil drilling and extraction activity.
Labor market conditions continued to improve gradually across most
of the nation, with a number of Districts noting a short supply of
workers with specialized technical skills. Wage growth generally
remained modest, though there were scattered reports of steeper
increases for highly skilled workers in certain occupations. Most
Districts continued to report widespread increases in commodity prices;
manufacturers are said to be passing along a portion of the higher costs
in the form of price hikes and fuel surcharges.
Consumer Spending and Tourism
Consumer spending was generally described as steady to up modestly
since the last report, with most Districts indicating small increases
from a year ago. Non-auto retail sales were indicated to be expanding
steadily in the Philadelphia, Cleveland, Minneapolis, Kansas City and
Dallas Districts, while sales were characterized as stable or
decelerating in the New York, Atlanta, Chicago, St. Louis and San
Francisco Districts. Sales were reported to have declined in the
Richmond District, and Boston described sales as mixed but generally
down from a year earlier. Retail inventories were generally said to be
at satisfactory levels, though St. Louis characterized inventory levels
as being on the high side. A number of Districts noted that a
combination of unfavorable weather and high fuel and food prices have
weighed on consumer spending in recent weeks. Cleveland and San
Francisco noted increased spending on discretionary items, and
Philadelphia indicated that some luxury goods retailers fared relatively
well. On the other hand, Chicago reported a decline in discretionary
spending.
Most Districts reporting on vehicle sales indicated that they have
been steady to stronger since the last report, specifically Richmond,
Chicago, St. Louis, Kansas City, Dallas and San Francisco. In addition,
Atlanta noted firm demand for automobiles. On the other hand, some
softening in car sales was noted in the northeastern Districts of New
York, Philadelphia and Cleveland. Many Districts indicated that supply
disruptions, primarily from Japan, have contributed to lean inventories,
which have impeded auto sales somewhat. There has also been widespread
tightening in the market for used cars, reflecting both strong demand
and a shortage of inventory. Shifts in consumer demand toward smaller,
more fuel efficient cars were noted in the Philadelphia, Cleveland, and
Chicago Districts, while St. Louis mentioned a shift from higher-end to
lower-end models. Tourism activity has generally strengthened since the
last report, and the outlook for the summer season looks positive.
Improvement in this sector was reported in the Richmond, Atlanta, Kansas
City, and San Francisco Districts; in addition, New York reported that
tourism increased in April but appeared to edge back in early May.
Dallas maintained that travel activity has been mixed, while Minneapolis
indicated that tourism has been slow recently due to adverse weather,
but that inquiries and advance bookings for the summer season look
strong. St. Louis noted that flooding forced the temporary closure of
numerous casinos along the Mississippi River.
Nonfinancial Services
Activity in the non-financial service sectors continued to
strengthen in most Districts, with the notable exception of St. Louis,
which reported fairly widespread declines. Service sector activity
generally expanded in the Boston, New York, Philadelphia, Richmond,
Minneapolis, Kansas City and Dallas Districts, though Richmond noted
deceleration in the pace of growth. There were also pockets of strength
in particular sectors. Information technology firms saw activity expand
in the Boston, Richmond, Minneapolis, Kansas City, and San Francisco
Districts. Employment agencies in the Boston and Chicago Districts
indicated continued improvement in activity, while New York and Dallas
reported some slowing in this industry. New York, Richmond and
Minneapolis cited strengthening in business and professional services,
while San Francisco indicated steady to mixed activity in this sector.
Activity in the transportation sector improved in the Cleveland,
Atlanta, Kansas City and Dallas Districts. Philadelphia and Richmond
noted some slowing in growth, and New York reported steady shipping
activity, while San Francisco indicated a slowdown in cargo traffic at
Southern California seaports. Dallas also reported weakening in
container trade volumes but noted increases in cargo volume, railroad
shipments and small parcel shipments.
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** Market News International Washington Bureau: 202-371-2121 **
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