Continued
Manufacturing and Related Services
The picture in manufacturing was mixed. The Boston, Chicago, Kansas
City and San Francisco Districts reported increasing demand and sales
since the previous Beige Book, although the improvement was generally
small and uneven, with two of these four Districts reporting that demand
growth, while positive, was slowing. Six Districts reported that demand
for manufactured goods was actually falling, although none reported a
dramatic fall. The outlook was somewhat more positive, with six
Districts reporting that manufacturers expected increasing demand and
only two reporting the opposite.
Areas of strength were varied. The Cleveland and Philadelphia
Districts both pointed to the revolution in natural gas production in
the United States as a driver of demand, but the Chicago District said
that a contact blamed cheap natural gas for weakness in demand for coal.
Several Districts noted that improvements in residential construction
boosted demand for products such as lumber, PVC, cement, and home goods.
The Chicago and Philadelphia Districts said that auto production was
positive, but Richmond said the opposite.
Weakness overseas remains a problem for U.S. manufacturing. Reports
from the Boston, Atlanta, and Chicago Districts explicitly mentioned it.
Although Europe represented one notable problem, several Districts also
mentioned weakness in demand in Asia as an issue. In general, District
reports indicate that the cost and availability of raw materials has not
been an issue for manufacturers recently, especially as compared with
the situation in previous years. Four Districts reported lower input
costs, but contacts in New York reported a slight increase.
On the employment front, there was little movement. Across all
Districts, few manufacturing firms reported any major hiring or layoffs,
and the ones that did usually attributed it to idiosyncratic factors
like new products or restructuring related to a merger. The Cleveland
District reported that firms continued to have trouble finding skilled
workers. Capital spending also showed little change; in addition,
several Districts reported that contacted manufacturers had not revised
their investment plans.
Nonfinancial Services
Activity in nonfinancial services generally picked up since the
previous report, although results were mixed across Districts and
service industries. New York and Philadelphia reported that overall
service-sector activity was flat to down slightly, whereas Minneapolis
and San Francisco noted expanding activity. Several Districts, including
Boston, Richmond, and San Francisco, reported steady to increasing
demand for information technology services; Kansas City, by contrast,
cited decreased sales at high-tech services firms. Reports from the
healthcare sector were also somewhat mixed, with Philadelphia and St.
Louis reporting positive results and San Francisco noting a drop in the
frequency of elective procedures. Advertisers in the Philadelphia and
San Francisco Districts continued to report strong revenues. In the
Dallas District, legal firms reported continued increases in demand for
services, while accounting firms cited seasonal slowness. Demand for
staffing services was generally lower than expected, with decreases
reported by Boston, New York, Richmond, and Dallas. Even so, demand
remained strong for highly skilled IT personnel in the Boston and
Richmond Districts.
Reports on transportation services were generally positive. Rail
contacts reported continued increases in intermodal shipments in the
Atlanta District and increased cargo volumes in the Dallas District,
with both Districts recognizing gains in lumber shipments. Atlanta and
Dallas also reported steady to increasing demand for trucking services,
whereas logistics firms and carriers in the Philadelphia District
reported a relatively sluggish start to the traditional freight
season.
Banking and Financial Services
Credit conditions have improved over the reporting period according
to District reports. Credit spreads were lower and competition for
high-quality borrowers among lending institutions has increased. The New
York District noted that shrinking spreads were observed particularly in
commercial and industrial loans as well as in commercial mortgages. Some
bankers in the Cleveland District mentioned a moderate loosening of
lending guidelines. The New York, St. Louis, and Kansas City Districts
reported unchanged credit standards; New York and Cleveland cited
declining delinquency rates.
The direction and magnitude of changes in loan demand varied among
the Districts and also with respect to type of loan. The Richmond and
Atlanta Districts reported generally low demand for loans, but some
pockets of growth. The Chicago District noted that growth in business
loan demand was generated mostly from small and mid-size firms and for
the purpose of refinancing rather than financing capital expenditures.
Cleveland, St. Louis, and San Francisco mentioned small positive or
negative changes in business credit demand, and relatively strong demand
for consumer credit. The Kansas City District reported stable demand for
commercial and industrial loans and commercial real estate loans, while
Dallas noted softer demand for loans overall; however, both Districts
cited increases in demand for residential real estate loans. The New
York and Philadelphia Districts observed growth in most lending
categories.
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** MNI Washington Bureau: 202-371-2121 **
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