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Chicago | 2021-07-14T00:00:00 | /beige-book-reports/2021/2021-07-ch | "July 14, 2021\nSummary of Economic Activity\nEconomic activity in the Seventh District increased moderately in late May and June and growth was limited by labor and materials supply constraints in many sectors. Contacts expected strong growth in the coming months. Employment increased strongly, business spending increased moderately, manufacturing increased modestly, and consumer spending and construction and real estate were flat. Wages rose moderately while prices rose strongly. Financial conditions improved slightly. Prospects for agriculture income in 2021 were little changed.\nEmployment and Wages\nEmployment increased strongly over the reporting period, and contacts expected a similar-sized increase over the next 12 months. Contacts across sectors reported continued difficulty in finding workers at all skill levels. Some businesses seeking to ramp up production, particularly restaurants, had limited operating hours because of a lack of workers. A temp agency contact said their openings increased and turnover rates were elevated; furthermore, with the ease of finding new positions, workers were being more selective about workplace environment, scheduling flexibility, and pay. Employers, temp agencies, and workforce development organizations pointed to childcare challenges, retirements, and financial support from the government as important factors limiting labor supply and remarked that worker concerns about health safety related to COVID-19 had largely gone away. Overall, wage and benefit costs increased moderately. However, contacts across sectors noted strong pressure to raise wages and there were widespread reports of businesses offering signing bonuses. One contact at a university noted that salaries and retirement benefits that had been cut early in the pandemic had been restored.\nPrices\nOverall, prices rose strongly in late May and June, though contacts expected a moderate increase in prices over the next 12 months. There were large increases in business output prices, driven by passthrough of higher materials, energy, and transportation costs. Contacts highlighted higher prices for a wide range of materials including metals, metal products, petroleum-based products, chemicals, electronics, and paper. Consumer prices moved up robustly, particularly for new and used vehicles. Contacts pointed to solid demand, limited inventories, and increased costs as sources of consumer price increases.\nConsumer Spending\nConsumer spending was flat over the reporting period but remained at elevated levels as retailers strained to meet pent-up demand. Contacts said that overall, higher prices hadn't deterred consumers' willingness to spend. Spending on leisure and hospitality services continued to rebound. Contacts noted especially strong recoveries at restaurants, casinos, and concessionaires at sporting venues and national parks. Nonauto retail sales remained strong, particularly in the appliance, grocery, jewelry, and sporting goods sectors. Spending on building materials and lawn and garden slowed but remained at a high level. Brick-and-mortar stores regained some market share from e-commerce. New and used light vehicle sales slowed due to a lack of inventory and dealers indicated that profit margins had widened. Dealers reported that they were increasingly selling from future vehicle allocations from automakers.\nBusiness Spending\nBusiness spending increased moderately in late May and June. Retail inventories were low for many items, and contacts expected inventory challenges to continue through the end of 2021. New and used light vehicle inventories decreased and remained low, and dealers didn't expect new vehicle inventories to improve until the end of the third quarter. Many manufacturing contacts said inventories remained below comfortable levels. Contacts reported ongoing supply chain issues, especially for raw materials, metals, microchips, and specialty parts, and expected the problems to continue into 2022. Demand for transportation services was strong and many contacts reported shipping delays, both from within the U.S. and overseas. Capital expenditures increased moderately, and contacts expected a similar-sized increase over the next twelve months. Many contacts noted that lead times for capital equipment were much longer than usual. One contact said higher inventory expenses were crowding out their capital purchases. Commercial and industrial energy usage increased modestly.\nConstruction and Real Estate\nConstruction and real estate activity were little changed from the prior reporting period and remained at a high level. Residential construction decreased modestly, but activity levels were healthy. Residential real estate activity increased slightly, as did home sales, though the low number of homes on the market continued to hold back activity. There was a large increase in home prices, while rents went up a bit. Nonresidential construction was unchanged. A contact in southeast Michigan reported that an increasing number of projects were being postponed because of high concrete and steel prices. Commercial real estate activity was also little changed, and prices and rents were steady.\nManufacturing\nManufacturing production increased modestly in late May and June. Most manufacturing contacts indicated that business was above pre-pandemic levels, but there were also widespread reports of logistical and supply issues holding back growth. Auto output was little changed, as assemblers and suppliers remained constrained by ongoing shortages of parts, notably microchips. Steel production increased slightly, and capacity utilization was at a multiyear high, with contacts reporting greater demand from most industries, with the exception of autos. Demand for heavy machinery increased, led by growth in construction and agriculture. Specialty metals manufacturers reported a moderate increase in orders from an already high level. Many had reached full capacity and were dealing with shortages of materials and longer lead times from suppliers.\nBanking and Finance\nFinancial conditions improved slightly over the reporting period. Participants in equity and bond markets reported a small improvement in conditions. Business loan demand increased moderately. One contact said that once firms were successful in getting their PPP loans forgiven, they were more comfortable taking out new loans to fund capital expenditures. Business loan quality increased slightly, with improvements reported across all sectors. Business loan standards loosened a bit in a very competitive environment. In consumer markets, loan demand increased slightly. Contacts reported that demand remained high, particularly in the auto and housing markets, and that consumer credit quality remained favorable. Loan quality increased slightly, while credit standards were unchanged on balance. Banks continued to be awash in deposits from both businesses and households.\nAgriculture\nAgriculture stayed on course to earn higher market-based incomes relative to last year, as most product prices remained high enough to offset increased costs for freight, energy, fertilizers, and labor. On net, corn prices were little changed, while soybean prices were a little lower over the reporting period. Although planted corn and soybean acreage was up from last year, it was lower than expected earlier in the growing season, which helped maintain prices. Crop conditions for corn and soybeans were mixed, as some parts of the District were in excellent shape and others were stressed by drought. Hog and milk prices eased off highs during the reporting period, while cattle prices were flat. One contact noted that a lack of workers in slaughterhouses had led to the suspension of some contracts with poultry producers. Farmland values moved higher again.\nFor more information about District economic conditions visit: chicagofed.org/cfsbc\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
New York | 2021-07-14T00:00:00 | /beige-book-reports/2021/2021-07-ny | "Beige Book Report: New York\nJuly 14, 2021\nSummary of Economic Activity\nEconomic growth in the Second District remained strong in the latest reporting period, as low levels of COVID and widespread vaccinations have enabled most businesses to re-open. Contacts continued to express broad-based optimism about the business outlook. The job market has strengthened further, as more businesses have added workers and raised wages, with many reporting labor shortages. Input price pressures have continued to broaden, and a growing proportion of businesses report that they are hiking their selling prices. Consumer spending has continued to grow, albeit at a more moderate pace, led by sales of used vehicles and tourism, while consumer confidence in the region climbed to near record highs. Home sales and rental markets have strengthened, while commercial real estate markets were mixed. Finally, contacts in the broad finance sector reported a pickup in activity, and regional banks reported rising loan demand and declining delinquency rates.\nEmployment and Wages\nThe job market strengthened further in recent weeks, with businesses indicating more hiring and growing labor shortages. A major New York City employment agency noted increased hiring activity and expects a rebound to pre-pandemic levels once most offices fully re-open. An upstate employment agency reported a continued increase in job postings, noting that many remain unfilled\u2014in part reflecting increased turnover and churn, as more workers have changed jobs.\nBusinesses in a number of sectors have reported increases in their employment levels\u2014particularly in the leisure & hospitality, wholesale trade, transportation and information sectors. Overall, business contacts report a gap between actual and desired staffing levels\u2014especially in the leisure & hospitality, professional & business services, and retail sectors; moreover, some restaurants and hotels have reportedly been unable to find enough staff to meet the surge in pent-up demand.\nBusinesses across all major sectors plan to add staff in the coming months. Many employers that had shifted to all or mostly remote work have begun to bring workers back to the workplace, and this is expected to be most pronounced in September.\nWage growth has picked up somewhat, most notably for jobs in leisure & hospitality, education & health, construction, and transportation & warehousing. Looking ahead, businesses across all major sectors plan to raise wages. A leading New York City employment agency noted a wide gap between desired and offered salaries.\nPrices\nFirms' input prices have generally continued to accelerate. As has been the case for several months, those in construction and manufacturing noted the most widespread increases, but in the latest reporting period, there has been a substantial increase among those in leisure & hospitality, transportation & warehousing, and retail & wholesale trade. Contacts in all sectors foresee widespread hikes in prices paid during the rest of 2021.\nSelling prices accelerated modestly, with particularly widespread price hikes in manufacturing and wholesale trade and moderate hikes in retail, transportation, and construction. A sizable share of contacts in all sectors except information plan to hike prices later this year.\nConsumer Spending\nConsumer spending has continued to grow, albeit at a somewhat more moderate pace. Non-auto retailers reported a continued increase in business, particularly for seasonal and travel-related merchandise. A major retail chain noted that its sales have continued to exceed plan, with sales in New York City picking up but still lagging the rest of the region. Retailers continued to express widespread optimism about prospects for the second half of 2021. Consumer confidence among New York State residents continued to improve in June, exceeding pre-pandemic levels and approaching record highs.\nNew vehicle sales were reported to be steady at high levels, while sales of used cars strengthened considerably. Sales in both categories remained well above pre-pandemic levels, despite low inventories. A persistent shortage of microchips is expected to constrain inventories and sales of new vehicles through the summer.\nManufacturing and Distribution\nBusinesses in the manufacturing, wholesale trade and transportation & warehousing sectors noted ongoing strong growth. Contacts continued to note supply disruptions, though to a somewhat lesser degree than earlier in the year. Looking ahead to the second half of this year, businesses in all these sectors remained widely optimistic about business prospects, with the main concerns being about shortages of workers.\nServices\nService industry contacts also reported robust growth in the latest reporting period. Contacts in the information and leisure & hospitality industries noted particularly widespread improvement, while those in professional & business and education & health services reported more moderate gains. A major social services nonprofit noted that increased food donations have enabled them to expand their distribution efforts. Looking ahead, contacts in all these sectors continued to express widespread optimism about business prospects.\nTourism has strengthened further, particularly in New York City, even as the volume of international and business visitors has remained well below pre-pandemic levels. In New York City, hotel occupancy rates climbed above 60 percent in June, a post-pandemic high, though room rates have remained well below pre-pandemic levels. With most restrictions now lifted, many more New York City hotels, restaurants, museums, and entertainment venues have re-opened or eased capacity constraints. A survey of residents across the Northeast indicated that many are eager to visit New York City, and the city recently launched a large promotional campaign to draw more domestic visitors.\nReal Estate and Construction\nHousing markets have been steady to stronger in the latest reporting period. Sales markets outside New York City have remained quite robust, though volume has plateaued or edged back\u2014largely due to lean inventories and high prices. In New York City, where inventories are not as low, sales volume continued to rebound, though the upward momentum has slowed. Home prices have been steady to higher across the District. In Manhattan, prices have stabilized well below peak levels of three years ago; across the rest of the New York City area, prices have been steady to slightly higher; and across upstate New York, prices have continued to rise.\nNew York City's rental market has shown signs of turning up. Rents are still down more than 10 percent from early-2020 levels across New York City, but they have begun to recover, with strong leasing activity continuing. This is generally attributed to a combination of people moving for better deals and a return to the workplace.\nCommercial real estate markets have remained mixed across the District. New York City's office market has continued to slacken, with vacancy and availability rates continuing to trend up and rents drifting down. However, office markets across the rest of the District have been steady to modestly stronger\u2014particularly in upstate New York. The industrial market has strengthened throughout the District, with vacancy & availability rates declining and rents up 5-7 percent from pre-pandemic levels.\nNew office construction has weakened from already sluggish levels, but multifamily residential construction has picked up outside Manhattan where it remains moribund. Construction sector contacts expect business to improve in the months ahead but expressed concern about the cost and availability of materials and labor.\nBanking and Finance\nBusinesses in the broad finance sector indicate that activity has picked up since the last report. Small to medium-sized banks in the District reported increased demand for loans, driven by higher demand for consumer loans and commercial mortgages. Refinancing was unchanged on net. Banks reported further tightening in standards on commercial mortgages and C&I loans and higher spreads on consumer loan and residential mortgages. Delinquency rates were down in all loan categories except residential mortgages, where they were reported to be unchanged.\nFor more information about District economic conditions visit: www.newyorkfed.org/regional\u2010economy\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Philadelphia | 2021-07-14T00:00:00 | /beige-book-reports/2021/2021-07-ph | "July 14, 2021\nSummary of Economic Activity\nOn balance, business activity in the Third District continued to grow moderately during the current Beige Book period; however, activity in most sectors remained below levels observed prior to the pandemic. The share of adults fully vaccinated against COVID-19 grew to above 50 percent. As normal activity resumes, labor shortages have worsened. Meanwhile, supply chain disruptions continue to challenge most sectors. Net employment continued at a modest pace of growth, while wages and prices continued to grow modestly and moderately, respectively. Wage pressures have been greatest for low-wage workers following years of stagnant wage growth. Over three-fourths of the firms expressed positive expectations for continued economic growth over the next six months \u2013 broadening in anticipation of a further uptake in vaccinations, the reopening of schools, a return to the workplace, and the phaseout of most stimulus measures.\nEmployment and Wages\nEmployment continued to grow modestly overall. The share of firms reporting employment increases broadened to over one-third of the manufacturers but edged back to one-fifth among nonmanufacturing firms. Overall, average hours worked rose for over one-fourth of all firms.\nAttracting sufficient labor remained a challenge for many firms across all sectors. Contacts at staffing firms reported that they were beginning to see somewhat better candidate flow and were expecting supply to build through September as schools reopen. However, contacts recalled that the labor market was tight before the pandemic and expect it to remain exceedingly tight in the fall. Contacts noted that the pandemic encouraged some early retirements. Moreover, the warehouse industry and the gig economy have created more labor market churn and less workplace loyalty.\nWages continued to rise modestly overall. The strongest wage growth pressure remained largely constrained to lower-wage jobs. Contacts expect wage growth at the lower end to slow again after catching up with years of stagnant growth, but they also expect the increases to eventually move to mid-wage jobs.\nOver four-fifths of the nonmanufacturing firms reported higher wage and benefit costs per employee \u2013 comparable with pre-pandemic levels. Almost no firms reported lower compensation. A rural area manufacturer noted that $20 an hour seems to be the wage required to attract entry-level workers. Firms continued to report raising wages and offering signing bonuses, retention bonuses, and referral bonuses to compete for scarce labor resources.\nPrices\nOn balance, prices continued to rise moderately over the period. The share of manufacturers reporting higher prices for factor inputs edged over four-fifths, while those receiving higher prices for their own products rose to above one-half. However, the share of nonmanufacturers reporting higher prices for their inputs remained at one-half, while the share receiving higher prices from consumers for their own goods and services edged up to nearly one-third.\nOver three-fourths of the manufacturing contacts reported expectations of paying higher prices over the next six months and expected to receive higher prices for their own goods.\nManufacturing\nOn average, manufacturing activity continued to grow moderately. However, net increases of new orders waned somewhat from the prior period's level, while net increases of shipments rose. In turn, the share of firms reporting an increase of order backlogs, inventories, and delivery times retreated from near record levels. Despite the reported strong demand, manufacturing employment and production remained below pre-pandemic levels.\nManufacturers continued to note significant production constraints because of ongoing labor shortages and supply chain disruptions. In response, many firms are raising wages, outsourcing production, and increasing automation.\nAccording to one contact, another firm \"overcompensated\" last year when the pandemic hit. Expecting a drop in demand, the manufacturer laid off all temporary workers and eliminated overtime. Instead, demand increased. However, the firm hasn't raised wages to attract workers back and still remains behind on orders.\nConsumer Spending\nContacts reported continued modest growth of nonauto retail sales. Survivors in the retail and restaurant sectors reported strong sales against 2019 levels, except in some urban markets and office parks where workers have not yet returned.\nReports from auto dealers suggest that new car sales edged slightly lower from a high level, as a lack of new inventory from manufacturers began to empty sales lots. Contacts noted that some manufacturers were holding cars awaiting microchips, while others had slowed production. Rising prices and strong used car sales continued to boost profits.\nTourism contacts continued to report modest, incremental growth. Domestic leisure travelers were active throughout the region and willingly spent their savings. Business and group travel also improved, but at a much slower pace, which is expected to continue through 2022.\nNonfinancial Services\nNonmanufacturing activity continued to grow moderately, with over half of the firms reporting increases in sales or revenues. However, on balance, output remained below pre-pandemic levels, and some businesses will remain shuttered until the fall.\nBusinesses that continue to struggle include fitness firms, shopping malls, offices, and restaurants and hotels \u2013 especially those that cater to the business traveler. In addition, many nonprofits have managed to get by with various government funding sources, but they don't expect a full recovery to normal operations until after 2022.\nFinancial Services\nThe volume of bank lending fell modestly during the period (not seasonally adjusted); during the same period in 2019, by contrast, loan volumes grew modestly. Commercial and industrial loans contracted significantly, while home equity lines and other consumer loans fell modestly. Auto lending and home mortgages grew slightly, and commercial real estate lending was flat. Credit card volumes grew moderately, as was the case over the same period in 2019.\nBankers, accountants, and bankruptcy attorneys continued to report that relatively few problems with bad debt had emerged. Paycheck Protection Program loans have notably helped many firms, but during the pandemic, many more businesses than usual have also qualified for the extremely beneficial Employee Retention Credit.\nOne attorney noted that clients were anxious to begin collecting past-due rent and mortgage payments; several clients anticipate problems, including a surge of personal bankruptcies, when the moratoria on evictions and foreclosures are lifted.\nReal Estate and Construction\nHomebuilders continued to report modest growth, al-though several noted that the pace of traffic and sales had slowed somewhat. Supply chain disruptions and the high costs of materials continued to challenge builders \u2013 resulting in higher home prices and longer delivery times for new homes. Some expect supply chain issues to be worse yet over the next three to four months.\nExisting home sales held steady, and availability remained low. Although one broker noted an uptick in new listings, availability remained at or below a one-month supply in many locations.\nThe relative lack of single-family homes has continued to support demand for multifamily construction. Those projects, along with warehouses and life science labs, continued to offset weakening demand for office space. Both construction and leasing activity held steady overall.\nFor more information about District economic conditions visit: www.philadelphiafed.org/research-and-data/regional-economy\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Minneapolis | 2021-07-14T00:00:00 | /beige-book-reports/2021/2021-07-mi | "July 14, 2021\nSummary of Economic Activity\nNinth District economic activity grew at a strong pace since mid-May. Employment saw solid growth, with strong hiring demand outpacing improved labor availability. Wage pressures were strong, with wholesale price pressures remaining higher than those for consumer prices. Growth was noted in consumer spending, construction, real estate, manufacturing, agriculture, and energy. Minority- and women-owned businesses in the region reported moderate improvements in business activity.\nEmployment and Wages\nEmployment saw moderate-to-strong growth overall since the last report. Two separate employer surveys showed labor demand continuing to increase in recent weeks. Staffing firms across the District reported strong job orders. Hiring demand was healthy across all sectors, but noted especially in retail, hospitality, manufacturing, construction, transportation, and health care. Despite growth, further gains were constrained by labor availability. A North Dakota staffing firm reported that it typically had 300 job openings daily but was \"filling only a small percent.\" A Minnesota contact said virtual job fairs were seeing more employers than job seekers, and another said many businesses \"would eagerly expand if they could find workers.\" A Montana staffing contact said employers often bemoaned the fact that there was \"so much [hiring] demand and no applicants.\"\nWage pressures were strong. Recent surveys showed a growing share of employers raising wages by 3 percent or more. Numerous contacts also reported additional incentives, including hiring and retention bonuses and tuition reimbursement. A company in central Minnesota reported offering on-the-spot cash for job applicants simply showing up for job interviews. A Montana staffing contact said that most employers were \"willing to pay what is needed to gain the people they need.\"\nWorker Experience\nLabor supply increased since the last report. Unemployment insurance claims continued to decline across all District states. Staffing and workforce contacts in states that have ended pandemic-era unemployment programs reported that the number of job seekers in the labor market increased, but not as much as expected. A recent survey showed that low pay at available jobs and concerns over COVID-19 exposure were the top challenges keeping some job seekers from accepting employment. Transportation and the need for more training or education were quoted as being moderate or significant challenges. While government benefits may be keeping some job seekers on the sidelines, many expressed that they would rather work in their preferred fields if given the opportunity. Nonprofit professionals working with diverse youth shared that the lack of paid internships and the narrow range of workforce development options were major challenges for their clients. Furthermore, some are struggling to find first-time job opportunities because automation is increasingly reducing the number of entry-level positions.\nPrices\nPrice pressures remained elevated since the previous report. An overwhelming majority of respondents to a survey of District professional services firms noted increased nonlabor input costs over the past year, though a much smaller proportion reported having raised selling prices; the outlook for both over the coming year was elevated. A separate survey of general District businesses revealed similar pricing experience. Manufacturing contacts noted continued steep input cost pressure across the board for raw materials and transportation, with one contact describing metals markets as \"out of control.\" Retail fuel prices in District states increased moderately since the previous report. Prices received by farmers in May increased from a year earlier for most important District commodities but decreased for lentils and chickpeas.\nConsumer Spending\nConsumer spending was moderately higher since the last report and remained high overall. A Minnesota shopping mall contact reported that more stores were opening, and customer traffic and spending were improving. Hospitality and tourism firms reported improving activity in recent weeks; a central Minnesota contact said there was \"pent-up demand for any entertainment.\" But many operations remained constrained by lack of workers and low inventories of vehicles, recreational equipment, and other products. Airline travel increased significantly in June compared with a month earlier, most of it coming from higher leisure travel. A Montana contact reported that rental car and lodging shortages were hampering otherwise-strong tourism activity there. Tourism traffic also improved in Michigan's Upper Peninsula in May and June.\nServices\nActivity in the services sector increased moderately. Preliminary results from an annual survey of professional services firms indicated that sales, profits, and productivity had all increased, and expectations called for continued growth over the coming year. Several providers of broadband and network management services noted that demand remained brisk. Accounting contacts reported that they remained busy due to supporting pandemic aid documentation requirements.\nConstruction and Real Estate\nCommercial construction grew slightly since the last report, with some variation among contacts. There was widespread concern over cost increases, but materials supply contacts said demand has remained healthy in most market segments. An industry tracker showed that total active projects in May and June remained slightly below last year, but the gap has been shrinking. An asphalt contact said that work has been \"a little low\" in Minnesota and the Dakotas, especially for public projects. Residential construction saw modest growth and remained at healthy levels. But contacts said some buyers were backing away from projects due to higher costs, and contractors were also less willing to start speculative building projects, fearful of taking losses.\nCommercial real estate improved modestly. Office and retail markets continued to improve, though return-to-office occupancy in some core markets like downtown Minneapolis remained sluggish. Residential real estate improved slightly; demand remained strong, according to contacts, but very low inventories of homes for sale has dampened total sales in many markets.\nManufacturing\nDistrict manufacturing activity remained strong since the previous report, despite continued challenges with input costs and availability. A regional manufacturing index indicated broadly increased activity in Minnesota, North Dakota, and South Dakota in May relative to the previous month. District manufacturing contacts generally reported solid new orders. However, a few contacts reported that raising final prices due to constraints on raw material and input availability was hampering demand. Due to substantial backlogs in maritime shipping, noted one contact, \"anything made overseas takes longer and is more expensive.\"\nAgriculture, Energy, and Natural Resources\nDistrict agricultural conditions continued to benefit from strong commodity prices. However, severe drought conditions across most of the District had many crop producers concerned about yields, as most corn, soybean, and wheat acres in the District were rated in fair or poor condition. Oil and gas exploration activity increased slightly since the previous report.\nMinority- and Women-Owned Business Enterprises\nMinority- and women-owned business enterprises (MWBEs) in the region continued to report moderate improvements in business activity and had an overall optimistic outlook on the economy. Personnel recruitment remained a challenge, but some were seeing more applicants for available jobs compared with previous months. MWBEs across several industries expected wage and input cost increases to continue putting pressure on their operations, and some planned to increase prices for their products within the next quarter. A nonprofit financial contact said that the pandemic hit many MWBEs earlier and harder than businesses overall and, given limited support infrastructure and access to credit, their recovery will also take longer.\nFor more information about District economic conditions visit: www.minneapolisfed.org/region-and-community\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Cleveland | 2021-07-14T00:00:00 | /beige-book-reports/2021/2021-07-cl | "July 14, 2021\nSummary of Economic Activity\nThe Fourth District economy continued to expand at a solid pace in recent weeks, although supply side constraints limited many firms' ability to keep up with growing demand. Overall, household spending increased as progress in the fight against COVID-19 led many consumers to pursue activities they had foregone for more than a year, such as dining out and traveling. However, auto dealers and residential real estate agents suggested that while demand remained solid, sales were limited because depleted inventories left potential buyers with fewer buying options. Manufacturers and construction contacts reported that materials shortages, delivery delays, and staffing shortfalls made it difficult to keep up with increasing orders, let alone work down growing backlogs. Contacts in professional and business services and financial services reported strong, steadily increasing activity. More generally, firms remained very optimistic that demand would continue to increase in coming months but were less optimistic that labor and other supply constraints would abate enough to alleviate some of the upward pressure on wages, nonlabor input costs, and selling prices.\nEmployment and Wages\nLabor demand remained solid in recent weeks, but firms continued to report difficulty in filling open positions. Nearly half of contacts indicated they increased staffing during the prior two months, with a nearly equal share reporting that staffing levels were unchanged. However, many of the firms that did not increase staffing commented that they simply could not find workers to fill new or open positions. Looking forward, more than half of contacts expected to increase staffing levels in coming months, with another 45 percent planning to hold staffing steady. Here again, many of those in the latter group suggested they would like to add workers but won't be able to because of a dearth of available labor.\nWith the number of open positions seemingly exceeding available workers, wage increases became more commonplace, especially within lower-wage occupations. In addition to higher wages, more contacts reported paying signing bonuses to keep up with competitors. However, one contact indicated that she was putting off decisions on further wage hikes and bonuses until she sees if labor availability increases as states end supplemental unemployment benefits.\nPrices\nNonlabor input costs increased further. Nearly 80 percent of contacts indicated that nonlabor input costs rose over the prior two months, a share that is roughly twice the share reporting increases at the turn of the year. Manufacturers noted rising costs for steel, aluminum, electronic components, freight, chemicals, plastics, and resins. Construction contacts cited widespread materials cost increases, as well, although a few homebuilders noted some relief in the cost of lumber. There were scattered reports that higher wages were spilling over to other input costs, including some business services. On balance, firms expect nonlabor input costs to continue increasing in coming months as supply constraints persist.\nSelling prices increased moderately, on balance. Nearly 65 percent of contacts said they increased prices in the prior two months. When asked the same question in January, 34 percent indicated they had raised prices. In most cases, recent price hikes were attributed to firms' trying to maintain margins amid higher costs. As one contact put it, \"We're trying to pass along our increased costs to our customers just like everyone else.\" But in many other cases, firms acknowledged that solid demand and limited supply provided them with opportunities to boost profit margins.\nConsumer Spending\nReports suggest that consumer spending increased moderately during the reporting period. General merchandisers and apparel retailers said that demand remained strong, and one department store contact noted that sales during Mother's Day and Father's Day were stronger than 2019 and 2020 sales on the same days. Hoteliers and restaurateurs reported significant improvement in activity as pandemic fears waned, and a contact at a large airport said that leisure travelers drove a strong rebound in air travel that exceeded her expectations. Auto dealers said that demand remained elevated, but sales dipped as the semiconductor chip shortage continued to limit the supply of new vehicles. Overall, contacts were optimistic that consumer spending would continue to increase in coming months thanks to unused stimulus funds and progress in the fight against the pandemic, while auto dealers commented that sales will pick up once inventory levels recover.\nManufacturing\nDemand for manufactured goods grew strongly across a wider range of end-user markets, including some (such as aerospace equipment) that have been lagging during the recovery. Supply chains continued to be disrupted both domestically and abroad, adding to longer lead times and raising transportation costs. Many contacts noted that a severe shortage of hourly wage workers restricted output growth. One contact was unable to fulfill 10 percent of his orders because the firm failed to reach its staffing goals. On balance, most respondents expected conditions to improve in coming months, although rising attrition rates and materials shortages tempered expectations for continued growth.\nReal Estate and Construction\nHomebuilders and residential real estate agents commented that although housing demand remains strong because of low mortgage rates, construction activity softened because of high materials prices. One homebuilder noted that input costs were \"out of control,\" with steel and lumber being two of the main drivers of price increases. Another homebuilder indicated that higher home prices had led some potential customers to walk away from projects. Existing home sales also slowed because the supply of available housing remained limited. One real estate agent suggested that sales for her firm were below 2019 levels entirely because of the shortage of inventory. Contacts were hopeful that homebuyers would reenter the market when prices stabilize.\nDemand for nonresidential construction and real estate continued to strengthen across many segments. Activity within the industrial sector remained strong, and demand for office spaces experienced notable increases in activity. Even so, one commercial real estate agent noted that many new developments and renovations had been put on hold because of increased materials costs and labor constraints among subcontractors. Looking forward, contacts were optimistic that demand would remain strong as more consumers and businesses return to their pre-pandemic lives.\nFinancial Services\nBanking activity increased modestly in recent weeks. Contacts continued to report growth in business lending, especially for commercial real estate loans, as more of the economy reopened and fiscal support to businesses waned. Contacts also noted that demand for mortgages and auto loans remained strong, but the recent uptick in interest rates and limited inventories in both markets limited loan demand. Lenders said that delinquency rates for consumer and commercial loans were still low and that the number of active forbearance agreements continued to drop. Looking ahead, bankers were optimistic that loan demand, especially business lending, would continue to pick up as COVID-19 restrictions ease.\nProfessional and Business Services\nDemand for professional and business services increased further as more businesses resumed in-person activities. Increased optimism also led many firms to restart projects that had previously been put on hold. A small management consulting firm reported that firms had begun to move forward with projects that were in the pipeline from 2019 and 2020. Overall, contacts were optimistic that demand would remain strong as general economic conditions improve further.\nFreight\nDemand for freight services grew modestly from an already high level. The rise in activity stemmed from customers' needing to replenish low inventories and from continued increases in overall economic activity. While demand for new routes grew, a shortage of truck drivers limited capacity. Looking forward, contacts expected demand to increase further in coming months, but expectations were tempered by concerns about difficulty finding drivers and uncertainty around the new administration's regulatory priorities.\nFor more information about District economic conditions visit: https://www.clevelandfed.org/en/region/regional-analysis\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Boston | 2021-07-14T00:00:00 | /beige-book-reports/2021/2021-07-bo | "July 14, 2021\nSummary of Economic Activity\nFirst District contacts reported solid increases in demand and modest gains in employment. Retail sales remained elevated, about on par with first quarter results. Air travel through Boston improved steadily in recent months and Cape Cod tourism contacts saw further gains. Manufacturing sales improved moderately in recent weeks despite ongoing supply disruptions. Software and information services firms reported strong gains from the first quarter, although sales at one firm remained down from one year earlier. Commercial real estate markets improved further, led by robust industrial leasing and sales activity and impressive gains in retail leasing. Residential real estate markets remained strong as over-the-year results were little changed. Employment rose modestly and wage increases were mixed. Reports of robust price increases became more common. The outlook remained cautiously optimistic and prospects for office leasing appeared less bleak.\nEmployment and Wages\nLabor demand strengthened moderately, and wage pressures increased, while employment increased modestly. A few manufacturing contacts described the labor market as tight for all skill levels, and one perceived that unemployment insurance held back the participation of unskilled workers. Nonetheless, a life sciences manufacturer resumed a plan to add hundreds more workers in 2021 following the resolution of regulatory uncertainty, and a food producer is adding a new production line and said that hiring difficulties and wage pressures had eased. Retail contacts experienced difficulty finding workers despite having implemented wage increases of $1 to $2 per hour. Software employment remained steady over the quarter, with turnover at average or below-average levels. One software contact engaged exclusively in replacement hiring while awaiting further information on demand, while two others described substantial hiring plans. Wages at software firms increased at their usual annual pace, but one firm felt that larger wage increases would be necessary moving forward in order to meet hiring goals.\nPrices\nPrice increases were robust on balance despite flat prices at software and IT firms. Three manufacturing firms planned to raise prices in 2021 and one raised prices in 2021Q2, by margins of 8 to 10 percent; another said that moderate price increases were possible in 2021 but uncertain. The price increases reflect a response to large ongoing cost pressures and the perception that consumers will tolerate them. A food manufacturer reported a 12 percent increase in input prices over the year and a packaging manufacturer saw an 8 percent increase in paper pulp just since the first quarter. One contact said that ocean container prices were back up to the extreme heights seen in the winter after having fallen in the spring. Increased freight costs were noted by manufacturers as well as retailers. A furniture retailer raised prices nearly 10 percent in recent months and a total of 20 percent over the year. Software contacts reported flat prices, consistent with their business models which allow only infrequent price changes.\nRetail and Tourism\nRetail sales at First District contacts stayed at high levels through the second quarter but were roughly even with first quarter results. At a furniture retailer, sales volume was up roughly 25 percent from 2019, which nonetheless fell slightly short of the pace of first quarter sales. The same retailer faced delays in receiving goods and difficulties hiring sales associates and warehouse workers. A clothing retailer said that sales in recent months remained up 30 percent over pre-pandemic levels, owing to continued strength in online sales, representing stable results since their last report.\nTravel industry respondents reported that air travel through Boston increased substantially in recent months. Compared with the comparable months from 2019, passengers were at 40 percent as of April 2021, at 45 percent as of May, and are expected to surpass 50 percent in June and July. The recovery in international and business travel was comparatively weak, however. Hotel bookings, occupancy rates, and room rates on Cape Cod held steady or improved further in a record-breaking spring season. Restaurants and small retail shops on the Cape also reported surging sales. Aside from potential problems related to ongoing labor shortages, retail and hospitality contacts remained optimistic that the summer would continue to yield very strong results.\nManufacturing and Related Services\nManufacturing contacts saw moderate growth amid ongoing supply disruptions. Three contacts\u2014a food producer, a manufacturer of industrial membranes, and a semiconductor manufacturer\u2014said that second quarter sales exceeded their expectations. The semiconductor contact said that the enormous increase in demand for their products from a year earlier derives from end users and not from either hoarding or depressed sales during the pandemic\u2014the example cited was increased demand for car safety features which require semiconductors. Firms did not report any major revisions to capital expenditures. Contacts experienced further moderate-to-steep cost increases that were mostly attributed to supply chain disruptions. Firms continued to be optimistic but made no major revisions to their outlooks, and they did not expect supply disruptions to ease before the end of 2021 and maybe even later.\nSoftware and Information Technology Services\nSoftware and IT contacts in the First District reported moderate-to-robust improvements in sales. One contact said that customers saw value in their company's cloud-based products after witnessing their usefulness during the pandemic. Revenues at one firm remained lower on a year-over-year basis, but that performance nonetheless reflected a moderate improvement over the previous quarter, and others reported robust acceleration in year-over-year performance. Most contacts were cautiously optimistic for stable or improving sales moving forward, but one maintained an uncertain outlook given the possibility of a resurgence in COVID-19 cases later in 2021.\nCommercial Real Estate\nCommercial real estate markets in the First District remained mixed but showed modest improvements on balance. The industrial market still had very strong leasing demand and industrial rents posted further modest increases amid very low vacancy rates. Industrial sales continued to grow, and capitalization rates fell to new lows. In the greater Boston area vacancies for life sciences space edged close to zero amid substantial ongoing construction activity. Industrial and multifamily construction gained strength, but contacts perceive that construction activity in those sectors would be more robust if not for surging construction costs and tight labor markets. A contact from Maine reported a robust increase in office leasing demand, but elsewhere office demand was roughly flat and effective rents softened slightly. Office vacancies were stable in Connecticut and Maine, up in Rhode Island, and down somewhat in the Boston area. Retail leasing improved sharply in Maine and Rhode Island, in part for seasonal reasons, although rents were seen as flat or down slightly. Loan rates for industrial and multifamily properties fell a further 25 basis points as banks sought to shed cash. The outlook improved somewhat, as contacts expected further growth in retail leasing and forecasted smaller declines in office footprints through early 2022 than they had in previous reports.\nResidential Real Estate\nNew England's residential real estate markets were mostly stable amid a high-demand, low-inventory environment that has persisted for some time. Connecticut data were unavailable. Closed sales increased substantially over the year to May in all reporting areas, but the numbers largely reflect the pause in market activity in May 2020 due to COVID-19. For the condo markets in Rhode Island, New Hampshire, and Maine, May's results indicate a deceleration in sales activity from April, but condo sales in Massachusetts and Boston increased substantially from the last report. Single-family home inventories did not improve but Boston condos again saw a slight year-over-year increase in supply. Median sales prices increased over-the-year by double-digit percentages, representing little change from the previous report for single family homes and a slight acceleration for condos. The Massachusetts and New Hampshire contacts perceived that low mortgage rates fueled demand. Three contacts mentioned the need for new construction to satisfy demand, but they acknowledged that high construction costs could add further upward pressure to prices. The Massachusetts contact is hopeful that, as pandemic restrictions ease, supply chain challenges will be resolved, and construction costs will fall.\nFor more information about District economic conditions visit: www.bostonfed.org/regional-economy\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Dallas | 2021-07-14T00:00:00 | /beige-book-reports/2021/2021-07-da | "July 14, 2021\nSummary of Economic Activity\nSolid expansion continued in the Eleventh District economy. Growth in the manufacturing and nonfinancial services sectors was strong, though activity remained somewhat below pre-pandemic levels. Retail sales dipped as supply chain issues hampered activity. Home sales remained elevated, but buyer traffic and interest cooled off slightly. Apartment demand surged, pushing up rents. Retail leasing picked up, while office demand stayed weak. Overall loan volumes rose broadly. Energy activity and agricultural conditions saw moderate improvement. Employment growth was moderate, and upward wage pressures increased with labor shortages being a significant issue for many firms. Ongoing supply chain disruptions intensified price pressures. Outlooks improved, though uncertainty increased, and a much larger share of respondents was experiencing supply chain challenges compared with earlier in the year.\nEmployment and Wages\nPayrolls expanded moderately outside of the retail sector, where employment was flat. Lack of labor availability, particularly for low and mid-skill positions, was a mounting concern among companies looking to hire, and many noted that this was slowing activity and/or expansion plans. Staffing firms noted stiff competition for recruiters and reported having many more positions to fill than qualified candidates to match. One staffing contact noted candidates were filling in applications with little or no intention of showing up for an interview. A few respondents expect some relief in labor challenges given the recent expiration of federal supplemental unemployment benefits in Texas.\nWage growth accelerated, and there were widespread reports of upward wage pressures across industries, including airlines and energy. A manufacturer said that even with a $500 signing bonus and $15 per hour starting pay for untrained workers, they were not getting applicants. An education services firm reported increasing entry-level labor compensation by 20 percent. A small coffeeshop owner cited offering signing bonuses and a $1,000 referral for a barista willing to stay on for three months.\nPrices\nPrice pressures accelerated further due to growing supply chain issues. A Dallas Fed survey of 382 Texas business illustrated that a majority of respondents were experiencing supply chain challenges, and among them 60 percent noted conditions had worsened over the past month. Input costs surged, with contacts in the construction, manufacturing, and retail sectors citing the steepest increases. There was continued concern among respondents regarding higher prices of fuel, agricultural commodities, building materials, metals, and motor vehicles. Several contacts, particularly manufacturing firms, noted that they were passing on higher costs with more ease than in the past, though some cannot pass them through which is negatively impacting margins. Selling prices rose at a fast clip in many sectors, and even airlines reported raising fares. Housing contacts noted continued difficulty obtaining appraisals reflective of the final sales price.\nManufacturing\nTexas factory activity gained momentum in June, with output growth accelerating broadly. Several manufacturers noted increasing demand and growing backlogs. Those citing slower activity mostly said supply chain and labor availability issues hampered their ability to meet orders. Refining operations improved further, though utilization rates remained below 2019 levels. Refiners cited strong seasonal demand but noted that margins were still weak. Contacts expect significant improvement in margins in 2022. Petrochemical production has mostly recovered from Winter Storm Uri, though some basic chemical production was still hampered by a combination of maintenance and outages. Supply chain disruptions were likely to take longer to clear up than anticipated at the time of the previous report. Manufacturing outlooks were optimistic but labor shortages, inflationary pressures, and uncertainty regarding when supply disruptions would be resolved weighed on sentiment.\nRetail Sales\nRetail sales fell during the reporting period as supply chain issues and tight inventories continued to constrain sales activity, particularly auto sales. A Dallas Fed survey of 47 Texas retailers showed that 87 percent of respondents were experiencing supply chain challenges, and among them 61 percent noted that conditions had worsened over the past month. Multiple auto dealers said that vehicle inventories were at all-time lows, negatively impacting their bottom line. Outlooks were mildly positive, though uncertainty increased due to long lead times, inventory shortages, and shipping challenges.\nNonfinancial Services\nBroad-based, solid expansion continued in nonfinancial services, though the pace of growth eased since the last report. Most accommodation and food services firms saw flat to higher revenues, and several contacts noted that the inability to fill open positions was holding back growth. Airlines said passenger demand and bookings surged, exceeding expectations. The acceleration was largely driven by domestic leisure travel and travel to nearby international tourist destinations, however, corporate demand ticked up as well. Most staffing firms reported broad-based increases in demand, ranging from healthcare to construction and hospitality workers, and a continued recovery in business. In transportation services, small parcel shipments rose, and air cargo volumes were flat to down, with demand largely domestic. Container cargo coming through the Port of Houston saw double-digit increases in May. Outlooks were positive, though uncertainty surrounding inflation, supply shortages, labor constraints, and the general business climate slightly increased.\nConstruction and Real Estate\nActivity in the single-family housing market remained hot but cooled off slightly during the reporting period. Sales continued to be robust because of a deep buyer pool, though traffic was off a bit and customers were slower to make buying decisions due to elevated prices. Contacts also noted a slight reduction in waitlists and some push back from buyers on pricing. Builders continued to limit sales due to production challenges, tight lot supply, and escalating costs. Outlooks were mixed, with contacts voicing concern about constrained lot supply, appraisal issues, rising costs, and labor and material shortages.\nApartment demand soared, raising occupancy and rents. Absorption in suburban locations remained robust but activity in the urban core has improved as well. Contacts expect rent growth to remain generally solid through 2022. One contact noted that given the recent price inflation in construction costs, it is becoming difficult to profitably begin new multifamily deals. Industrial construction and leasing remained exceptionally strong. Demand for office space continued to be sluggish and vacancies ticked up further. Retail leasing has picked up, though activity remains below normal.\nFinancial Services\nLoan demand continued to expand at a robust pace, pushing up overall loan volumes. Strength in commercial real estate activity led growth, but residential real estate, commercial and industrial, and consumer lending also increased. Nonperforming loans continued to dip, and credit standards remained largely unchanged. Loan pricing remained competitive, with multiple respondents citing concerns regarding too much liquidity chasing deals and/or margin compression. Sentiment regarding general business activity improved markedly, with eighty percent of respondents reporting an improvement. Outlooks stayed optimistic.\nEnergy\nDrilling and completion activity expanded moderately, and oilfield services firms noted difficulty hiring to support increased oil field activity. Exploration and production firms expect the market to support a West Texas Intermediate price near $70 in the second half of the year, and reiterated that, at this price, capital spending plans would likely be little changed among large U.S. producers. E&P firms have slightly revised up their production outlook for this and next year due to strong year-to-date results and a higher oil price forecast for 2022. Sentiment in the oil and gas industry continued to improve, though contacts remained cautious about tax policy changes and rising materials and labor costs.\nAgriculture\nDrought conditions eased in much of the District, though severe drought persisted in West Texas and Southern New Mexico. In areas with sufficient soil moisture, producers were optimistic for robust crops this year. Crop prices were slightly higher overall, supported by concern over U.S. and global drought conditions. For crops like corn and sorghum, cash prices are at an eight-year high. Recent rainfall benefitted pasture conditions, which is a positive for livestock producers amid high feed costs.\nFor more information about District economic conditions visit: www.dallasfed.org/research/texas\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
San Francisco | 2021-07-14T00:00:00 | /beige-book-reports/2021/2021-07-sf | "Beige Book Report: San Francisco\nJuly 14, 2021\nSummary of Economic Activity\nEconomic activity in the Twelfth District expanded notably during the reporting period of mid-May through June. Employment levels expanded moderately, accompanied by further upward wage pressures resulting chiefly from labor shortages in many sectors. Prices rose considerably, driven by low availability of raw materials and supply chain disruptions. Retail sales increased at a solid pace due to pent-up demand, whereas further easing of social-distancing restrictions led to a notable increase in demand for services. Manufacturing continued to expand at a modest pace, while activity in the agriculture and resources sectors increased somewhat. Conditions in the residential real estate market remained very strong, while activity in the commercial real estate sector was generally subdued. Lending activity grew slightly, bolstered by demand for residential and auto loans.\nEmployment and Wages\nOverall employment levels expanded moderately, although labor market conditions varied. Employment accelerated more notably in sectors that benefitted from recently eased business restrictions, such as food services, travel, and hospitality. At the same time, employers reported difficulties in hiring and retaining workers for lower-wage positions and increased competition for higher-wage jobs. Contacts noted a widespread shortage of truck drivers and other workers in the transportation and logistics sector, which exacerbated supply chain disruptions and delays. Worker shortages were also noted in construction, manufacturing, agriculture, and consumer services. Labor supply was more steady in the technology, financial, higher education, and entertainment sectors. Most employers reported improved worker productivity. A few contacts noted a persistent lack of affordable childcare options and an increase in retirements as factors holding back labor force growth. Employers in the agriculture sector highlighted a lack of support for immigrant labor and difficulties in obtaining work visas for transient workers.\nWage pressures increased further, chiefly due to labor shortages and increased competition for workers in many sectors. Many employers reported having to increase wages to attract and retain workers for both low- and high-paying jobs, including those in the construction, manufacturing, utilities, technology, retail, logistics, aerospace, health-care, food services, and hospitality sectors. Employers additionally mentioned extending more generous offers including sign-on bonuses, reduced or flexible hours, childcare-related benefits, and even vaccination cash incentives. Wage pressures were more subdued in the entertainment and higher education sectors, as well as for some positions in financial services and local government.\nPrices\nPrices rose considerably in recent weeks. Continued supply chain disruptions, low availability of raw materials, and increasing labor costs all contributed to upward pricing pressures. Contacts observed pronounced price increases in agricultural goods, fuel and transportation costs, and certain building materials such as asphalt, concrete, and metals. Surging demand for dining and lodging services resulted in some increase in prices at restaurants and hotels. Fees for legal and professional services remained generally stable.\nRetail Trade and Services\nRetail sales increased at a solid pace. Sales growth was supported by elevated household savings, pent-up demand, and favorable credit conditions. Demand was particularly strong for clothing, personal care products, and gasoline. A number of contacts reported increased foot traffic in retail stores, while e-commerce sales continued to be strong. Retail trade in Hawaii as well as other tourist destinations also improved over the reporting period. Retailers across the District noted that back orders and logistical delays resulted in reduced inventories and shortages for some products.\nContacts observed a continued shift in consumer spending from goods back to services. This resulted in slightly lower sales of certain products such as electronics and furniture but increased activity in the consumer and business services sector. Further unwinding of pandemic-related restrictions led to improved conditions in the travel, leisure, entertainment, food service, and hospitality industries. However, demand for business travel and hospitality services remained weak. Despite some materials shortages, health-care spending picked up owing to increased overall capacity. Demand for technology and logistic services remained elevated, although sales volumes were somewhat restrained by capacity constraints.\nManufacturing\nManufacturing activity continued to expand at a modest pace. New orders grew further over the reporting period, especially for fabricated metals, aerospace and transportation equipment, renewable energy equipment, and manufactured food products. Contacts reported low inventories and increased capacity utilization. Continued logistical bottlenecks and shortages of raw materials caused additional delays in order fulfilment. Contacts also noted reduced productivity at factories due to inclement weather and higher temperatures. Wood product manufacturers observed that demand for lumber may have already peaked in recent weeks, given dropping prices and excess inventory at lumberyards. One manufacturer in the Pacific Northwest noted lower demand for certain wood products from large home improvement retailers and housing job sites.\nAgriculture and Resource-Related Industries\nActivity in the agriculture and resources sectors increased somewhat. Eased local restrictions led to generally increased domestic demand for agricultural and resource-related products. International demand for logs, fruits, vegetables, seafood, and other products increased over the reporting period despite an appreciating dollar. Producers noted reduced but still adequate supply and inventory levels of fruits, raisins, and nuts. Supply chain disruptions continued to cause costly delays with trade from Asian markets in particular. Growers in California reported drought conditions and increased costs associated with irrigation. This led some farmers to leave a portion of their acreage fallow, prioritizing water usage on more profitable crops.\nReal Estate and Construction\nConditions in the residential real estate market remained very strong. Strong demand for single-family homes outpaced existing home supply, driving sales prices up further. The lack of available homes was further exacerbated by increasing labor and raw materials costs, which somewhat reduced the rates for project completions and sales over the reporting period. Contacts commented on the recent drop in lumber prices, noting that it boded well for construction activity in the near future. Homebuilders also reported an elevated backlog of orders, especially in the suburbs, as well as robust permit issuance. Additionally, contacts highlighted a persistent shortage of affordable housing throughout the District. Demand for multifamily homes also increased, with one contact in California mentioning increased multifamily construction around entertainment, media, and gaming locations. A housing developer in Alaska observed that builders are reluctant to commit to final pricing due to volatility in materials and supply chain costs.\nDemand for commercial real estate remains subdued. Although sales of commercial spaces picked up somewhat over the reporting period, general activity in this sector remained lackluster, and commercial permit issuance decreased in some areas. Demand for new retail and hospitality spaces stayed muted with reports highlighting the use of existing capacity as mobility restrictions eased. Demand for industrial, warehouse, and distribution spaces remained robust but generally unchanged. Demand for office space increased slightly due to many businesses' initialization of return-to-work plans.\nFinancial Institutions\nLending activity grew slightly over the reporting period. Loan demand remained relatively strong and stable across the district, with new loan originations focusing on residential mortgage and refinancing, auto financing, and credit card activity. Reports from across the District noted increased deposits, high liquidity levels, and healthy consumer balance sheets. Contacts mentioned offering lower lending rates due to increased competition for loans but observed small credit quality deterioration. In investment markets, valuations for firms dedicated to intellectual property, environmental, and energy transition grew notably, showing continued investor interest around innovation and sustainability investment opportunities.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Kansas City | 2021-07-14T00:00:00 | /beige-book-reports/2021/2021-07-kc | "Beige Book Report: Kansas City\nJuly 14, 2021\nSummary of Economic Activity\nThe Tenth District economy expanded moderately in June, with broad-based growth across most sectors. Consumer spending increased moderately, driven by strong gains in retail sales and moderate growth in restaurant and tourism activity. Manufacturing activity expanded robustly, and the majority of manufacturers indicated that capital expenditures this year would be similar to or higher than pre-pandemic levels. Sales increased slightly in the professional and high-tech services and transportation sectors but declined slightly in wholesale trade. Residential real estate activity rose moderately as home sales increased despite low inventories and robust home price growth. Commercial real estate activity improved modestly, with lower vacancy rates and higher sales. The energy sector continued to expand, and most firms reported higher production levels, revenues, and profits. The farm economy remained strong, with relatively high profit margins for most major commodities. Employment increased, and wage growth accelerated as the majority of contacts continued to report labor shortages. Respondents noted robust increases in input and selling prices, and additional strong price gains were anticipated.\nEmployment and Wages\nDistrict employment increased slightly in the services sector and modestly in the manufacturing sector in June. Within services, gains were concentrated in retail, wholesale trade, and tourism, while employment declined slightly in health services and real estate. Transportation and restaurant contacts noted declines in the number of employees but gains in the number of hours worked. Looking ahead, respondents from all sectors except health services anticipated employment gains over the next six months.\nThe majority of contacts continued to report labor shortages, with many noting demand for all positions and others noting a particular need for technicians and hourly labor. In response to labor shortages, half of services contacts and two-thirds of manufacturing contacts reported investing in labor-saving automation strategies, with about a third of all contacts indicating a faster pace of investment than in the past. In addition, two District states implemented return-to-work cash incentives, and four states have opted out of enhanced federal unemployment benefits. Wages increased robustly since the last survey and even stronger gains were expected in the coming months.\nPrices\nOver the survey period, input and selling prices rose robustly in the services and manufacturing sectors, although contacts continued to report that hikes in selling prices were not keeping pace with higher input costs. Within services, input prices rose robustly across all sectors. Transportation and restaurant contacts reported a sizable gap between the pace of growth in input and selling prices. In contrast, retailers were better able to pass along higher input costs onto consumers. Several contacts noted that rising input prices were a primary factor restraining business investment and capital spending. Selling prices for construction supplies increased modestly since the last survey after rising a faster pace earlier this year. Both services and manufacturing contacts expected robust growth in input and selling prices over the next six months.\nConsumer Spending\nConsumer spending continued to increase moderately in June. Retailers reported robust sales, while tourism and restaurant sales increased moderately. Auto sales increased slightly, but all auto contacts reported that inventories fell further from already low levels. Sales in health services fell slightly since the last survey, but contacts expected a strong rebound in the coming months. Tourism and retail respondents expected sales to continue to rise moderately, while contacts from the auto and restaurant industries anticipated slight gains. Many contacts noted that stronger demand was a primary factor supporting business investment and capital spending for the remainder of 2021.\nManufacturing and Other Business Activity\nManufacturing activity continued to increase robustly in June, with growth in durable goods manufacturing outpacing that of nondurables. New orders increased modestly for nondurable goods and moderately for durable goods. Similarly, production levels increased moderately at nondurable goods plants and robustly at durable good plants. The majority of manufacturers noted that their capital expenditure plans this year were similar to or higher than pre-pandemic levels, with a quarter indicating significantly higher levels. Many contacts attributed this pick-up in investment to strong demand. When asked about 2022, the majority of contacts expected capital spending levels similar to or moderately higher than 2021 levels. Both nondurable and durable goods manufacturers expected robust gains in production and new orders in the coming months, although slightly stronger levels of activity were anticipated for durable goods manufacturing.\nOutside of manufacturing, sales rose at a slight pace in the transportation and professional and high-tech services sectors but fell slightly in the wholesale trade sector. Respondents from all three sectors expected moderate sales gains in the coming months. Contacts in all three sectors reported moderate increases in capital spending over the past month. Looking ahead, transportation and wholesale trade contacts expected additional moderate gains in capital expenditures, while professional and high-tech services contacts expected capital spending to hold steady.\nReal Estate and Construction\nResidential real estate activity continued to expand moderately since the previous survey, while commercial real estate activity rose modestly. Home sales increased moderately despite a moderate decline in inventories from already low levels. Home prices experienced robust growth, and contacts expected this trend to continue over the next few months. Construction supply sales were unchanged over the survey period, but contacts expected moderate declines in the coming months. Commercial real estate conditions continued to improve, with modestly lower vacancies and moderately higher sales, prices, and construction. Absorption rates rose modestly, but contacts also noted that developers' access to credit became modestly more difficult. Looking ahead, contacts expected further gains in commercial real estate activity in the months ahead.\nBanking\nDistrict banking contacts reported moderate growth in overall loan demand in recent weeks. The increase in demand was concentrated in two categories, commercial real estate and commercial and industrial lending. Loan demand edged down slightly in other categories, including residential real estate, consumer lending, and agricultural lending. Credit standards remained stable across all lending categories as loan quality strongly improved in comparison to one year ago. Bankers expected loan quality to improve moderately over the next six months. Finally, overall deposit levels rose at a modest pace, with comments suggesting that deposit growth was concentrated in liquid accounts such as checking and demand deposit accounts.\nEnergy\nDistrict energy activity continued to increase since the last survey period. The number of active oil and natural gas rigs picked up, with the addition of active oil rigs in New Mexico, Oklahoma, and Wyoming. Along with increased rig counts and production, most firms reported higher revenues and profits in June. Moving forward, most firms raised their expectations for the pace of price increases over the next year. However, the average prices firms reported needing for a substantial increase in drilling to occur also rose considerably. Nearly a third of firms reported that uncertainty about future oil and gas prices was the main constraint limiting near-term growth in activity. Over half of District energy contacts indicated their firms have continued to invest in labor-saving automation strategies because of labor shortages.\nAgriculture\nAgricultural economic conditions in the Tenth District were strong through June, with profit margins for most major commodities relatively high. Prices of most crops were still near multi-year highs, although had declined slightly since the previous reporting period. Hog prices also remained strong. The winter wheat harvest was delayed slightly in parts of the District, but crop quality was not expected to be hindered and higher production was anticipated throughout the region. In addition, the District's corn and soybean crop was in slightly better condition than the nation in all states except Missouri. In contrast to other commodities, profitability for cattle producers continued to be limited. Drought also persisted in some portions of the District and remained a concern for both crop and livestock producers.\nFor more information about District economic conditions visit: www.KansasCityFed.org/research/regional-research\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Atlanta | 2021-07-14T00:00:00 | /beige-book-reports/2021/2021-07-at | "July 14, 2021\nSummary of Economic Activity\nEconomic activity in the Sixth District continued to expand at a moderate pace from mid-May through June. Demand for labor strengthened, and worker shortages across multiple skill levels and job types intensified. Wage pressures increased and were more widespread. Some nonlabor costs continued to rise, and pricing power remained mixed. Retail sales activity strengthened. Auto sales slowed somewhat. Hotel occupancies increased due to robust leisure travel activity; however, hotels reliant on business travel continued to experience weakness. Demand for housing remained strong, inventories were soft, and home prices accelerated further. Commercial real estate activity improved. Manufacturing activity accelerated and supply delivery times lengthened. Conditions at financial institutions were steady, deposit balances grew, and demand for consumer loans picked up.\nEmployment and Wages\nOverall employment in the District increased since the previous report. Many contacts reported that labor shortages were impeding hiring and putting upward pressure on wages; however, some noted shortages had eased in recent weeks. Lack of available labor remained acute among lower-skilled positions. Shortages of nurses, drivers, IT, and skilled trades workers, particularly mechanics and maintenance workers, persisted. Due to an inability to fully staff, some restaurants and retailers reduced hours, and hotels offered limited guest services and amenities. Manufacturers responded to hiring challenges by reducing the number of shifts, requiring more overtime than typical, and accelerating plans to automate. Some construction firms reported an inability to fill entry-level positions at a reasonable wage and turned to contract and temporary employees as a result. Contacts reported increased poaching of talent, and burnout was mentioned as a concern among under-staffed firms. Many contacts were optimistic that labor availability would improve in the fall as schools restart and enhanced unemployment benefits end; however, there were several who do not expect labor supply to improve for six to nine months.\nWage pressures intensified over the reporting period and upward pressure on wages was more widespread. Though wage pressure was most notable among low-skilled positions, wage increases began spreading across more industries and skill levels. Growing demand, poaching of talent, and retention of employees were cited as the primary drivers of rising wages. Some manufacturers noted that bargaining power had shifted more to the employee, as reports surfaced of employees being allowed to customize individual shift schedules.\nPrices\nDistrict contacts noted continued rising fuel, shipping, and freight costs over the reporting period, and other input costs such as lumber, though stabilizing somewhat, remained elevated. Reports on pricing power were mixed. Some contacts noted the ability to pass through rising costs, while others absorbed the increases to maintain demand.\u202fMost firms considered input cost increases as transitory and expect them to ease as supply chains normalize. The\u202fAtlanta Fed's Business Inflation Expectations survey for June showed year-over-year unit costs\u202fincreased to\u202f3\u202fpercent on average.\u202fYear-ahead expectations\u202fincreased to 3 percent in June, up from 2.8 percent in\u202fMay.\nConsumer Spending and Tourism\nDistrict retailers reported strong sales in malls located in vacation destinations. Contacts expect consumer spending dollars to shift over the summer to leisure travel-related activities from home related spending. While year-over-year auto sales levels remained elevated, the pace of sales growth slowed since the previous report due to the shortage of new car inventories.\nTravel and tourism contacts reported a strong increase in the number of leisure travelers over the reporting period. Atlanta, Miami, and Orlando were among the top destination cities for Memorial Day weekend, kickstarting the summer travel season. Hotel occupancy levels at lower-priced hotels were elevated, but demand for higher-priced hotels dependent on business travelers remained weak. While leisure travel is expected to continue to grow at a healthy pace over the summer, business travel and convention activity is expected to remain soft.\nConstruction and Real Estate\nWhile low interest rates continued to fuel housing demand, the combination of limited inventory and declining affordability across the District damped home sales somewhat. While many District markets remained attractive to homebuyers looking to migrate from higher cost regions such as the Northeast and West Coast, existing home inventories continued to lag behind demand, causing home prices to rise to peak levels. Although lumber costs declined from peak levels, they remained well-above historic norms. Homebuilders continued to limit sales to stay ahead of rising costs.\nOn balance, commercial real estate (CRE) activity strengthened since the previous report. Conditions in the retail and hotel segments improved modestly. Multifamily activity improved notably from earlier this year. The softness in the office sector persisted as employers remained cautious about future office space needs, and negative absorption and new deliveries pushed office vacancies upward. Contacts noted that competition is accelerating among lenders for a small segment of CRE loans. Smaller banks and non-bank lenders were noted as the more aggressive CRE lenders.\nManufacturing\nManufacturing firms indicated that business activity accelerated since the previous report. Supply delivery times lengthened as supply chain disruptions continued, which coupled with worker shortages, interrupted production for some manufacturers. Expectations for future production levels remained optimistic.\nTransportation\nDistrict transportation activity strengthened over the reporting period, and contacts noted that demand for transportation services far outstripped the supply across the industry. Trucking firms and freight brokers reported robust activity combined with limited availability of container, trailer, and truck capacity. Southeast ports experienced unprecedented container volumes and capacity utilization amid continued strong demand for imported goods. Railroad contacts reported solid increases in overall traffic as compared with year-earlier levels. However, dwell times in rail yards rose due to significantly low trucking capacity. Logistics companies saw double-digit increases in volumes and revenues, driven primarily by growth in direct-to-consumer ecommerce activity. Inland barge contacts reported improved utilization, though not to pre-pandemic levels. Transportation contacts expect supply chain disruptions to persist over the next six to 12 months.\nBanking and Finance\nConditions at financial institutions remained stable. Loan growth was flat to slightly negative for a majority of portfolios; however, there was some growth in vehicle and other consumer loans. Deposit balances continued to increase and banks added to securities portfolios as a means to generate margin on the additional liquidity. Asset quality remained strong as there was little change in the level of nonperforming assets. Delinquency rates held steady while net charge-offs continued to decline.\nEnergy\nThe outlook among District energy contacts continued to improve over the reporting period. Contacts cited strengthening demand for oil and gas, which outpaced exploration and production activity. Chemical manufacturing output surged over the reporting period, and some contacts noted activity returned to or exceeded pre-pandemic levels. Utilities contacts reported rising commercial and industrial activity and stable residential demand. Energy firms continued to pursue investment in renewable energy sources, specifically wind and solar production, and battery storage.\nAgriculture\nAgricultural conditions remained mixed. Widespread rain across parts of the District resulted in abnormally moist to excessively wet conditions while much of Florida and southern Georgia experienced abnormally dry to moderate drought conditions. Planting progress for much of the region's cotton, soybean, and peanut crops were mostly on par with the five-year average. On a month-over-month basis, the production forecast for Florida's orange crop was up in June while the grapefruit production forecast was down; both forecasts remained below last year's production levels. The USDA reported year-over-year prices paid to farmers in May were up for corn, cotton, soybeans, cattle, broilers, eggs, and milk, but down for rice. On a month-over-month basis, prices were up for corn, rice, soybeans, broilers, eggs, and milk, but down for cotton. Cattle prices were unchanged.\nFor more information about District economic conditions visit: www.frbatlanta.org/economy-matters/regional-economics\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
St Louis | 2021-07-14T00:00:00 | /beige-book-reports/2021/2021-07-sl | "Beige Book Report: St Louis\nJuly 14, 2021\nSummary of Economic Activity\nEconomic conditions have continued to improve at a moderate pace since our previous report. Contacts continue to report that labor and material shortages are restraining their ability to meet customer demand. Overall cost pressures remain elevated, but firms reported varying degrees of pass-through to customers. Reports on consumer spending continue to be strong, although inventory shortages are restraining auto sales. Reports on the real estate sector were unchanged, and sales remained high despite strong price growth and low inventories. Banks reported slight improvements in loan demand and stable credit quality. District agriculture conditions declined modestly but remain favorable when compared with previous years.\nEmployment and Wages\nEmployment has increased modestly since our previous report. Despite the increase in headcounts, contacts across the District continued to face worker shortages and high turnover rates for recent hires. Firms reported increasing benefits, introducing greater flexibility, and lowering job requirements in order to attract workers. Business contacts have so far reported mixed trends in the wake of several states cutting or planning to cut federal unemployment aid; some reported seeing a clear increase in applicants, while others reported no change.\nWages have grown moderately; however, wage growth has been strong for low-wage positions as a consequence of the tight labor market. One Kentucky restaurant reported offering a starting wage of $16 per hour and receiving no applicants. An amusement park increased seasonal wages by $2 per hour and a 10% bonus if employees worked from July through Labor Day. Many other contacts emphasized raising wages for both new and existing employees while turnover remains high.\nPrices\nPrices have increased moderately since our previous report. The pass-through rate of cost increases varies by industry. A contact from a regional grocery store chain reported passing slight nonlabor cost savings to consumers, while refraining from passing the moderate incremental labor costs to consumers. A contact from the home-furniture industry reported that only a small portion of cost increases are being passed to consumers. A contact in the restaurant industry reported varying levels of cost increases depending on the size of the establishment. The cost pressures are due to increased demand for inputs and a lagging supply chain. Restaurants with more purchasing power have been able to keep prices steady, but smaller and newer venues are experiencing robust cost increases\u2014which are being passed to consumers. A contact reported that costs for some food items, gloves, paper products, and to-go drink trays remain elevated. Contacts from the travel and hospitality industry reported higher costs due to robust increases in food, beverage, and labor costs. The contacts attributed the ability to pass price increases to consumers to strengthening demand for travel and hospitality services. One contact from a jewelry store reported passing all the moderate cost pressures resulting from both higher wages and higher prices for precious metals and diamonds to customers. Prices for raw materials have been down moderately overall since the previous report, with the exceptions of steel, shredded scrap, and coal.\nConsumer Spending\nDistrict general retailers, auto dealers, and hospitality contacts continue to report strong consumer spending activity. Consumer sentiment on the current economic situation rose significantly in West Tennessee. General retailers continue to report strong business activity and a positive outlook. District auto dealers reported no change in sales but continued high demand and decreasing inventory levels for both new and used vehicles. A restaurant contact reported that business activity has been higher during the past month and expects demand to hold steady for the next few months. A hotel industry contact reported that leisure travel has been stronger than expected and has made up for the lack of business travel. A St. Louis catering company reported that company sales for May and June were very close to 2019 sales.\nManufacturing\nManufacturing activity has moderately increased since our previous report. Firms in both Arkansas and Missouri reported upticks in new orders and production, although the rate of growth has slightly declined. Supply-chain-related cost pressures and product shortages remain high, and manufacturers in the area expect these difficulties to continue for several months. Contacts reported that they are still struggling to find and retain employees, with one manufacturer noting that they have begun recruiting prospective high school graduates.\nNonfinancial Services\nActivity in the nonfinancial services sector has increased slightly since our previous report. Airport passenger traffic continues to increase strongly, although it remains below levels from the same period in 2019. Airport cargo traffic has decreased slightly since the previous report. A childcare contact reported that enrollment inquiries have increased as employers continue to transition back to working in-person. Large logistics firms continue to make significant investments and expand hiring in the Memphis and Louisville areas. An education contact reported that it has been difficult to secure large quantities of school supplies such as laptops and paper for the upcoming school year. A remediation services contact reported increased demand for their services driven by requirements to remediate coal ash.\nReal Estate and Construction\nResidential real estate activity remains unchanged since our previous report. Total home sales across the largest District metro areas remain high in spite of increasing home prices. Despite slowing in recent months, contacts remain optimistic that sales levels will hold at current levels throughout the remainder of the year. In St. Louis, the median price for a home increased by 20.5% and the median price for a condo increased 17.5% compared with a year earlier. Meanwhile, apartment rental prices across the largest District metro areas have risen moderately since our previous report and sharply since this time last year. The median number of days a house is on the market has decreased since our previous report, reaching as low as 10 days in Louisville. A contact reported that new construction will be needed to increase inventory in the market and the falling lumber prices should help to boost construction. Housing permits are also up in the St. Louis metro area.\nCommercial real estate activity continues to vary across different sectors. Industrial real estate activity has increased strongly since our previous report, with leasing activity increasing across all the largest District MSAs. In Memphis, the industrial vacancy rate has fallen sharply since our previous report. Meanwhile, office and retail rental activity has improved slightly, with more square footage being occupied since our previous report.\nBanking and Finance\nBanking conditions in the District have improved slightly since our previous report. District banks reported an increase in overall loan demand since last quarter. One contact indicated this quarter was one of the best quarters in terms of loan volumes. Credit quality remained unchanged and generally good. Deposit levels continued to expand, but the growth rate has slowed significantly. Banks remained flush with liquidity, and a contact reported trying to find ways to deploy the excess capital. Looking ahead, banking contacts expressed concern that material supply shortages would affect the demand for construction loans.\nAgriculture and Natural Resources\nDistrict agriculture conditions declined modestly relative to the previous reporting period but remain steady relative to the same period last year. Between the end of May and end of June, the percentages of corn, cotton, rice, and soybeans rated fair or better decreased modestly across the District.\nNatural resource extraction conditions improved modestly from April to May, with seasonally adjusted coal production increasing 7%. May production was up strongly compared with a year ago, increasing 34%.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
National Summary | 2021-07-14T00:00:00 | /beige-book-reports/2021/2021-07-su | "Beige Book: National Summary\nJuly 14, 2021\nThis report was prepared at the Federal Reserve Bank of Boston based on information collected on or before July 2, 2021. This document summarizes comments received from contacts outside the Federal Reserve System and is not a commentary on the views of Federal Reserve officials.\nOverall Economic Activity\nThe U.S. economy strengthened further from late May to early July, displaying moderate to robust growth. Sectors reporting above-average growth included transportation, travel and tourism, manufacturing, and nonfinancial services. Energy markets improved slightly, and agriculture had mixed results. Supply-side disruptions became more widespread, including shortages of materials and labor, delivery delays, and low inventories of many consumer goods. Strained car inventories resulted in somewhat lower car sales despite steady demand, and home sales rose slightly despite limited supply. Nonauto retail sales grew at a moderate pace on balance, and tourism was buoyed by the further abatement of pandemic-related concerns. Residential construction softened in several Districts in response to rising costs, while commercial construction was mixed but up slightly on balance. Bank lending activity increased slightly or modestly in most Districts. The outlook for demand improved further, but many contacts expressed uncertainty or pessimism over the easing of supply constraints.\nEmployment and Wages\nThree-quarters of Districts reported either slight or modest job gains and the remainder reported moderate or strong increases in employment. Healthy labor demand was broad-based but was seen as strongest for low-skilled positions. Wages increased at a moderate pace on average, and low-wage workers enjoyed above-average pay increases. Labor shortages were often cited as a reason firms could not staff at desired levels, with firms in three Districts delaying expansion or scaling back services due to understaffing. Higher than average turnover and lower retention rates were reported in three Districts. All Districts noted an increased use of non-wage cash incentives to attract and retain workers. Firms in several Districts expected the difficulty finding workers to extend into the early fall.\nPrices\nPrices increased at an above-average pace, as seven Districts reported strong price growth and the rest saw moderate gains. Pricing pressures were broad-based and grew more acute in the hospitality sector, as the reopening of hotels and restaurants confronted limited supplies of materials and workers. Construction costs remained high, but lumber prices reportedly eased a bit. Container prices returned to very high levels after having moderated in the spring. Pricing power was mixed, as some contacts reported that high end-user demand enabled them to increase their prices and others said that input price pressures had reduced their profit margins. While some contacts felt that pricing pressures were transitory, the majority expected further increases in input costs and selling prices in the coming months.\nHighlights by Federal Reserve District\nBoston\nContacts reported solid increases in demand and modest gains in employment. Wage and pricing pressures intensified, and several firms implemented significant price and/or wage increases. Labor demand strengthened further but many contacts continued to complain of labor shortages. The outlook was mostly unchanged but prospects for office leasing appeared somewhat less bleak.\nNew York\nThe regional economy continued to grow at a strong pace, and contacts were increasingly optimistic about the near-term outlook. Both hiring and wages picked up and businesses reported widespread labor shortages. Tourism picked up further, and service-sector businesses reported widespread improvement. Input price pressures have intensified further, and more businesses have raised or plan to raise their selling prices.\nPhiladelphia\nBusiness activity continued at a moderate pace of growth during the current Beige Book period \u2013 still below levels attained prior to the pandemic. More widespread vaccinations have led to a faster resumption of normal activity which has exacerbated labor shortages and wage pressures for low-wage jobs. However, employment continued to grow modestly, as did overall wage growth, while prices continued to grow moderately.\nCleveland\nThe District's economy expanded at a solid pace amid further progress in the fight against COVID-19, although growth was hampered by labor and other supply constraints. Most firms remained optimistic about the strength of demand in coming months but were less certain that supply chain challenges would ease. Thus, many expected that upward pressure on wages, other in-put costs, and prices would persist in coming months.\nRichmond\nThe regional economy continued to grow moderately in recent weeks. Manufacturers and service sector businesses experienced growth in sales, but in many cases, growth was being restrained by lack of available labor, raw materials, shipping capacity, or inventories. Employment and wages rose modestly, and firms continued to struggle finding workers. Price growth increased slightly from an already elevated rate.\nAtlanta\nEconomic activity expanded at a moderate pace. Labor markets improved and wage pressures picked up for some positions. Some nonlabor costs remained elevated. Retail sales increased. Leisure, hospitality, and tourism activity strengthened. Residential real estate demand remained strong. Commercial real estate conditions strengthened. Manufacturing activity expanded. Banking conditions were steady.\nChicago\nEconomic activity increased moderately. Growth was limited by supply constraints. Employment increased strongly, business spending increased moderately, manufacturing increased modestly, and consumer spending and construction and real estate were flat. Wages rose moderately while prices rose strongly. Financial conditions im-proved slightly. Prospects for agriculture income in 2021 were little changed.\nSt. Louis\nEconomic conditions have continued to improve at a moderate pace since our previous report. Contacts continue to report that labor and material shortages are re-straining their ability to meet customer demand. Overall inflation pressures remain elevated, but firms report varying degrees of pass-through to customers.\nMinneapolis\nThe District economy saw strong growth despite challenges of inventory shortages, higher prices, and labor needs. More workers entered the labor market, but still lagged behind hiring demand. Consumer demand remained high, fueling continued growth in services, tourism, and manufacturing. Though commodity prices remained high, ag producers faced widespread drought. MWBE firms had an optimistic outlook on the economy.\nKansas City\nEconomic activity expanded moderately in June, and further gains were expected over the next few months. Consumer spending increased moderately, with robust gains in retail sales and a moderate pick up in restaurant and tourism activity. Contacts in most other sectors also reported stronger demand and increased activity levels. Wage growth accelerated as labor shortages persisted, and both input and selling prices rose robustly.\nDallas\nThe District economy expanded at a solid rate, bolstered by continued broad based growth across sectors. Supply chain challenges and labor shortages were more widespread than in the last report and were slowing the pace of expansion. Outlooks stayed positive, though uncertainty increased.\nSan Francisco\nEconomic activity in the District expanded notably, and labor market conditions improved moderately. Wages and inflation picked up further. Retail sales and activity in the services sector strengthened solidly. Activity in the manufacturing and agriculture sectors rose more modestly. Residential construction remained very strong, while lending activity grew slightly.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Chicago | 2021-06-02T00:00:00 | /beige-book-reports/2021/2021-06-ch | "June 2, 2021\nSummary of Economic Activity\nEconomic activity in the Seventh District increased moderately in April and early May and approached its pre-pandemic level. Contacts expected strong growth in the coming months. Employment, consumer spending, business spending, and manufacturing production all increased moderately, while construction and real estate was flat. Wages and prices rose moderately and financial conditions improved slightly. Prospects for agriculture income in 2021 improved.\nEmployment and Wages\nEmployment increased moderately over the reporting period, and contacts expected a strong increase over the next 12 months. Contacts again reported minimal employee absenteeism due to Covid-19 infections or exposures. Help wanted signs sprouted across the District as businesses sought to meet growing demand. Contacts across sectors reported greater difficulty in finding workers, particularly at the entry level. Employers, temp agencies, and workforce development organizations pointed to a number of factors limiting labor supply, including health safety concerns, childcare challenges, cutbacks in public transportation schedules, job search fatigue, and financial support from the government. Overall, wage and benefit costs increased moderately. However, contacts across sectors noted strong pressure to raise wages, particularly at the entry level, and there were widespread reports of businesses offering signing bonuses. In addition, there was an increase in reports of firms hiring employees away from other firms by offering greater pay.\nPrices\nOverall, prices rose moderately in April and early May, and contacts expected similar-sized increases over the next 12 months. Contacts noted that prices for copper, steel, aluminum, metal products, resins, natural gas, food products, PVC pipes, and lumber were noticeably higher. Business output prices moved up moderately, driven by passthrough of higher material, energy, and transportation costs. Many manufacturers said that unlike usual, they were able to raise prices with little pushback. Consumer prices moved up moderately due largely to increased costs; in response there were reports of some retailers limiting operating hours or trying to cut costs by renegotiating leases.\nConsumer Spending\nConsumer spending increased moderately over the reporting period. Contacts said that looser pandemic-related restrictions and stimulus payments from the American Rescue Plan supported activity, though the impact of the payments had waned in recent weeks. Spending on leisure and hospitality services rose but stayed below pre-pandemic levels. Nonauto retail sales increased moderately, with continuing high levels of demand for furniture, home furnishings, home improvements, electronics, appliances, and sporting goods. Grocery store sales remained healthy and there were again reports of consumers trading up for more expensive items, such as premium meat cuts, finer wines, and seafood. Contacts from some large open-air shopping centers reported that consumer traffic levels had recovered to or remained just below 2019 levels. New and used light vehicle sales increased modestly from a high level, but with sales constrained by issues of vehicle availability.\nBusiness Spending\nBusiness spending increased moderately in April and early May. Retail inventories were uncomfortably low for many items, and contacts expected challenges to continue through much of 2021. New and used light vehicle inventory levels fell further\u2014to very low levels for new vehicles. One dealer reported that their stocks were at 33% of normal and that the manufacturer indicated the situation wouldn't improve until August at the earliest. Many manufacturing contacts said inventories were below comfortable levels. Contacts noted that supply chain issues had worsened, particularly for raw materials, microchips, and specialty parts. They expected little improvement through the end of the year. Demand for transportation services increased moderately. Many contacts reported ongoing shipping delays, both from overseas and within the U.S. Capital expenditures were up moderately, and contacts expected a moderate increase over the next twelve months. Several contacts said that long wait times for equipment were holding back spending. Demand for commercial and industrial energy consumption was little changed overall.\nConstruction and Real Estate\nConstruction and real estate activity increased slightly over the reporting period. Residential construction was little changed from a strong level. Contacts said that rising costs due to limited lot availability and higher material costs (particularly for lumber) were putting a damper on building. Home remodeling activity was strong and continued to grow. Residential real estate activity increased moderately despite low inventory levels. Strong demand pushed home prices up noticeably, with many selling for well above list price. Residential rents edged up. Nonresidential construction increased slightly, with contacts highlighting growth in the industrial and transportation infrastructure sectors. Commercial real estate activity was little changed overall. Rising demand for industrial space was offset by falling demand for office and retail space. That said, a few contacts noted that retail space that had emptied earlier in the pandemic was starting to fill again. Commercial real estate prices increased marginally and rents were unchanged. The availability of sublease space was up modestly as some offices trimmed their post-pandemic footprint.\nManufacturing\nManufacturing production increased moderately in April and early May despite widely reported supply chain challenges. Most manufacturing contacts said that business was above pre-pandemic levels. Auto output declined slightly due to parts shortages, notably of microchips. Steel production increased moderately to meet growing demand from manufacturers, builders, and the energy sector. Demand for heavy machinery also grew moderately, spurred by growth for construction, mining, and agriculture. Specialty metals manufacturers reported a solid increase in shipments, but also a large increase in backlogs as they struggled to keep up with demand.\nBanking and Finance\nFinancial conditions improved slightly over the reporting period. Participants in the equity and bond markets reported a small improvement in conditions, though volatility remained elevated. Lenders continued to report that businesses and households had large amounts of cash on hand to finance spending. Business loan volumes were little changed on balance, with contacts highlighting strength in construction and manufacturing, but weakness in commercial real estate and leisure and hospitality. Business loan quality increased slightly across most segments. Contacts reported stiff competition for loan opportunities and that standards had loosened a bit. In consumer markets, loan demand increased modestly, led by ongoing growth in residential mortgage activity. Consumer loan quality increased slightly, while credit standards were little changed.\nAgriculture\nExpectations for farm income in 2021 strengthened across sectors in April and early May. Drought and dry weather conditions were an issue across a substantial portion of the District, though timely rains could still erase most of the impact. Frosts damaged some plants and trees, with potentially heavy losses for fruit producers. Corn and soybean planting proceeded ahead of the normal pace. Corn, soybean, and wheat prices moved up and were near multi-year highs. Hog, cattle, and milk prices rose, helped by strong meat and dairy exports. Egg prices dropped however. Despite higher prices, livestock producers' margins were little improved because of higher feed costs. Farmland values increased once again, because of to strong demand and limited inventory.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Richmond | 2021-06-02T00:00:00 | /beige-book-reports/2021/2021-06-ri | "June 2, 2021\nSummary of Economic Activity\nThe regional economy expanded moderately since our previous report. Manufacturers reported strong growth in shipments and new orders, intensifying already-sizeable backlogs and long lead times. Port and trucking volumes also rose as both import and export activity picked up. Retailers experienced moderate growth and increased foot traffic at physical stores. New car sales were limited by low inventories, which spurred higher demand for used vehicles. Consumer travel and tourism rose, particularly for weekend destinations, while business travel remained low. Despite the easing of COVID-related restrictions, some restaurants and hospitality services were unable to open to full capacity because they were unable to hire more workers. Similarly, demand for nonfinancial services rose but growth was constrained by labor shortages. The demand for residential real estate remained high amid very low inventory levels. Commercial real estate leasing increased moderately, including some office leasing as businesses returned to working in-person. Loan activity rose, particularly for business loans. Employment increased modestly, but many firms reported having difficulties filling open positions. Prices rose sharply in recent weeks as shortages of labor and materials led to higher costs, some of which translated to higher prices to customers.\nEmployment and Wages\nEmployment rose modestly in recent weeks, but job growth was somewhat constrained by labor shortages as firms across a variety of industries reported having difficulty filling open positions. One contact speaking about the hospitality sector thought that many former workers were either choosing to remain unemployed or had found new jobs in another industry. Several contacts also noted increased turnover and one reported that employees were leaving for advancement opportunities. Wages increased moderately, overall. Strong demand for workers, particularly at the entry-level, drove up starting wages. Several employers also noted that raising wages for entry-level positions led them to raise wages to retain more experienced staff.\nPrices\nOverall, prices increased sharply in recent weeks. Price increases were largely attributed to strong demand, rising input costs, and supply constraints. Firms across goods-producing and service-providing industries experienced increased prices paid for labor, energy, shipping, raw materials, and inventories, but the degree to which those price increases were passed on to customers varied. For example, a furniture store said that they were unable to pass along increased costs because of online competition and MSRP pricing. In contrast, a small appliance manufacturer was able to pass along price increases because others in their industry faced similar rising input costs and were also raising prices.\nManufacturing\nFifth District manufacturers saw strong growth in demand in recent weeks, as both shipments and new orders increased. Manufacturers of materials, home goods, and food reported especially high demand. Lead times lengthened, and inventories of inputs fell. Backlogs of orders grew, as shortages of labor and input goods constrained production. Trucking and shipping container shortages, as well as delays at ports, contributed to difficulties in receiving inputs and in getting final goods to customers. Because of the delays in receiving and high costs of inputs, many manufacturers looked for substitutions for regular inputs and eliminated certain products.\nPorts and Transportation\nFifth District ports saw robust growth in recent weeks, as volumes continued to break records. Growth of both imports and exports was strong, with notable acceleration in the growth of exports. On the import side, volumes were driven by retail goods, especially furniture, home goods, and home improvement goods. On the export side, volumes of agricultural products were high. Both imports and exports of automobiles were volatile, which contacts attributed to the microchip shortage.\nFifth District trucking companies reported moderate growth from already high volumes in recent weeks. Demand exceeded supply, as labor and equipment constraints caused truckers to turn business away. Shipments of most goods rose, as volumes of home improvement goods were especially strong, and some supplies for business conventions began to move. Supply shortages and long lead times for new tractors and trailers led companies to rely more heavily on repairing and reusing older equipment.\nRetail, Travel, and Tourism\nFifth District retailers reported moderate growth in demand and revenues in recent weeks. Shopper traffic increased, and shoppers were generally serious about making purchases. Clothing sales began to increase after a soft year, and demand for home goods remained strong. However, many retailers reported that supply chain disruptions, such as shipping and production delays, were limiting inventories. Auto inventories were especially low and continued to shrink, as the microchip shortage limited supply of new cars and increased demand for used vehicles, which were also in short supply.\nTravel and tourism increased moderately in the Fifth District since our last report. Visitation was especially strong at beaches and other outdoor attractions. Some museums and restaurants opened amid strengthening business conditions. Hotels saw short booking-windows but high occupancy on weekends, which contacts attributed to leisure travel, mostly from people who live in drivable distance. Hotel occupancy was lower during the week, as group and business traveled remained soft, but inquiries for group travel increased. Restaurants, hotels, and other attractions reported cutting services and restricting capacity because of labor constraints.\nReal Estate and Construction\nDemand for homes held fairly steady at high levels since our last report. Prices continued to rise, and the average time to sell a home shortened. Builders saw a continued drop in inventories, with some communities selling out of homes. Agents noted that more resale homes were being put on the market but were being absorbed too quickly to boost inventories. Construction and material costs continued to increase, and shortages of materials caused building delays. Real estate agents noted that mortgage applications were getting approved, but they were increasingly seeing cash sales.\nCommercial real estate leasing expanded moderately in recent weeks, but new projects were delayed by shortages and high costs of inputs. Multifamily occupancy and rental rates rose. Retail leasing strengthened, leading to falling vacancy rates as stores and restaurants opened and expanded, and contacts noted an increase in new construction. Office leasing improved as businesses returned to the workplace, and some agreed to longer-term leases than in the past year and took advantage of leasing concessions. Industrial leasing remained strong despite increasing rates, and new construction continued.\nBanking and Finance\nOverall loan demand rose moderately this period due in part to the need for increased capital as businesses continuing to emerge from the pandemic. Financial institutions indicated a moderate demand for conventional commercial lending driven by improving consumer and business sentiment as well as sustained low rates. In addition, contacts noted a continued slight growth in mortgage lending, but reported a slight decline in refinancing requests. Deposit growth was strong owing to the recent round of stimulus payments. This has led to increased competition among financial institutions as firms seek to deploy these deposits. Credit quality and delinquencies remained good.\nNonfinancial Services\nThe demand for nonfinancial services rose moderately in recent weeks. An increase in health services demand was driven by non\u2011COVID-related services and elective procedures. A university president reported a substantial spike in applications, but noted that applications from lower income students were down slightly. Meanwhile, an advertising agency reported solid growth in new ad spending, particularly from small businesses. There were several reports, however, that the inability to find additional workers was limiting sales and revenue growth.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Dallas | 2021-06-02T00:00:00 | /beige-book-reports/2021/2021-06-da | "June 2, 2021\nSummary of Economic Activity\nThe Eleventh District economy continued to expand at a solid pace during the reporting period. Growth in the manufacturing and nonfinancial services sectors was strong, though activity remained below pre-pandemic levels. Retail sales were mixed. Home sales and single-family construction remained robust, but activity was being constrained by labor, lot, and materials shortages. Apartment demand rose, while office leasing stayed weak. Overall loan volume increased sharply, buoyed by continued strength in real estate lending. Energy activity and agricultural conditions improved. Employment growth was moderate, and upward wage pressures continued as hiring remained a key challenge for many companies. Ongoing supply chain disruptions intensified price pressures, particularly in the construction and manufacturing sectors. Outlooks improved, though there was widespread apprehension about the sustainability of current demand growth in light of supply constraints, difficulty hiring, and rising costs.\nEmployment and Wages\nEmployment expanded at a moderate pace. Lack of labor availability, particularly for low-skilled positions, was a growing concern among firms trying to hire or recall workers, with a majority noting a lack of applicants and generous unemployment benefits as impediments to hiring. Many contacts, particularly accommodation and food service firms, reported sizable numbers of unfilled positions, and some noted that existing staff have had to take on responsibilities outside of their normal jobs. Some firms noted difficulties getting applicants to show up for interviews, which further hampered hiring.\nWages continued to increase, with reports of significant upward pressure in industries having trouble finding and retaining workers. There were multiple reports of considerable wage pressures for mechanics, warehouse employees, construction specialty trades, and truck drivers. A manufacturer said that even with a starting hourly wage of $14 for non-skilled workers, they were unable fill 20-plus open positions.\nPrices\nPrice pressures intensified further in part due to persistent supply chain issues, and multiple firms noted that this was affecting business growth. Input costs surged, with contacts in the construction, manufacturing, and retail sectors citing the steepest increases. There were several reports of higher prices of fuel, petrochemicals, agricultural commodities, building materials, lumber, metals, and vehicles, as well as rising freight costs. Some contacts expect costs to remain elevated for some time due to strong demand and/or supply chain challenges. Selling prices rose at a fast clip in many sectors. Housing contacts noted difficulty obtaining appraisals due to rapid escalation in home prices. Compared to yearend 2020, business contacts have revised upward their expectations for input and selling price increases in 2021.\nManufacturing\nSolid expansion continued in the manufacturing sector, though the pace of growth eased from the prior reporting period. Several durable goods manufacturers noted large backorders and a lack of capacity to keep up with strong demand. Those noting slower activity said supply chain issues combined with inventory or raw materials shortages led to slowdowns in production schedules. Refining operations were recovering from the disruption caused by the Colonial pipeline outage, and contacts were increasingly optimistic for strong U.S. fuel demand in the third quarter. Margins are expected to rise in the second half of the year to near 2019 levels. Petrochemical production has mostly recovered from Winter Storm Uri outages, but supply chain disruptions were likely to persist through yearend 2021. Overall outlooks improved, although some manufacturers voiced concern about the dampening effect on activity of supply constraints, extended lead times, and proposed tax hikes.\nRetail Sales\nRetail sales grew robustly in April but dipped in May, which contacts attributed to supply chain issues and low inventories. Auto sales expanded as well during the reporting period, though new car supplies were limited by microchip shortages. Outlooks were positive, buoyed by the reopening of the economy and current pace of vaccinations, though rising costs and inventory shortages remained a concern.\nNonfinancial Services\nNonfinancial services expanded strongly over the reporting period. Demand growth was broad based, led by increases in leisure and hospitality, transportation, and professional and business services. Restaurateurs and hoteliers said leisure activity was largely driving demand as business travel remained sluggish. Airlines also cited modest increases in ticket sales, which they attributed to improvement in COVID statistics and easing restrictions. Leisure travel continued to dominate airline bookings, and contacts noted a pickup in reservations a few months out. Staffing firms reported broad-based increases in demand. In transportation services, air cargo volumes rose sharply due to continued strength in domestic e-commerce activity. Container shipments coming through the Port of Houston picked up, and small parcel shipments increased as well. Outlooks were positive, although there was apprehension regarding the sustainability of current demand growth along with proposed changes in tax policies among other regulations.\nConstruction and Real Estate\nActivity in the single-family housing market remained brisk. Sales continued to be robust, though builders were struggling to keep up with demand and had to limit sales. Several builders are shifting away from build-to-suit construction to only starting inventory homes and selling them at the framing or drywall stage due to production challenges and escalating costs. In fact, in some instances, builders were selling lots and/or inventory homes to the highest bidder. Others who were still doing build-to-suit jobs noted including price escalation clauses in contracts to cover cost increases incurred during the construction phase. Lot supply remained very tight as did existing and finished vacant home inventories. In the existing-home market, realtors reported bidding wars on listings and homes getting snapped up quickly. Outlooks were mixed, with contacts voicing concern about constrained lot supply, appraisal issues, rising costs, and labor and material shortages.\nApartment demand was solid, pushing up occupancy and rents. Apartment construction was ramping back up after a slowdown last year due to COVID. Contacts said that there is a lot of money chasing multifamily deals and pricing on assets is quite aggressive. Industrial construction and leasing remained robust. Demand for office space remained weak and vacancies ticked up further.\nFinancial Services\nLoan volumes rose robustly over the past six weeks supported by continued strength in commercial and residential real estate activity. Commercial and industrial loan volumes ticked up, while consumer lending was flat. Nonperforming loans declined, and credit standards stayed somewhat tight. Loan pricing remained competitive, and multiple contacts said they were flush with liquidity and that it was difficult to deploy the excess capital to generate reasonable returns. Sentiment regarding general business activity improved markedly, with 68 percent of respondents citing an increase over the past six weeks. Outlooks were optimistic, with contacts expecting continued declines in non-performing loans, strong loan demand, and increased general business activity six months from now. Nearly half of respondents also noted that they expect long-term rates to rise over the next 12 months.\nEnergy\nDrilling and completion activity rose further during the reporting period. Oilfield services firms noted modest hiring to support increased oil field activity. Exploration and production firms expect the market to support a West Texas Intermediate price of $60-65, and reiterated that, at this price, capital spending plans would likely remain unchanged among large U.S. producers. E&P firms have slightly revised up their production outlook for 2021 thanks to strong year-to-date results. Sentiment in the oil and gas industry improved further, though contacts remained cautious about changes in tax policy and rising fuel, materials, and labor costs.\nAgriculture\nRecent rainfall eased drought conditions in parts of the District and improved prospects for row crops. Agricultural commodity prices moved higher across the board, spurred by tight world supply and robust export demand. Overall, row crop farmers were optimistic for improved production and revenues this year. Significantly higher grain prices, however, have negatively affected the livestock sector with feed costs double what they were a year ago. Beef exports were strong, which together with continued capacity constraints in meat packing plants have driven up beef prices to well-above-average levels.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Boston | 2021-06-02T00:00:00 | /beige-book-reports/2021/2021-06-bo | "June 2, 2021\nSummary of Economic Activity\nBusiness activity in the First District expanded at a moderate pace on average, with notable variation across sectors. Restaurant sales were up sharply in recent months, surpassing their comparable 2019 levels. Automobile and home furnishings sales were flat but at very high levels, and a discount retailer saw moderate sales increases. Most manufacturers reported moderate to strong revenue increases, while two had flat but robust sales. Commercial real estate markets were mostly stable but retail leasing increased notably. Residential real estate sales rose moderately as recent data point to increased listings. Labor demand strengthened, but hiring was held back by widespread labor shortages. Amidst intensified recruiting efforts, wage increases varied across sectors. Prices held mostly steady despite growing cost pressures at some businesses, although restaurant prices rose sharply. Contacts generally maintained a cautiously optimistic outlook.\nEmployment and Wages\nLabor demand strengthened but many firms reported difficulties in hiring and retention. Staffing firms reported high demand for labor across a range of sectors. Retail headcounts were level despite accelerating labor demand, as firms\u2014especially restaurants\u2014faced pronounced labor shortages. Manufacturers described ambitious hiring goals: one planned to hire 10,000 workers and another had open positions equal to more than 10 percent of total staff. While the former firm did not anticipate market constraints on labor supply, other manufacturers reported unusual difficulties finding workers. In this context of higher labor demand, wage increases were slight to moderate among manufacturers, wages for restaurant workers also went up, and selected hourly workers enjoyed wage increases of up to 30 percent. Signing bonuses and enhanced recruiting efforts were mentioned with increased frequency. Among the barriers to labor supply, firms cited generous unemployment benefits, childcare responsibilities, and safety concerns.\nPrices\nHigh demand and low inventory in the auto industry led to modest price increases. A few manufacturers complained of further upward pressure on input prices\u2014such as freight\u2014but held back from raising prices in favor of cost-cutting measures. Other manufacturers reported no substantive pricing pressures. In Massachusetts, restaurant prices increased sharply to cover increased labor and food costs, and a furniture retailer faced increased wholesale pricing pressure but did not report any price increases. Staffing bill rates were either flat or up slightly.\nRetail and Tourism\nAccording to contacts, since March retail sales were stable or moderately higher and restaurant sales surged, while through March hotel occupancy rates showed little improvement from winter. New and used automobile sales were roughly steady at a very strong pace, straining inventories. The scarcity of processing chips continued to restrain production at some carmakers, threatening an otherwise strong market for 2021. A salvaged goods chain reported moderately increased sales in recent months, with revenues up 6 percent from the same period in 2019. Online sales of home furnishings remained robust and sales of outdoor furniture increased earlier in the season than expected. A contact perceives that the market for outdoor furniture expanded in the pandemic and will stay strong.\nRestaurants across Massachusetts experienced a dramatic uptick in sales in April and May, with recent revenues exceeding those in the same period of 2019. April also brought the reopening of the majority of the roughly 500-700 restaurants in the state that temporarily closed over the winter. The return of widespread outdoor dining fueled the initial surge in sales, but more recently dining room sales increased as well. Conventions in Boston remain canceled through the fall, but major outdoor events slated for October\u2014including the Boston Marathon\u2014are anticipated to bring large numbers of visitors to the area. As of March, hotel occupancy rates in greater Boston stood at around 25 percent, similar to the previous report, but contacts remain optimistic for summer tourism.\nManufacturing and Related Services\nOf the eight firms contacted this cycle, six reported moderate to strong revenue gains in 2021Q1 from the previous quarter and two said that sales were roughly flat. All reported higher sales versus the same period a year ago. Year-over-year growth was exceptionally strong for suppliers to the semiconductor and health care industries, respectively, and a provider of diagnostic services to veterinarians also reported strong sales increases from one year ago. These results were not distorted by pandemic-related declines in 2020. Two firms that reported being inundated with orders pointed out that customers were placing the same order with multiple suppliers, and so felt that results were perhaps inflated relative to true demand.\nContacts cited two main limits to growth: labor scarcity and supply chain issues. The dearth of semiconductors remains a major problem, but contacts also cited long lead times for a variety of other inputs. Supply constraints held back production for some contacts, but most were able to meet their output goals and none made major revisions to their capital expenditures plans. All contacts were optimistic for the rest of 2021 and some revised their forecasts up. All anticipated relaxing any remaining COVID restrictions over the summer.\nStaffing Services\nFirst District staffing firms reported mixed results ranging from modest revenue declines to robust gains in the first quarter of 2021 from the previous quarter. Two out of four firms said that 2021Q1 had been their strongest quarter since before the pandemic, with sales increases as high as 28 percent. Firms described labor demand as robust across most fields, and especially strong for direct hires in skilled positions. Conversions from temporary to permanent employment increased. Contacts expressed growing concerns about weak labor supply, but one said there was an ongoing surplus of low-skilled workers. One firm reported sharply higher pay rates for selected positions and said that the higher rates reflected a combination of labor scarcity and growing business confidence. Other firms launched new recruiting campaigns to combat labor scarcity. Some contacts perceived that generous unemployment benefits were the deciding factor holding back labor supply, but others expected at least a modest boost in labor supply as vaccination rates climbed and infection rates declined.\nCommercial Real Estate\nCommercial real estate markets in the First District were stable or improving. Robust demand for warehouse space amid low inventories translated into very rapid sales of listed properties. Industrial construction was seen as still profitable despite high construction costs, but some contacts warned that further cost increases could become prohibitive. Life sciences construction plans expanded moderately to include Rhode Island, despite remaining concentrated in the Boston area. Contacts were encouraged by fresh gains in retail leasing activity, due to a spate of openings and relaunches of restaurants and smaller stores, but noted that large-format retail leasing remained weak. Office leasing showed no signs of improvement and the outlook for eventual office occupancy rates and rents remains uncertain. Contacts expect to have a clearer picture of the office market after Labor Day, which is when many firms are expected to bring greater numbers of workers back to the office.\nResidential Real Estate\nResidential real estate markets posted robust sales and further price increases to March and April 2021, with growing strength in condominium sales. Vermont reported changes from March 2020 to March 2021 while all other reporting areas provided changes from April 2020 to April 2021; Connecticut data were unavailable.\nClosed sales, pending sales, and median sales prices increased by moderate-to-large margins over-the-year in all reporting areas, indicating a moderate acceleration in activity since the previous report. Condominium sales showed particular strength, with pending condo sales up more than 100 percent in all reporting markets. However, the outsized over-the-year sales gains in part reflect the low sales levels in March and April of 2020, when the market was on pause due to COVID-19. As in the last report, homes for sale are down by double digit percentages for all reporting markets, although the Boston condo market saw a moderate increase in supply. Although contacts continued to worry about low inventories, the Massachusetts contact pointed out a substantial increase in listings in April, and some expected a seasonal increase in listings in the coming months.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Philadelphia | 2021-06-02T00:00:00 | /beige-book-reports/2021/2021-06-ph | "June 2, 2021\nSummary of Economic Activity\nOn balance, business activity in the Third District continued to grow moderately during the current Beige Book period; however, activity in most sectors remained below levels observed prior to the pandemic. The share of adults who have received at least one dose of a COVID-19 vaccine has climbed well past 50 percent. As normal activity resumes, contacts have reported increasing demand. However, labor shortages and supply chain disruptions have also continued. Some contacts observed that some of the perceived strong demand may represent the broader (duplicative) search efforts of employers for labor and producers for parts. On the housing front, an overly hot market may be discouraging buyers. Net employment continued at a modest pace of growth, while wages and prices continued to grow modestly and moderately, respectively. About two-thirds of the firms expressed positive expectations for continued growth over the next six months \u2013 broadening among nonmanufacturers but narrowing among manufacturers since the prior period.\nEmployment and Wages\nEmployment continued to grow modestly overall. The share of firms reporting employment increases broadened to one-third among nonmanufacturers, while reported increases edged back to one-fourth among manufacturing firms. Overall, average hours worked rose again but for a smaller share of all firms.\nNearly all firms reported difficulty hiring sufficient labor. Contacts at staffing firms reported ongoing demand for workers, unusually high levels of open orders, and a dearth of qualified job candidates. While demand clearly exceeds the supply, contacts did note that perceived demand may be overstated by clients placing orders with more staffing firms than is typical.\nWages continued to rise modestly. The percentage of nonmanufacturing firms reporting higher wage and benefit costs per employee edged above one-third, while the share reporting lower wages remained very low. Prior to the pandemic, the share of firms reporting compensation increases averaged well over one-third. Across all sectors, firms continued to report raising wages and offering signing bonuses, retention bonuses, and referral bonuses to compete for scarce labor resources.\nPrices\nOn balance, prices continued to rise moderately over the period. The share of manufacturers reporting higher prices for factor inputs remained at about three-fourths, while those receiving higher prices for their own products rose well above one-third. In turn, the share of nonmanufacturers reporting higher prices for their inputs rose to one-half; however, the share receiving higher prices from consumers for their own goods and services fell to one-fifth.\nContacts continued to note severe supply chain disruptions impacting most sectors of the economy. Microchip shortages continued to limit current and future production plans, and container shortages continued to disrupt logistics.\nLooking ahead one year, the prices that firms anticipate receiving for their own goods and services rose further still \u2013 after the firms reported moderately high expectations last quarter. Firm expectations for compensation increases were slightly higher than those for their own prices, and expectations of general consumer price increases rose the most. Unlike in prior quarters, firms now expect general consumer inflation to be even higher than firm prices.\nManufacturing\nOn average, manufacturing activity continued growing moderately. About 40 percent of the firms reported that increases of shipments and new orders were somewhat higher. On net, manufacturing activity remained below pre-pandemic levels.\nAs with perceived demand at staffing firms, many manufacturers have stated that their production would be higher but for labor shortages and supply chain disruptions. A good portion of the perceived demand appears to be real, as order backlogs, inventories, and delivery times increased further and were at or near record levels in May.\nConsumer Spending\nContacts reported continued modest growth of nonauto retail sales. Survivors in the retail and restaurant sectors are reporting strong sales and profits even against 2019 levels. Rising vaccination rates and an anticipated return to \"normal\" are feeding positive expectations for the remainder of the year.\nReports from auto dealers suggest that sales grew moderately. In some markets, year-to-date sales now equal their 2019 sales for the comparable period. Some contacts suggested that buyers may have hastened recent purchases to avoid an anticipated decline in dealer inventory as manufacturers contend with the microchip shortage. Despite the tightening constraint on new car sales, stronger used car sales and higher prices have boosted profit margins.\nOverall, tourism continued to grow modestly \u2013 reflecting a slow recovery as more potential leisure travelers are vaccinated. Consumers have pent-up demand for travel experiences, and many have extra savings to spend. Contacts also noted improvements in business travel but don't expect a full recovery this year or next.\nNonfinancial Services\nOn balance, nonmanufacturing activity continued at a moderate pace of growth. Over one-third of the firms reported increases in sales or revenues; however, most firms continued to note that output remains below pre-pandemic levels.\nFinancial Services\nThe volume of bank lending fell slightly during the period (not seasonally adjusted); compared with the same period in 2019, by contrast, loan volumes grew modestly. Commercial and industrial loans, home equity lines, and other consumer loans fell moderately, while auto lending fell slightly. Commercial real estate lending grew, but only slightly, while home mortgages were flat. Credit card volumes were also flat \u2013 in contrast, volumes grew at a modest pace over the same period in 2019.\nBankers, accountants, and bankruptcy attorneys continued to report that relatively few problems with bad debt had emerged. Optimism had grown for many of their clients in recent weeks; however, some creditors and landlords have become impatient to collect, evict, or foreclose. A credit counselor reported increasing activity to fix credit scores for prospective first-time homebuyers, to keep current homeowners in their houses, and to consider personal bankruptcy options.\nAn accountant reported more mergers and acquisitions, with some clients choosing to sell their businesses \u2013 giving reasons of retirement, uncertainty, stress, and high valuations as motivating factors. A corporate lawyer noted that a few smaller clients had simply paid their debts and closed down their businesses.\nReal Estate and Construction\nHomebuilders reported modest growth in new contracts as sales traffic slowed, yet construction activity continued apace. Contacts noted that higher prices and extended delivery times have dissuaded some buyers, while builders remain challenged by the high costs of building materials, ongoing supply chain disruptions, and the unreliability of subcontractor scheduling.\nExisting home sales were flat, as new listings continued to fall \u2013 availability dropped below a one-month supply in many locations. In the face of ongoing demand, contacts noted a strong sellers' market in which offers were often above asking price, in all cash, or without inspections or other buyer protections. One contact noted that some potential buyers were giving up, while others commented on the rising unaffordability, especially for buyers who qualify for FHA but not conventional financing.\nPhiladelphia's commercial construction activity appeared to have improved slightly to 85 or 90 percent of pre-pandemic levels. Little change was evident in nonresidential leasing activity, although reports of future office downsizing continued to grow. Demand for warehouse space remained strong, and the weak supply of for-sale homes appears to be boosting demand for rental units.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Atlanta | 2021-06-02T00:00:00 | /beige-book-reports/2021/2021-06-at | "June 2, 2021\nSummary of Economic Activity\nEconomic activity in the Sixth District expanded at a moderate pace, on net, from April through mid-May. Demand for labor strengthened, though shortages among low-skilled workers persisted. Wage pressures increased for positions in high demand. Some nonlabor costs continued to rise, and pricing power remained mixed. Retail sales activity increased, and auto sales rose more than expected. Hotel occupancy levels rose due to robust leisure travel activity; however, hotels dependent on business travel continued to struggle. Demand for housing remained strong and home prices continued to rise. Conditions in commercial real estate were mixed. Manufacturing activity strengthened as new orders and production levels rose. Conditions at financial institutions were stable, and consumer loan demand grew slightly.\nEmployment and Wages\nOverall employment in the District increased since the previous report. Contacts reported strengthening demand for labor as economies in the region began to reopen. Demand was strongest among lower-skilled positions, and employers reported that labor availability among that segment was very low. Shortages were also noted among skilled trade workers, nurses, IT workers and commercial drivers. Many employers continued to state that expanded unemployment insurance benefits and stimulus payments were keeping would-be workers on the sidelines; others indicated that childcare, transportation issues, and the inability to guarantee hours were key factors in preventing potential workers from seeking employment. Employers indicated there was a great deal of churn among low-skill, low-wage positions, and many reported that labor shortages had a limiting effect on services to customers, as well as the production of goods, which is contributing to supply chain disruptions. Several contacts anticipate that labor shortages will abate this fall but there is a great deal of uncertainty around how much supply will materialize. For firms with limited supply of labor in their markets, opportunities to offer remote work for some positions have removed geographic barriers, allowing employers broader access to talent.\nWage pressure picked up from April through mid-May, and upward pressure was most notable among low-skilled positions. Within this segment, reports of wage increases were more widespread with referral and signing bonuses becoming increasingly more common. Among the more skilled positions, wage increases were more modest.\nPrices\nDistrict contacts reported that input costs, particularly for lumber, steel, transportation, and shipping remained at elevated levels. Increased costs in construction materials and labor slowed business expansion projects. Reports on pricing power were mixed, but many contacts cited the removal of promotional pricing to maintain margins. The Atlanta Fed's Business Inflation Expectations survey showed year-over-year unit costs increased significantly to 2.8 percent on average in May. Year-ahead expectations increased to 2.8 percent in May, up from 2.5 percent in April.\nConsumer Spending and Tourism\nDistrict retailers continued to report healthy sales activity over the reporting period, driven largely by tourism. Although auto production and inventory levels fell due to tight chip supplies, sales rose well above forecasted levels for April.\nTravel and tourism contacts across the District reported continued strong demand in leisure travel, with hotel occupancy levels in the 80-90 percent range. Contacts noted an uptick in bookings for business travel, conventions and special events planned for the second half of the year. International travel activity continued to be constrained as vaccine distribution in other countries remained slow.\nConstruction and Real Estate\nHousing activity throughout the District remained strong over the reporting period. Relatively low interest rates and a shift from renting towards home buying remained primary drivers of demand, as well as an increase in buyers moving to the region from higher cost markets in the Northeast and West Coast. The persistent shortage in existing home inventory levels resulted in further home price appreciation. In some markets, contacts reported that homes were frequently selling above the asking price. Heavy demand from investors, particularly for newly constructed homes, was also noted to be contributing significantly to price pressures and reduced inventories for home-owner purchasers. Homebuilders noted rising cost pressures as labor and material costs escalated, and many reported efforts to limit sales by raising prices. Contacts noted that housing affordability is becoming more of concern.\nReports on commercial real estate (CRE) activity were mixed. Conditions in the retail and hotel segment improved modestly, as contacts reported increased consumer traffic amid further re-openings of malls, stores, and hotels. Occupancy at lower-priced hotels rose, though higher-priced hotels continued to experience challenges as business travel remained muted compared with pre-pandemic levels. Activity in the multifamily sector improved, even in some of the hardest hit, high-density areas. The office sector continued to face headwinds as many employers remained cautious about future space needs. Negative absorption and new construction are pushing office vacancies upward. Banks reported that capital was available, and competition accelerated among lenders for a small segment of CRE loans.\nManufacturing\nReports on manufacturing activity were largely consistent with the previous report, with contacts noting continued increases in new orders and production levels. Supplier delivery times slowed considerably, and finished inventory levels fell somewhat. Expectations for future production levels remained positive, with nearly two-thirds of contacts expecting higher levels of production over the next six months.\nTransportation\nDistrict transportation activity expanded since the previous report. Contacts at several ports reported record volumes of containerized imports, and some noted significant investments in infrastructure to grow container capacity. Railroad contacts saw substantial increases in intermodal shipments and total traffic compared with pre-pandemic levels. Trucking firms reported double-digit increases in freight volumes; however, driver shortages persisted. Impacts on freight movements from the shutdown of the Colonial Pipeline were noted as immaterial.\nBanking and Finance\nConditions at District financial institutions remained stable over the reporting period. Earnings grew due to lower provisions for loan loss expenses and higher noninterest income, which improved capital. Net interest margins stabilized but remained compressed due to the low interest rate environment. Deposit levels continued to be elevated. Some loan growth returned over the last six weeks, particularly in consumer loans, although residential loan growth slowed due to lower housing inventories, increased cash purchases, and a loss of market share for residential mortgages to nonbanks. Increases in securities portfolios continued to outpace loan growth. Past due balances in loan portfolios held steady despite ongoing declines of loans in forbearance.\nEnergy\nDistrict energy contacts experienced some operational disruptions resulting from the Colonial Pipeline shutdown, including fuel access and delivery tightness that required fuel trucks to be pulled from surrounding markets to serve impacted areas. Production slowed at oil refineries that were unable to offload fuel. Nonetheless, optimism about oil and gas demand among energy contacts continued to grow as economies across the U.S. reopened. Oil and gas exploration and production picked up slightly since the previous report, and contacts expect activity to accelerate in the coming months. Renewable energy projects increased as investment dollars continued to flow into windfarms, solar power plants, and battery storage. Utilities contacts indicated that commercial activity picked up, and residential demand remained strong.\nAgriculture\nAgricultural conditions remained mixed. Widespread rain across much of the District resulted in abnormally moist to excessively wet conditions while the southern tip of Florida experienced abnormally dry to moderate drought conditions. Most of the region's cotton and peanut crops were behind the five-year planting average, while soybean planting was mixed, and Tennessee's corn crops were mostly on par with the five-year average. On a month-over-month basis, the production forecast for Florida's orange crop was unchanged in May while the grapefruit production forecast was down; both forecasts were below last year's production levels. The USDA reported year-over-year prices paid to farmers in March were up for corn, cotton, rice, soybeans, and broilers, but down for eggs and milk; cattle was unchanged. On a month-over-month basis, prices increased for corn, rice, soybeans, cattle, broilers, eggs, and milk but decreased for cotton. Contacts reported some supply chain challenges, including the ability to acquire materials and equipment, higher input costs, and tighter labor availability. Several contacts noted land values increased.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
New York | 2021-06-02T00:00:00 | /beige-book-reports/2021/2021-06-ny | "Beige Book Report: New York\nJune 2, 2021\nSummary of Economic Activity\nEconomic activity in the Second District continued to grow strongly in the latest reporting period, as vaccinations expanded and COVID cases abated across the District. Business contacts expressed widespread optimism about the near-term outlook. The labor market has strengthened further, with contacts reporting increased employment and wages, as well as difficulties hiring and retaining staff. Input price pressures have intensified further, and more businesses report that they are raising their selling prices. Consumer spending has strengthened, bolstered by accelerating auto and retail sales and rising tourism. Housing markets have been steady to stronger, while markets for office and retail space appear to have stabilized at weak levels. Finally, contacts in the broad finance sector reported moderate improvement in conditions, while regional banks reported higher loan demand and little change in delinquency rates.\nEmployment and Wages\nThe job market strengthened further in recent weeks, with more businesses reporting a pickup in employment and widespread labor shortages. A major New York City employment agency noted a significant increase in hiring and a greater sense of urgency to fill open positions. Similarly, an upstate employment agency noted increased hiring activity for both payroll and contract workers and indicated that filling job openings have been challenging. Many business contacts ranked staffing as a top business concern, especially at the lower end of the wage spectrum, and attributed this to a combination of workers' health concerns, child-care constraints, and generous unemployment benefits.\nA broad array of businesses plans to add staff in the coming months\u2014particularly those engaged in leisure & hospitality, manufacturing, retail, and wholesale trade. A major employment services firm expects the tight labor market to intensity, as businesses bring staff back to the office and many workers are looking to change jobs.\nWages have continued to grow moderately, with especially widespread increases in the retail and wholesale trade sectors. Looking ahead, a substantial proportion of businesses across all major industry sectors plan to raise wages.\nPrices\nFirms' input prices have continued to accelerate across the board, with an overwhelming majority of contacts in construction and manufacturing noting increases. Businesses in all sectors expect widespread hikes in prices they pay in the months ahead.\nSelling prices accelerated modestly, with hikes widely reported in manufacturing, retail, wholesale trade, and transportation but steady prices in most other sectors. The vast majority of manufacturers, retailers, wholesalers, and transportation firms plan price hikes in the months ahead. More moderate increases were anticipated in other industry sectors. Uncertainty about future inflation was also cited as a concern in planning and formulating contracts.\nConsumer Spending\nConsumer spending picked up to a strong pace of growth in recent weeks. Non-auto retailers reported a substantial increase in business, with some reports of a sharp rebound in demand for luggage and formal wear. A major retail chain noted that its sales in the region have exceeded plan, though sales in New York City continued to lag, partly due to weak international tourism. Retailers also expressed increasing optimism about the near-term outlook. Consumer confidence among New York State residents surged to a two-year high.\nSales of both new and used vehicles have strengthened noticeably since the last report, far surpassing pre-pandemic levels, despite low inventories. However, a persistent shortage of microchips is expected to keep inventories lean for a number of months, and this is expected to severely restrain new vehicle sales. Dealers reported that credit availability continues to be satisfactory.\nManufacturing and Distribution\nActivity continued to grow strongly in the manufacturing and wholesale trade sectors but slowed somewhat in transportation & warehousing. Contacts continued to report widespread supply disruptions and delays at ports and in trucking. Looking ahead, businesses in all these sectors continued to express widespread optimism about near-term business prospects, despite ongoing concerns about the future availability of workers and materials.\nServices\nService industry contacts also reported sturdy growth in the latest reporting period. Contacts in the hard-hit leisure & hospitality sector noted exceptionally strong gains in business activity. Businesses in the information, professional & business services, and education & health sectors all noted a continuation of fairly brisk growth. Looking to the months ahead, contacts in all these sectors expressed widespread optimism about business prospects.\nTourism has strengthened further, particularly in New York City, though the volume of international and business visitors has remained well below pre-pandemic levels. In New York City, hotel occupancy rates have continued to rise, exceeding 50 percent for the first time since before the pandemic, with weekend occupancy rates noticeably higher. Nightly room rates have risen but remained well below normal levels. Moreover, as restrictions have been lifted, a number of New York City hotels have re-opened, and the city has waived the hotel occupancy tax for the third quarter of this year. Museums and restaurants have also seen a rebound in business.\nReal Estate and Construction\nHousing markets continued to strengthen in the latest reporting period. Sales markets outside of Manhattan have remained quite robust, with rising sales volume, lean inventories, strong price appreciation, and frequent bidding wars. In Manhattan, sales volume has picked up strongly, while the inventory of homes for sale has receded somewhat from the peak levels of last October but remains higher than normal. Prices have stabilized at about 6 percent below pre-pandemic levels.\nNew York City's rental market remains soft but appears to have hit bottom. Rents in Manhattan are still down roughly 20 percent from early-2020 level and down 10-15 percent in Brooklyn and Queens. However, leasing activity has picked up substantially across the city reaching the highest levels in well over a decade. A local real estate expert ascribes this largely to more people moving for better deals.\nCommercial real estate markets have remained mixed across the District but have shown signs of stabilizing overall. Office markets in and around New York City continued to slacken, with vacancy and availability rates continuing to trend up and rents steady but moderately below year-earlier levels in Manhattan and modestly below across the rest of the metro region. Office markets across upstate New York have been steady. The market for retail space has stabilized, with scattered signs of a pickup in some areas. The industrial market remains fairly robust, with vacancy rates steady at low levels and rents up 5-10 percent from a year earlier.\nNew office construction has remained sluggish, but multifamily residential construction has picked up outside New York City. Contacts in the District's construction industry have grown somewhat more positive about current conditions and substantially more optimistic about the near-term outlook, though there is widespread concern about the cost and availability of materials, especially lumber, and workers.\nBanking and Finance\nBusinesses in the broad finance sector noted moderate improvement in business activity. Bankers reported a pickup in loan demand, mainly from the commercial sector. Credit standards were unchanged, except on residential mortgages where bankers tightened standards. Loan spreads were little changed. Delinquency rates were generally flat overall\u2014down modestly for C&I loans, but up somewhat for residential mortgages. Banks reported that they have become less lenient toward delinquent accounts, except for commercial mortgages.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
St Louis | 2021-06-02T00:00:00 | /beige-book-reports/2021/2021-06-sl | "Beige Book Report: St Louis\nJune 2, 2021\nSummary of Economic Activity\nContacts reported that economic conditions have moderately improved since our previous report, although growth was robust in some sectors. Many contacts described a situation in which growth in demand for their products or services is outpacing their growth in capacity. Contacts cited product and material shortages and low staffing levels as key constraints. Many supply chain issues also stemmed from labor shortages at suppliers' facilities. Contacts remained optimistic and expect these constraints to subside beginning in the fall. On net, 48 percent of contacts expect economic conditions during the remainder of 2021 to be better or somewhat better than the same period one year ago.\nEmployment and Wages\nEmployment has increased modestly since our previous report. Contacts across industries reported hiring to meet higher demand. Many, however, noted shortages for both skilled and unskilled labor. One St. Louis job fair, held by a dozen restaurants to fill more than a hundred positions, drew barely a dozen applicants. Contacts attributed this scarcity to increasing demand for labor in other sectors, unemployment benefits, and workers' healthcare and childcare concerns; one manufacturer, so affected by childcare difficulties, planned to use federal aid funds to address the issue. Many firms reported difficulty maintaining employee morale and engagement. A high-end restaurant owner reported only a single employee who never came in late or missed a shift in a month after offering a $1000 bonus for doing so. Some firms turned to automation; one manufacturer reported doing so after seeing a 70% turnover rate in new hires.\nWages have increased moderately. Employers specifically reported increasing starting wages and sign-up bonuses to attract new hires, though small firm wages remained more stagnant. One restaurant owner reported that raising his starting wage has drawn interest from prospective workers\u2014when he can find any to talk to.\nPrices\nPrices have increased moderately overall since our previous report, but prices in some sectors such as automobile retailing and construction have increased sharply due to transitory supply chain constraints and a spike in consumer demand. Contacts across industries reported increased delivery costs and long lead times for input materials. Several auto dealers reported strong increases in new and used vehicle prices, depending on the age and mileage of the vehicle. These contacts attribute the price increases to high demand and a reduced supply due to input shortages; however, these prices are expected to stabilize before the end of the year. A manufacturing contact reported increased input costs for fuel, acrylic, wood, and metals. Steel prices have increased moderately since our previous report and robustly year over year. Lumber prices have declined since our previous report but remain elevated relative to one year ago. A contact from a regional refinery reported that oil prices have stabilized at a higher level than expected. Several contacts in the construction industry reported increased material supply prices. Contacts in the retail and commercial real estate industries reported lower sales prices.\nConsumer Spending\nConsumer spending activity has increased strongly since our previous report. General retailers reported increased sales over the past six weeks and an overall improved outlook, citing federal aid to households, vaccinations, and pent-up demand. Auto dealers reported that sales over the past six weeks were about the same or slightly higher than the previous 6 weeks, although the outlook for sales for the coming quarter was mixed. Dealerships described the impact of stimulus checks as \"massive\" and \"ongoing.\" Hotel occupancy is up, but the number of rooms available is down due to labor shortages. A contact noted that parents who have not spent much on experiences for their children are ready to start spending now that social distancing restrictions have been relaxed.\nManufacturing\nManufacturing activity has strongly increased since our previous report. Survey-based indices suggest that production, capacity utilization, and new orders have strongly increased. Some firms are experiencing large order backlogs as supply chain issues and labor shortages have constrained production. Several contacts in the region noted that Winter Storm Uri caused disruptions in the supply of plastics coming from the Gulf Coast. Contacts also reported that they are struggling to find and maintain employees due to competition with other industries, especially as COVID-19 restrictions are lifted. On average, firms reported they expect strong increases in production, capacity utilization, and new orders in the third quarter, but remain pessimistic about supply-chain disruptions in the next few quarters.\nNonfinancial Services\nActivity in the nonfinancial services sector has increased slightly since our previous report. About two-thirds of contacts indicated that sales met or exceeded expectations during the second quarter. Airport passenger traffic has increased by 10% since our previous report, but only to around two-thirds of May 2019 levels. One logistics contact mentioned that low inventories have increased demand for their services. The recent pipeline cyberattack disrupted trucking shipments to the northeast. A crack in the Interstate 40 bridge connecting Memphis to Arkansas disrupted auto and barge traffic in May. Several healthcare contacts reported lingering issues from COVID-19, such as higher input costs and tighter hospital budgets. An IT service contact reported a slowdown in new projects due to difficulties connecting with new clients.\nReal Estate and Construction\nResidential real estate activity remains unchanged since our previous report. Inventory levels remain extremely low and the median number of days a house is on the market continues to fall. Contacts reported that low interest rates and pent-up demand from the pandemic are continuing to drive demand for homes. Home building has slowed due to supply chain issues. In addition, suppliers have extended lead times on appliances and some finished building products. Builders are also waiting to list houses until they are complete, to adjust for materials' price volatility. Several contacts reported that these changes in costs are causing clients to reconsider or cancel projects.\nCommercial real estate activity remains mixed across different sectors. Industrial real estate activity remains unchanged, with high demand from e-commerce distribution facilities. Demand for office and retail spaces remains low, but contacts speculate that the return of some office workers as well as increased retail spending will lead to improvement. Contacts reported that supply shortages and price volatility may lead to delays or cancellations of projects. However, industrial construction projects are expected to continue despite these issues.\nBanking and Finance\nBanking conditions have improved slightly since our previous report. Many bankers highlighted high asset quality, ample liquidity, and record earnings in the first quarter of 2021. Most contacts anticipate mortgage business and PPP loan income to increase their earnings. Compressed net interest margins continue to be a concern. Contacts reported a modest increase in overall loan demand. Commercial and industrial (C&I) loan demand rose slightly, while consumer loan demand, particularly for auto loans, increased moderately. To offset higher used car prices, many lenders have decided to stretch out terms on auto loans to make financing more affordable. Delinquency rates remained low, although some lenders started to see a slight uptick in C&I delinquencies in recent months.\nAgriculture and Natural Resources\nAgriculture contacts remain optimistic about current conditions overall. Most agriculture contacts surveyed reported that their sales thus far have met expectations. Supply chain issues are raising many producers' costs, although higher commodity prices have helped generate higher incomes, maintaining profit margins. One contact indicated that government support has been strong in the sector. The percentage of row crops planted has increased since the previous reporting period and is up slightly from this time in 2020. Progress of acres planted is up slightly to moderately this year for every crop of the District states; only Indiana is behind their 2020 progress to this point. This optimism extends to the outlook as well, as contacts reported that their outlook for the rest of 2021 has improved somewhat.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
San Francisco | 2021-06-02T00:00:00 | /beige-book-reports/2021/2021-06-sf | "Beige Book Report: San Francisco\nJune 2, 2021\nSummary of Economic Activity\nEconomic activity in the Twelfth District expanded significantly during the reporting period of April through mid-May. Conditions in the agriculture and resources sectors improved notably, while manufacturing activity continued to expand at a modest rate. Contacts reported ongoing strength in residential real estate markets, but largely unchanged conditions in the commercial real estate sector. Lending activity rose somewhat, with increased competition for new loans and deals. Employment levels continued to increase modestly, accompanied by moderately higher wages. Price increases stepped up considerably, driven by increased material costs and supply chain disruptions. Retail sales increased a fair bit as vaccinations continued, allowing for further easing of social-distancing restrictions. Activity in the consumer and business services sectors strengthened somewhat.\nEmployment and Wages\nOverall employment levels continued to increase as the labor market tightened in some regions. Employment accelerated in states that only recently lifted business restrictions, like California, and slowed modestly in states where unemployment levels were already low, as in the Mountain West. Most of the job growth was concentrated in the hospitality, retail, tourism, and food services sectors, with employers seeking to rehire workers as the economy reopens and demand for these services strengthens. However, many of these employers also reported facing difficulties hiring and retaining workers for low-skilled jobs, as did contacts in manufacturing, construction, transportation, and agriculture. Labor demand also picked up in the technology and entertainment sectors while holding steady in the financial and other professional services sectors.\nWage pressures increased moderately. Employers in the construction, manufacturing, technology, retail, health-care, restaurant, and hospitality sectors reported having to increase wages to retain and attract workers for both high- and low-skilled jobs. In addition to raising wages, these employers also mentioned offering other incentives such as sign-on bonuses, reduced or flexible hours, and the ability to work remotely. Wage increases were especially high in restaurants and hospitality services ramping up to reopen, and employers reported difficulties in rehiring workers. Wages in financial services remained stable.\nPrices\nPrice increases stepped up considerably over the reporting period. Continuing supply chain disruptions, low inventories, and increasing labor costs have contributed to upward pricing pressures in recent weeks. These were most pronounced for users of raw materials, especially fuel and lumber. With burgeoning demand for food services, prices for many agricultural products have also risen, which translated into higher prices at grocers and some restaurants. Additionally, prices for airline tickets, rental cars, and lodging have started to normalize from previous lows.\nRetail Trade and Services\nRetail sales increased a fair bit over the reporting period. Sales growth was particularly strong in restaurants and drinking establishments during recent weeks, as the continued pace of vaccinations allowed for further easing of social-distancing restrictions. A number of contacts reported increased foot traffic in retail stores, while e-commerce sales continued to be strong. However, retailers across the District highlighted several supply chain disruptions, including port issues, container shortages, and manufacturing delays. As a result, most retailers, even consignment and thrift stores, reported low inventory stock and raised concerns that the current sales pace might slow in coming months. Sales of new and used motor vehicles remained robust, although constrained by low inventories, as did those of home improvement goods. Demand for airline reservations was noted to have picked up for the first time since the onset of the pandemic.\nActivity in the services sector also strengthened moderately. Following the further unwinding of pandemic-related restrictions, conditions in the travel, leisure, entertainment, and hospitality industries improved, albeit slowly. Bookings for hotel rooms slightly increased due to a pickup in leisure travel. Restaurants reported operating at almost full capacity outdoors, although indoor dining capacity was still limited. Demand increased for automotive parts and services, as well as for car rentals. In health care, elective services and non-COVID-19 lab testing increased modestly, but preventive services remained subdued. Demand for transportation and logistical services continued to be strong, while that of legal and other professional services was largely unchanged.\nManufacturing\nManufacturing activity continued to expand at a modest rate. New orders growth remained strong, especially for wood products, chemicals, manufactured metals, computers, electronics, and manufactured food products. Yet delivery delays and shortages of input materials, such as semiconductors, continued to hold back production and decreased inventories in some cases. Wood product manufacturers in the Pacific Northwest, already operating at full capacity, reported having to delay production of some orders. A contact in Southern California noted that capacity utilization rates in manufacturing of renewable energy equipment have normalized, and new orders are generally growing.\nAgriculture and Resource-Related Industries\nConditions in the agriculture and resources sectors notably improved. Loosened capacity restrictions in restaurants and drinking establishments contributed to stronger demand for agriculture products, including wheat, corn, nuts, and fruits. Demand from abroad also increased, aided by the depreciating dollar in the later part of the reporting period. As a result, inventories of fruits and nuts were noted to have decreased to lower-than-usual levels. However, supply chain disruptions continued to negatively affect many producers with one reporting both domestic and international logistical issues that resulted in significant delays in seafood product sales. Growers in California noted that current drought conditions are expected to negatively impact annual crops this year, driving up labor and electricity costs as farmers depend more on wells and water pumps for irrigation.\nReal Estate and Construction\nResidential construction activity continued to expand at a brisk pace. Demand for single-family homes remained strong, although construction still failed to meet high demand since the previous reporting period. The lack of available homes was further exacerbated by increasing labor and transportation costs, as well as widespread shortages of raw materials, including lumber, asphalt, cement, steel, and wallboard. The lack of available land caused some homebuilders to start building smaller homes or to move further into rural areas. Contacts in the Pacific Northwest noted that bidding wars are common for newly listed properties, and some homebuilders are delaying price quotes until completion of new homes due to overall cost uncertainties. Demand for multifamily homes also increased, although a few contacts noted that projects in metropolitan areas had to be put on hold due to increasing costs. Several contacts in California mentioned a backlog of permits due to COVID-related shutdowns in local governments.\nConditions in the commercial real estate market were largely unchanged. Demand for new office, retail, and hospitality space stayed muted with reports of high vacancies and declining lease rates. However, demand for industrial, warehouse and distribution spaces strengthened especially in the suburbs, and vacancy rates were noted to be relatively low with lease rates either steady or rising. One contact in Southern California mentioned that the continued pace for vaccinations has contributed to a slight pickup in demand for retail space, as people return to metropolitan areas in preparation of in-person work.\nFinancial Institutions\nLending activity rose somewhat during the reporting period. Most new growth in loan origination was led by demand for commercial and multifamily real estate. Residential mortgage and refinancing activity also continued to be solid, while demand for auto loans and credit cards held steady. However, contacts across the District noted increased competition among financial institutions for new loans and deals, which led a few to raise concerns over deteriorating loan quality. Overall though, banks reported low delinquency rates, ample liquidity, and high asset quality. Mergers and acquisitions activity continued to increase, although one contact in Southern California observed a decline in SPACs (special purpose acquisition companies) origination in recent weeks.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
National Summary | 2021-06-02T00:00:00 | /beige-book-reports/2021/2021-06-su | "Beige Book: National Summary\nJune 2, 2021\nThis report was prepared at the Federal Reserve Bank of Cleveland based on information collected on or before May 25, 2021. This document summarizes comments received from contacts outside the Federal Reserve System and is not a commentary on the views of Federal Reserve officials.\nOverall Economic Activity\nThe national economy expanded at a moderate pace from early April to late May, a somewhat faster rate than the prior reporting period. Several Districts cited the positive effects on the economy of increased vaccination rates and relaxed social distancing measures, while they also noted the adverse impacts of supply chain disruptions. The effects of expanded vaccination rates were perhaps most notable in consumer spending in which increases in leisure travel and restaurant spending augmented ongoing strength in other spending categories. Light vehicle sales remained solid but were often constrained by tight inventories. Factory output increased further even as significant supply chain challenges continued to disrupt production. Manufacturers reported that widespread shortages of materials and labor along with delivery delays made it difficult to get products to customers. Similar challenges persisted in construction. Homebuilders often noted that strong demand, buoyed by low mortgage interest rates, outpaced their capacity to build, leading some to limit sales. Nonresidential construction increased at a moderate pace, on balance, even as contacts in several Districts said that supply chain disruptions pushed costs higher and, in some cases, delayed projects. Demand for professional and business services increased moderately, while demand for transportation services (including at ports) was exceptionally strong. Lending volumes increased modestly, with gains in both household and business loans. Overall, expectations changed little, with contacts optimistic that economic growth will remain solid.\nEmployment and Wages\nStaffing levels increased at a relatively steady pace, with two-thirds of Districts reporting modest employment growth over the reporting period and the remainder indicating employment gains were moderate. As the spread of COVID-19 continued to slow, employment growth was strongest in food services, hospitality, and retail. Manufacturers also added workers in several Districts. It remained difficult for many firms to hire new workers, especially low-wage hourly workers, truck drivers, and skilled tradespeople. The lack of job candidates prevented some firms from increasing output and, less commonly, led some businesses to reduce their hours of operation. Overall, wage growth was moderate, and a growing number of firms offered signing bonuses and increased starting wages to attract and retain workers. Contacts expected that labor demand will remain strong, but supply constrained, in the months ahead.\nPrices\nOn balance, overall price pressures increased further since the last report. Selling prices increased moderately, while input costs rose more briskly. Input costs have continued to increase across the board, with many contacts noting sharp increases in construction and manufacturing raw materials prices. Increases were also noted in freight, packaging, and petrochemicals prices. Contacts reported that continuing supply chain disruptions intensified cost pressures. Strengthening demand, however, allowed some businesses, particularly manufacturers, builders, and transportation companies, to pass through much of the cost increases to their customers. Looking forward, contacts anticipate facing cost increases and charging higher prices in coming months.\nHighlights by Federal Reserve District\nBoston\nBusiness activity in the First District expanded at a moderate pace. Restaurant sales were up sharply, and restaurant openings buoyed retail property leasing. Labor demand strengthened but hiring was held back by labor shortages. Recruiting efforts intensified, with varying degrees of wage increases. Prices held mostly steady despite growing cost pressures.\nNew York\nThe regional economy continued to grow at a strong pace, with growth broad-based across industries. Hiring picked up and wages continued to grow moderately, with availability of workers cited as a top concern. Consumer spending and tourism picked up noticeably. Input price pressures have intensified further, and more businesses are raising their selling prices.\nPhiladelphia\nBusiness activity continued at a moderate pace of growth during the current Beige Book period \u2013 still below levels attained prior to the pandemic. Supply constraints continued to limit growth but may also be contributing to overstated perceptions of strong demand for labor and parts. Employment continued to grow modestly as did wage growth, while prices grew moderately.\nCleveland\nThe pace of business activity quickened, and contacts expect that demand will remain strong in the near term. However, supply chain bottlenecks constrained growth and caused materials costs to escalate. Price hikes became more widespread as firms attempted to keep up with rising costs. Hiring activity was reportedly modest because of a dearth of job applicants. A greater share of firms boosted wages, especially for hourly workers.\nRichmond\nThe regional economy expanded moderately in recent weeks. Manufacturers and service providers reported increased activity but also faced higher labor and input costs as well as shortages of materials. Employment rose moderately but was constrained by challenges filling open positions. Prices rose briskly in recent weeks as some increased costs of business were passed along to customers.\nAtlanta\nEconomic activity expanded at a moderate pace. Labor markets improved and wage pressures picked up for some positions. Some nonlabor costs remained elevated. Retail sales increased. Leisure, hospitality, and tourism activity strengthened. Residential real estate demand remained strong. Commercial real estate conditions were mixed. Manufacturing activity improved. Banking conditions were steady.\nChicago\nEconomic activity increased moderately. Employment, consumer spending, business spending, and manufacturing production all increased moderately, while construction and real estate was flat. Wages and prices rose moderately and financial conditions improved slightly. Prospects for agriculture income in 2021 improved.\nSt. Louis\nContacts reported that economic conditions have moderately improved since our previous report. Many contacts described a situation in which growth in demand for their products or services is outpacing their growth in capacity.\nMinneapolis\nThe District economy saw robust demand, tempered by inventory shortages and rising prices. Job openings increased, but wage growth was not well aligned with firms' broader concerns over labor availability, and workforce contacts cited low wages as a barrier to job seekers taking available jobs. Manufacturing and construction activity continued to grow despite strong input cost pressures. Agricultural incomes grew sharply.\nKansas City\nEconomic activity rose moderately since the last survey. Consumer spending increased moderately, and sales were above pre-pandemic levels for the majority of retail, restaurant, and auto contacts. Most other sectors expanded as well, including commercial real estate, which increased for the first time since the pandemic started. However, about two-thirds of firms reported a negative impact from rising material prices and lack of availability.\nDallas\nThe District economy expanded at a solid rate, bolstered by continued strong growth in housing, manufacturing, and nonfinancial services. Drilling activity rose further. Price pressures intensified. Reports of labor shortages were more widespread across sectors and skill levels than the last report. Outlooks stayed positive.\nSan Francisco\nEconomic activity in the District expanded significantly, and labor market conditions continued to improve modestly. Wages and inflation picked up further. Retail sales increased, and activity in the services sector strengthened moderately. Conditions in the manufacturing and agriculture sectors continued to improve. Residential construction remained strong, while lending activity grew somewhat.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Kansas City | 2021-06-02T00:00:00 | /beige-book-reports/2021/2021-06-kc | "Beige Book Report: Kansas City\nJune 2, 2021\nSummary of Economic Activity\nConditions in the Tenth District economy continued to improve at a moderate pace in April and May, and contacts in most sectors anticipated additional gains in the months ahead. Consumer spending increased moderately as retail, restaurant, and tourism sales rose. Sales exceeded pre-pandemic levels for the majority of retail, restaurant, and auto contacts, while tourism and healthcare sales remained below pre-pandemic levels. Manufacturing activity expanded robustly, and almost two-thirds of manufacturers reported that new orders were at or above pre-pandemic levels. Contacts also reported sales gains in the wholesale trade, professional and high-tech, and transportation sectors. Residential real estate activity increased and home prices rose robustly as inventories fell further from already low levels. Commercial real estate activity increased slightly for the first time since the pandemic started. The energy sector expanded as production, commodity prices, and capital expenditures moved higher. The farm economy remained strong, but drought conditions continued to strain producers in the western part of the region. Employment rose at a modest pace, and wages increased moderately. Input prices increased robustly, while selling prices increased at a moderate pace.\nEmployment and Wages\nDistrict employment continued to increase modestly during the survey period in both the services and manufacturing sectors, with a slight majority of contacts in both industries indicating that employment levels were now at or above pre-pandemic levels. Recent employment gains in the services sector were driven by hiring in the retail and wholesale trade industries, while transportation, auto, and real estate contacts reported slight declines. Looking ahead, services contacts expected modest increases in employment in the coming months, with slightly stronger gains in tourism and wholesale trade. Manufacturers anticipated both employment levels and hours to rise moderately in the next few months.\nThe majority of contacts reported labor shortages, with many contacts noting demand for all positions and several others in need of truck drivers and technicians. More than three-quarters of contacts reported that the inability to find workers with the required skills was restraining hiring plans. Wages rose moderately, and while the majority of contacts expected wage growth to remain moderate throughout 2021, more than one-third of manufacturing and services contacts expected to raise wages by 4 percent or more at their firms.\nPrices\nThe prices of raw materials rose robustly in both the manufacturing and services sectors since the previous survey, while selling prices increased at a slightly more moderate pace. The majority of respondents also indicated that selling prices were above pre-pandemic levels. More than one-third of contacts reported that rising materials prices and supply issues, such as lack of availability or increased delivery times, were having a strong negative effect on their firm, and an additional one-third of contacts reported a slight negative impact from these factors. About 80 percent of contacts expected these factors to persist for 12 months or less. Contacts in both sectors expected input prices to continue to rise robustly over the next six months, while the growth rate of selling prices was anticipated to accelerate.\nConsumer Spending\nConsumer spending grew moderately over the survey period, and the majority of contacts noted that sales were above pre-pandemic levels. The strongest sales gains in April and May were observed in the retail, restaurant, and tourism sectors. Compared to pre-pandemic levels, more than 70 percent of retailers and half of restaurant owners indicated higher sales, while the majority of tourism contacts continued to report lower sales. Health services and auto sales held fairly steady since the previous survey, with health services sales still below pre-pandemic levels and auto sales above. Respondents across all consumer sectors expected sales gains in the coming months, with restaurant and tourism contacts expecting particularly strong gains.\nManufacturing and Other Business Activity\nManufacturing activity expanded robustly since the last survey as production and new orders increased at both durable and nondurable goods plants, albeit with stronger gains among durable goods producers. Almost two-thirds of respondents indicated that new orders were either at or above pre-pandemic levels. Looking ahead, both durable and nondurable goods manufacturers expected moderate gains in production, new orders, and capital expenditures in the coming months.\nOutside of manufacturing, sales rose robustly at wholesale trade firms, moderately at transportation firms, and modestly at professional and high-tech services firms in May. In addition, capital expenditures increased modestly over the survey period in all three sectors. Transportation and wholesale trade contacts expected moderate-to-strong sales gains over the next six months, while sales at professional and high-tech services firm were expected to continue to rise moderately.\nReal Estate and Construction\nResidential real estate activity continued to expand moderately in April and May, while commercial real estate activity increased slightly for the first time since the pandemic started. Home prices sustained robust growth as sales increased moderately and inventories continued to decline. Contacts expected these trends to continue in the coming months. Construction supply sales rose modestly since the last survey, and similar gains were expected in the next few months. Commercial real estate contacts noted modest increases in absorption rates, sales, prices, rents, and construction as well as a slight decrease in vacancy rates. Growth in commercial sales and construction was expected to pick up in the coming months, and vacancy rates were expected to fall modestly. However, developers' access to credit was expected to become modestly more difficult.\nBanking\nLoan demand rose slightly since the previous survey, with gains driven by modest growth in the demand for consumer installment loans and slight growth in the demand for commercial real estate loans. Commercial, industrial, and residential real estate loan demand held steady, while demand for agricultural loans declined modestly. Credit standards remained stable across all lending categories, and bankers reported that overall loan quality had improved strongly since last year. Additional improvement in loan quality was anticipated over the next six months. Deposit levels increased robustly in recent weeks, with anecdotal evidence suggesting the increase is concentrated in liquid accounts, such as demand deposit accounts and savings accounts.\nEnergy\nDistrict energy activity expanded in April and May as the number of active oil and natural gas rigs rose due to the addition of several oil rigs in Oklahoma. With a larger number of active rigs compared with a year ago, production levels also increased modestly. Multiple firms indicated capital spending plans aimed at increasing production in 2021 while reducing costs after restructuring over the past year. Employment in the energy sector inched up slightly across the District since the last survey period, but the number of jobs remained considerably below year-ago levels. A slight increase in commodity prices since the last survey period supported higher revenues and profits for regional firms. Contacts across the District expected stable to slightly higher oil prices for the remainder of the year as impacts from the pandemic continue to wane and demand recovers.\nAgriculture\nThe Tenth District farm economy remained strong, but drought continued to strain all types of producers in the western part of the region. Prices for corn, soybeans, wheat, cotton, and hogs increased in recent weeks and remained at multi-year highs through the early part of May. In contrast, prospects for the cattle industry remained subdued as cattle prices were near pre-pandemic levels but profit opportunities were limited due to elevated feed costs. Alongside severe drought in the western portion of the District, the wheat crop was in poorer condition in Colorado relative to other states. Contacts also reported that the impact of drought on pasture quality and hay production continued to worsen.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Cleveland | 2021-06-02T00:00:00 | /beige-book-reports/2021/2021-06-cl | "June 2, 2021\nSummary of Economic Activity\nThe economic recovery gained strength in recent weeks, and contacts across an array of industries reported healthy gains in customer demand. Contacts often pointed to progress in the fight against the COVID-19 pandemic, the easing of government-mandated restrictions, and the release of pent-up demand as key drivers of the recent improvement in customer demand. For these same reasons, firms were decidedly upbeat that demand will continue to improve in the near-term. That said, many contacts commented that supply chain bottlenecks were constraining growth by causing extended lead times, depleted inventories, and escalating materials and transportation costs. Hiring activity was reportedly modest despite the improvement in customer demand, and many firms indicated they were operating with fewer staff members than they would like because of a dearth of job applicants. Consequently, a greater share of firms boosted wages, particularly for hourly workers on the lower end of the pay scale. Price hikes became more widespread as firms attempted to keep up with rising costs for materials and labor.\nEmployment and Wages\nStaff levels increased modestly, despite widespread reports that customer demand had strengthened. Many firms commented that their headcounts were below desired levels because there were too few applicants for open positions. The problem was acute for firms in consumer-facing industries. A few retailers and restaurants noted they operated with reduced hours or had closed locations because they were short-staffed. One convenience store chain tried to increase its staff level for the past month, but unsuccessfully. As a result, 10 of its stores operated for four fewer hours than desired each day. Many manufacturers also said they were short-staffed, and several noted they were using overtime to fill the staffing gap. Others indicated that they were automating processes to keep up with demand and to reduce labor needs. Contacts in several industries observed an increase in employee turnover, which they attributed to workers' feeling more confident leaving their jobs for higher wages or for more suitable positions.\nThe dearth of available workers motivated a greater share of firms to raise wages. About 55 percent of our survey respondents increased wages over the past two months, up from about 40 percent in the prior period. Reports of wage increases were widespread and were especially common among manufacturing, retail, and freight contacts. One staffing company contact remarked that he turned away prospective clients that offered starting wages of less than $13 per hour because he will not be able to find anyone at that wage.\nPrices\nReports of rising input costs have grown more widespread. About three-fourths of contacts reported that their nonlabor costs had increased in the last two months. This share is up from about two-thirds in the last report. Cost increases were broad across items and were especially sharp for resins, metals, lumber, packaging, and freight services. Rising input costs were partly attributed to supply chain challenges caused by suppliers who often did not have enough workers to meet demand. A few manufacturing and construction firms reported that suppliers were raising their prices more frequently. One real estate developer said that quotes from general contractors were now valid for only 10 days, whereas before the pandemic quotes would be valid for 30 days or even as many as 180 days. Looking to the second half of 2021, roughly 60 percent of contacts expect their nonlabor costs will increase by an amount comparable to or more than the increases they experienced in the first half of 2021.\nReports of firms' raising their selling prices also became more widespread. Many of the firms that raised prices suggested they were able to pass through most of their cost increases to customers. Contacts now expect it to take longer than previously anticipated for these supply chain issues to be resolved. This expectation motivated some of them to be more aggressive with their pricing. Looking ahead, about half of contacts plan to raise their selling prices in the second half of the year, with most of those firms intending to do so to an extent that will at least preserve their margins.\nConsumer Spending\nReports suggest that consumer spending grew significantly. General merchandisers and apparel retailers said that demand remained strong beyond the expected boost from stimulus funds in March. Several contacts believed there was a good deal of pent-up demand that was being released as government restrictions were being eased. Hoteliers reported improvements in leisure travel, and auto dealers commented that sales were strong despite limited inventory and higher selling prices. Contacts were optimistic that consumer spending would continue to improve in the coming months thanks to growing vaccination numbers and easing of government-mandated restrictions.\nManufacturing\nDemand for manufactured goods continued to increase strongly. Contacts cited strength in demand for products related to housing, autos, and other durable consumer goods. Aerospace-related production continued its modest recovery, although demand remained weak on balance. Many contacts noted that output growth was constrained by shortages of hourly-wage workers, extended lead times for inputs, and depleted inventories. Many contacts reported their capacity utilization was within its normal range, although a sizeable minority reported above-normal capacity utilization. Manufacturers generally expected demand to continue to rise in coming months.\nReal Estate and Construction\nDemand for residential construction and real estate remained elevated as homebuyers continued to take advantage of low mortgage interest rates. Even so, a few contacts remarked that escalating construction costs may have sapped some of the momentum in homebuilding. One homebuilder observed that elevated prices made some customers hesitant to move forward with projects. A realtor observed a slowdown in lot purchases as builders in her market waited for construction prices to settle. Expectations for demand were mixed. Some contacts believed that housing demand would remain strong, while others predicted that elevated prices would discourage potential homebuyers.\nNonresidential construction and real estate activity increased in nearly all sectors as workers began to return to their offices, more consumers resumed in-store shopping, and overall economic conditions continued to improve. Overall, nonresidential contacts were optimistic that demand would increase further as the economy continues to reopen and pent-up demand is released. However, one contractor suggested that rising prices and materials shortages may curtail construction.\nFinancial Services\nBanking activity increased moderately. Contacts noted that demand for auto loans and mortgages remained strong, although the recent uptick in interest rates and limited inventories in both markets dampened activity. Multiple contacts reported improvements in business lending, especially for commercial real estate loans. However, overall loan demand remained relatively soft. Lenders said that delinquency rates for consumer and commercial loans were still low and that the number of active forbearance agreements continued to drop. Bankers were optimistic that loan demand would continue to pick up as social distancing restrictions ease, but they also noted that potentially higher interest rates clouded their outlooks. They were also concerned that supply challenges could curtail their clients' sales and soften their demand for credit.\nProfessional and Business Services\nDemand for professional and business services remained strong. Authentication services continued to benefit from the further expansion of ecommerce. Also, demand for consulting and technical services increased as more companies began to recover from the pandemic. Overall, contacts anticipated that demand would continue to grow as firms feel more comfortable moving forward with projects that had previously been put on hold.\nFreight\nDemand for freight services remained robust, and volumes increased as the broader economy continued to recover. Contacts commented that shortages of shipping containers and bottlenecks at ports continue to be problematic. Looking forward, contacts expected demand to improve further in coming months, although many anticipate that a persistent driver shortage will constrain growth.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Minneapolis | 2021-06-02T00:00:00 | /beige-book-reports/2021/2021-06-mi | "June 2, 2021\nSummary of Economic Activity\nNinth District economic activity grew at a moderate-to-strong pace since early April. Employment grew moderately, with strong hiring demand outpacing labor availability. Wage pressures were moderate overall, and wholesale price pressures increased briskly while consumer prices increased more moderately. Growth was noted in consumer spending, construction, real estate, manufacturing, agriculture, and energy. Minority- and women-owned businesses in the region reported moderate improvements in business activity.\nEmployment and Wages\nEmployment grew moderately since the last report, with strong hiring demand outpacing labor availability. Job postings saw strong increases in recent weeks, particularly in South Dakota and Montana. A Minnesota staffing firm with multiple offices said every location had at least 100 job openings. Hiring demand was healthy across all sectors, but was strongest in manufacturing, construction, health care, and hospitality. Recent hiring and near-term hiring expectations improved for firms of all sizes; however, large firms reported significantly stronger hiring tendencies. For those hiring, most said their ability to find and hire staff was moderately or extremely difficult. Contacts in the Dakotas and Montana expected some improvement in labor availability with the early elimination of enhanced federal unemployment benefits in those states. But the action itself was weeks away, and competition for new entrants would be high.\nWage pressures were moderate overall. Wage growth among the large majority of contacts remained below 3 percent on an annualized basis. Workers at construction, manufacturing, and hospitality firms saw stronger wage growth, while many service-related firms saw weaker growth. Future wage expectations were slightly higher, but not well aligned with firms' broader concerns over labor availability. A manufacturer of construction products recently increased hourly wages by $3 an hour and saw job applications jump significantly.\nWorker Experience\nJob seekers saw modest improvement in labor market conditions since the last report. While hiring demand was robust, job service contacts reported low wages as a moderate or significant barrier keeping job seekers from taking available jobs. They also noted increased interest in telework, but few viable options. A workforce contact said that displaced high-income earners were actively seeking jobs to replace lost income, while low-income earners were more likely to stay on the sidelines if they were receiving government benefits. Contacts also cited the challenges of childcare and children's school schedules in making employment decisions. Several contacts pointed to increased inoculations and the gradual return of activities in travel and hospitality as positives for frontline workers. A labor contact expressed that while employment for janitorial workers remains 10 percent below pre-pandemic levels, more janitors were finding work deep cleaning commercial spaces.\nPrices\nWholesale price pressures increased briskly, while consumer prices increased more moderately, as ongoing spikes in certain inputs fed through to final prices. Nearly a quarter of respondents to a business conditions survey reported nonlabor input price increases of greater than 10 percent relative to pre-pandemic levels. Pressures were slightly lower for final/retail prices charged to customers. Respondents to a construction survey noted increases in materials costs across the board, but particularly sharp increases for lumber, steel, and copper wire. Manufacturing contacts continued to report higher final prices due to increased costs for raw materials, packaging, and transportation. However, contacts offered that growing demand was allowing firms to pass along a greater share of markups to customers. Retail fuel prices increased at a moderately strong pace since the previous report.\nConsumer Spending\nConsumer spending was slightly higher since the last report, but remained at elevated levels. Restaurants, bars, hotels, and recreation firms all reported increased activity in recent weeks. However, many reported difficulty hiring and were operating at limited hours and/or capacity. A Montana contact said tourism firms were \"facing the toughest recruiting season ever.\" Auto sales in the western portion of the District remained strong, with low inventories remaining the biggest obstacle. \"Most new units are spoken for by the time they arrive at the dealerships,\" said one Montana contact. Similar demand was reported for recreational and marine vehicles. Airline passenger levels have hit a seasonal lull before the summer travel season, but a North Dakota travel contact said activity was expected to rise \"once families begin summer vacations.\" A regional shopping center in Minnesota said that traffic had been rising; while still below pre-pandemic levels, growth was expected to continue due to pent-up demand.\nConstruction and Real Estate\nCommercial construction activity grew slightly overall, held back by supply chain disruptions and rising costs for materials. Overall project activity showed signs of increasing, according to two industry trackers and contacts across the District. However, many contacts also noted that supply chain problems and inflated materials costs were creating significant project delays and some outright cancellations, and lack of available labor was further eroding their ability to either take on work or complete projects. All of these pressures were having a noticeable effect on profits. Similar difficulties were evident in residential construction. However, contacts noted stronger overall demand and outlooks, and recent residential permitting remained robust across many of the District's larger markets.\nCommercial real estate improved modestly overall, though subsectors varied. Industrial property remained strong, with some speculative building reentering the market. Vacancy rates rose in office and retail, with sublease activity also increasing. Apartment vacancy rates remained low across the District, and rents were reportedly rising again, but uncertainty related to the elimination of eviction moratoriums remained. Residential real estate continued to see strong home sales across the District. In many District markets, inventories of homes for sale were half\u2014or less\u2014of last year's levels; shortages were acute among lower-priced homes, sparking offers above asking prices.\nManufacturing\nDistrict manufacturing activity increased briskly since the last report despite sharp cost increases. An April index of regional manufacturing conditions indicated strong expansion in activity in Minnesota and increased activity in North Dakota and South Dakota from a month earlier. More than half of manufacturing contacts reported that they expect revenues to increase in the second quarter of 2021 from the previous quarter.\nAgriculture, Energy, and Natural Resources\nAgricultural conditions improved sharply since the previous report. Contacts expected strong farm incomes heading into planting season, building on recent commodity price increases and export demand. Crop progress as of mid-May was generally well ahead of recent averages in District states. However, extreme drought conditions spread in portions of the District. District oil and gas exploration activity increased slightly since the previous report, but remained well below its pre-pandemic level.\nMinority- and Women-Owned Business Enterprises\nMinority- and women-owned business enterprises (MWBEs) in the region reported moderate improvements in business activity, according to a May survey. Customer traffic and revenue is modestly to significantly higher compared with the same period a year ago, when restrictions were imposed. A contact working with minority entrepreneurs warned that barriers faced by many businesses to access financial assistance during the pandemic continued to put them behind in the recovery. They further indicated that while many businesses have been technologically adapting to the new environment, some clients lack the knowledge and/or capacity to do so. A contact in the hospitality industry expressed difficulty finding employees and highlighted the inability of small businesses to match current income from government benefits. Like firms overall, MWBE manufacturing and construction businesses were faring well, but also faced labor and material shortages, respectively.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
National Summary | 2021-04-14T00:00:00 | /beige-book-reports/2021/2021-04-su | "Beige Book: National Summary\nApril 14, 2021\nThis report was prepared at the Federal Reserve Bank of Dallas based on information collected on or before April 5, 2021. This document summarizes comments received from contacts outside the Federal Reserve System and is not a commentary on the views of Federal Reserve officials.\nOverall Economic Activity\nNational economic activity accelerated to a moderate pace from late February to early April. Consumer spending strengthened. Reports on tourism were more upbeat, bolstered by a pickup in demand for leisure activities and travel which contacts attributed to spring break, an easing of pandemic-related restrictions, increased vaccinations, and recent stimulus payments among other factors. Auto sales grew, even as new-vehicle inventories remained constrained by microchip shortages. The picture in nonfinancial services generally improved, partly supported by strengthening demand for transportation, professional and business, and leisure and hospitality services. Despite widespread supply chain disruptions, manufacturing activity expanded further with half the Districts citing robust growth. Bankers in most reporting Districts saw modest to moderate increases in overall loan volumes. Sustained high demand and tight supply of single-family homes further pushed up prices, and builders noted ongoing production challenges, including rising costs. Reports on commercial real estate and construction varied, with activity in the hotel, office, and retail segments generally remaining weak. Agricultural conditions were mostly stable over the reporting period. Activity in the energy sector was mixed; coal production fell, while oil and gas drilling was flat to up. Outlooks were more optimistic than in the previous report, boosted in part by an acceleration in COVID-19 vaccinations.\nEmployment and Wages\nEmployment growth picked up over the reporting period, with most Districts noting modest to moderate increases in headcounts. The pace of job growth varied by industry but was generally strongest in manufacturing, construction, and leisure and hospitality. Hiring remained a widespread challenge, particularly for low-wage or hourly workers, restraining job growth in some cases. Commercial and delivery drivers were specifically cited as in short supply, as were specialty and skilled tradespeople. Some firms noted absenteeism due to COVID-19 was down. Employment expectations were generally bullish. Wage growth accelerated slightly overall, with more significant wage pressures in industries like manufacturing and construction where finding and retaining workers was particularly difficult. Some contacts mentioned raising starting pay and offering signing bonuses to attract and retain employees.\nPrices\nPrices accelerated slightly since the last report, with many Districts reporting moderate price increases and some saying prices rose more robustly. Input costs rose across the board, but especially in the manufacturing, construction, retail, and transportation sectors\u2014specifically, metals, lumber, food, and fuel prices. Cost increases were partly attributed to ongoing supply chain disruptions, temporarily exacerbated in some cases by winter weather events. There were widespread reports of increased selling prices also, but typically not on pace with rising costs. Contacts generally expect continued price increases in the near term.\nHighlights by Federal Reserve District\nBoston\nEconomic activity in the First District expanded at a modest to moderate pace in late February and March. Tourism seemed poised for a summer rebound. Two firms enacted large layoffs, but otherwise headcounts were stable or up. The outlook was mostly optimistic, but several contacts expressed growing concerns about inflation.\nNew York\nThe regional economy grew at a strong pace for the first time during the pandemic, with growth broad-based across industries. Hiring picked up and wages continued to grow moderately. Consumer spending and tourism picked up noticeably. Input price pressures have intensified, and more businesses are raising their selling prices.\nPhiladelphia\nBusiness activity picked up to a moderate pace of growth during the current Beige Book period. However, severe myriad supply constraints continued to hamper potential growth from demand described as \"on fire,\" and activity remained below levels attained prior to the pandemic. Employment ticked up modestly, as wage growth and prices continued at modest and moderate paces, respectively.\nCleveland\nThe District's expansion accelerated with a new round of government stimulus and more widely available vaccines. There were even signs of improvement in the hard-hit accommodation and food services sector. Supply chain disruptions spread, however, limiting growth and putting upward pressure on input costs. Looking forward, firms expect the economy to grow robustly in 2021 as supply chain constraints ease later in the year.\nRichmond\nThe regional economy grew moderately in recent weeks. Production increased strongly and importing picked up, leading to high volumes for ports and trucking companies. Consumer spending also picked up. Both manufacturers and retailers faced delays and shortages of raw materials and finished goods. Employment increased and firms looked to fill open positions. On balance, prices rose moderately.\nAtlanta\nEconomic activity expanded at a modest pace. Labor market conditions improved. Some nonlabor costs continued to rise. Retail sales increased. Hospitality and tourism activity strengthened. Residential real estate activity remained strong and home prices rose. Commercial real estate conditions were mixed. Manufacturing activity improved. Banking conditions were stable.\nChicago\nEconomic activity increased moderately. Employment, consumer spending, business spending and manufacturing production increased moderately, while construction and real estate was flat. Wages and prices rose modestly. Financial conditions were little changed. Prospects for agriculture income in 2021 improved.\nSt. Louis\nReports from contacts indicate that economic conditions have been moderately improved since our previous report. Many contacts cited faster-than-expected pace of vaccinations for stronger-than-expected activity and an improving outlook.\nMinneapolis\nThe District economy grew moderately, with signs of acceleration. Job openings and employment rose, but unemployed workers faced obstacles in job searches. Construction showed renewed signs of growth, manufacturing continued to increase, and higher commodity prices benefited farmers. Despite improved oil prices, drilling remained subdued. Minority-owned firms reported more financial instability than firms overall.\nKansas City\nEconomic activity expanded moderately in March, and contacts were optimistic about growth in the coming months. Consumer spending rose moderately as retail, restaurant, auto, and tourism sales increased. Activity also expanded moderately in the manufacturing, professional and high-tech services, wholesale trade, transportation, residential real estate, and energy sectors.\nDallas\nThe District economy accelerated and was boosted by strong growth in manufacturing, retail, and nonfinancial services. Activity in the housing market remained robust, and energy activity rose further. Supply chain disruptions led to marked increases in goods prices. Outlooks were more positive and less uncertain than in the previous reporting period.\nSan Francisco\nEconomic activity in the District expanded at a moderate pace as labor markets conditions improved. Wages and inflation picked up. Retail sales growth accelerated, while activity in the services sector rose slightly. Conditions in the manufacturing sectors strengthened modestly. Residential construction continued to be strong. Lending activity grew further but loan refinancing tapered somewhat.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Minneapolis | 2021-04-14T00:00:00 | /beige-book-reports/2021/2021-04-mi | "April 14, 2021\nSummary of Economic Activity\nEconomic activity in the Ninth District increased moderately since mid-February, with signs of accelerating growth. Employment saw notable gains, with rising labor demand but continued gaps in job matching. Wage pressures were modest but appeared to be rising, and price pressures were moderate. Sources reported growth in consumer spending, commercial and residential construction and real estate, manufacturing, energy, and agriculture. Conditions for minority-owned businesses trailed those of similar firms.\nEmployment and Wages\nEmployment saw strong growth since the last report but remained below pre-pandemic levels. Job postings increased steadily across the District through mid-March. Staffing firms reported higher job orders in recent weeks and expected that trend to continue. These firms also reported modestly rising unfilled job orders and were themselves hiring more recruiters. Construction, health care, and manufacturing firms reported moderate to strong labor demand, and hospitality and tourism firms also reported hiring despite recent difficulties in those sectors. Staffing expectations for the coming months were widely higher in most sectors, though labor availability was a widespread concern. Numerous contacts reported concern over the potential labor-dampening effects of renewed enhanced unemployment insurance benefits. A Wisconsin staffing firm reported many job applicants but few taking the next step to interviews. Initial unemployment claims in March continued a downward trend but were still more than twice the level of similar, pre-pandemic periods.\nWage pressures were modest overall but rising. For most firms, wages have been rising by less than 3 percent annually. Greater pressure was reported by manufacturing and construction firms. Multiple contacts mentioned growing prevalence of sign-on bonuses, which helped attract candidates without raising long-term salary commitments. Several workforce contacts suggested that employers might be delaying wage hikes in hopes of a surge of newly vaccinated job seekers. \"Why start raising wages when a lot of labor might be coming back?\"\nWorker Experience\nContacts reported a continued disconnect between job opportunities and labor supply and a contrast between rural and urban labor markets. Job training professionals, particularly in Minneapolis-St. Paul, expressed their need to know more about the skill sets employers are seeking. Other contacts indicated that training programs and other services don't always meet the needs of low-earning workers, particularly for those with limited English and computer skills. Hospitality and janitorial workers reported that transportation, schedule changes, online learning, relocation, and COVID-19 exposure continued to hamper employment. Several contacts noted that a great number of frontline workers affected by this dynamic were people of color, some of whom don't qualify for public benefits because of their immigration status. A labor contact suggested that some of the automation undertaken during the pandemic was likely to be permanent and emphasized the need for efficient paths to train workers for manufacturing jobs.\nPrices\nPrice pressures remained moderate since the previous report. Preliminary responses to a survey of District businesses indicated a substantial increase in nonlabor input costs in the first quarter of 2021 from a year earlier. However, most of those firms reported only slight increases in prices charged to customers; expectations for prices over the second quarter were similar. Retail fuel prices in District states continued to increase briskly over the reporting period. Prices received by farmers increased in February from a year earlier for corn, soybeans, wheat, hay, hogs, turkeys, chickens, and eggs, while prices for potatoes, dry beans, milk, and cattle decreased.\nConsumer Spending\nConsumer spending rose moderately, with signs of growing confidence, likely helped by recent federal stimulus. Hospitality firms reported difficult conditions across the District through February. However, many were seeing improved sales in recent weeks as weather improved and traffic increased among vaccinated customers. The lifting of operating restrictions in Minnesota also helped boost foot traffic there, though sentiment was more cautious in Minneapolis-St. Paul. A regional shopping center said that activity was still well below pre-pandemic levels but saw steady increases in traffic and spending in March. Ski resorts reported strong activity, and vehicle dealers reported healthy demand, with sales limited in some cases by low inventory. Airport passenger levels in mid-March were roughly 50 percent higher than early February levels, and regional airports reported that new flights were being added.\nConstruction and Real Estate\nCommercial construction activity grew modestly overall, with signs of increased optimism. Total active major construction projects as of mid-March remained below year-ago levels. Contacts in the Dakotas and Montana reported stronger activity than those in Minnesota. However, firms across the District noted a moderate upturn in projects out for bid, particularly in Minneapolis-St. Paul. Project cancellations and delays also improved. Residential construction continued to grow moderately, with permit increases in most of the District's larger markets compared with last year. Supply chains and rising input costs were major concerns for the entire sector, and material delivery lead times were rising.\nCommercial real estate improved slightly as some firms looked to move workers back to the office and consumer foot traffic also rose. But virtually all categories faced occupancy challenges, save for industrial space, which has experienced growth and relative stability. Residential real estate continued to see strong home sales across the District despite very low inventories.\nManufacturing\nDistrict manufacturing activity increased moderately since the previous report. A March index of regional manufacturing conditions indicated expansion in activity in Minnesota, North Dakota, and South Dakota from a month earlier. Heavy equipment producers reported strong demand and long delivery lead times due to ongoing strength in construction and improvement in agriculture. Producers of construction materials continued to report strong demand, especially from residential building; a maker of ready-mix concrete said that recent sales were up 40 percent from a year ago.\nAgriculture, Energy, and Natural Resources\nAgricultural conditions improved briskly heading into spring planting, as prices for many commodities continued to increase well above their recent levels. Despite some recovery in crude oil prices, drilling activity in the Bakken area increased only slightly compared with the previous report. Industry contacts said that maintenance and service activity on wells had increased, but oilfield employment was still down dramatically from its pre-pandemic level. Iron ore mines continued to operate at capacity since the previous report, while contacts in nonferrous mining reported steady to slightly increased demand.\nMinority- and Women-Owned Business Enterprises\nMinority- and women-owned business enterprises (MWBEs) continued to report more widespread decreases in revenue than other businesses in comparable industries. However, an economic development contact reported greater success accessing more recent rounds of federal pandemic relief aid among these firms due to longer application deadlines and more clarity about the programs. Minority-owned firms in the hospitality and tourism industry have been more negatively impacted than other firms in these sectors, according to a March survey. Revenue losses have been greater on average, and there was more financial instability among these firms compared with firms overall. In contrast, women-owned firms in these sectors reported slightly better overall revenue trends, financial stability, and outlook than non-MWBE firms. A community-based organization that works with minority-owned businesses indicated that a large number of their clients have seen net losses of up to 60 percent since the beginning of the pandemic.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
St Louis | 2021-04-14T00:00:00 | /beige-book-reports/2021/2021-04-sl | "Beige Book Report: St Louis\nApril 14, 2021\nSummary of Economic Activity\nContacts reported that economic conditions have moderately improved since our previous report. Some large employers planned for a robust hiring season, including hosting spring job fairs. Area universities also indicated a robust hiring season. Inflation pressures have increased moderately, but the degree of change has varied across industries. Many contacts cited a faster-than-expected pace of vaccinations, stronger-than-expected economic activity, and an improving outlook. Consumer spending reports indicate a high degree of sales volatility stemming from federal aid to households and low retail inventories. Contacts across many sectors continued to cite ongoing supply chain difficulties, such as sourcing imported inputs; however, some contacts reported improvements in domestic supply chains.\nEmployment and Wages\nEmployment has increased moderately since our previous report, especially in the transportation, manufacturing, and hospitality sectors. Two large employers\u2014one whose business grew during the pandemic and another who is hopeful growth will arrive with spring and vaccines\u2014held job fairs to fill hundreds of positions. Hiring firms continued to compete for workers, who remain scarce; one employer reported the response rate among applicants offered an interview was as low as 50%. Many other firms, notably smaller firms, reported more mixed employment trends.\nWages have increased slightly; contacts reported raising wages and bonuses to attract potential workers concerned about their health and to keep existing workers lured by new unemployment benefits. Contacts also attributed the stronger wage pressures to higher wage expectations for new hires, particularly from low-wage workers. Growth in wages at small firms remained muted.\nPrices\nPrices charged to consumers have increased moderately since our previous report, but price changes varied across industries. A regional grocer reported persistent but modest increases in costs but little change in prices charged to consumers. Several restaurants have raised prices moderately due to earlier cost pressures and now stronger demand. A contact in the banquet industry said they have not raised prices in the past year and have no plans to raise prices within the next year. Another hospitality industry contact expects paper product costs, which have been elevated, to decline in the near future as suppliers catch up with demand and paper product use slows as in-person dining replaces take-out orders. A retail contact in outdoor furniture and equipment reported higher prices charged to consumers since our previous report due to \"unbridled demand\" and higher freight costs. A retail contact in home furnishing reported higher input costs and prices charged to consumers since our previous report but expects prices to stabilize due to lower demand and increased production capacity. A retail contact expects further price increases of refrigerators over the summer due to a shortage of imported materials among domestic manufacturers.\nConsumer Spending\nReports from District general retailers, auto dealers, and hospitality contacts indicate that consumer spending activity has improved moderately since our previous report. Credit and debit card spending is up sharply in recent weeks but remains at levels consistent with spikes after the previous round of federal aid.\nThe outlook among West Tennessee consumers improved relative to December. General retail contacts reported improved business activity. An Arkansas grocer expects that positive sales trends for groceries will continue after the pandemic. Auto dealers reported that business activity is steady but lack of inventory is a major issue. A St. Louis restaurant contact reported increased business activity due to warmer temperatures and higher vaccination rates. Hospitality contacts reported that business activity has exceeded expectations after the vaccine rollout led to a strong increase in leisure travel.\nManufacturing\nManufacturing activity has strongly increased since our previous report. Firms in both Arkansas and Missouri reported a strong uptick in new orders and production. Several contacts reported that coronavirus-related labor shortages continue to be a challenge, as firms are unable to produce the quantity of products that can be sold. One contact reported that on-going supply chain issues, especially those related to semi-conductor shortages, have worsened for auto manufacturers in the region. A distribution transformer manufacturer in the region is expanding its operations, hiring 150 new workers in the process.\nNonfinancial Services\nActivity in the nonfinancial service sector has increased slightly since our previous report. Across District metro areas, nonfinancial service employment was unchanged, declining slightly for education and health services and increasing slightly for transportation and utilities services. Airport passenger traffic increased substantially in March. A healthcare contact reported that although referrals have been increasing in the past several weeks, first-quarter patient volume and revenue were well below pre-pandemic levels due to COVID apprehension and the extreme weather in February. Parcel services companies continue to expand employment and invest in the District. Childcare contacts reported increases in inquiries and enrollment, but are concerned about ongoing staffing shortages and how and when large employers will impose a return to working in-person.\nReal Estate and Construction\nResidential real estate activity was unchanged since our previous report, with one contact observing that residential demand shows no sign of slowing. The total number of homes sold across the largest District MSAs has risen since February, home prices increased, and the median number of days on the market decreased. The inventory of homes remains extremely low, with levels below this time last month and this time last year. Apartment rental rates across the District have not changed since our previous report, although rental prices in the Memphis and Little Rock MSAs are higher than one year ago.\nResidential construction activity was unchanged since our previous report. Problems continue with building materials for new projects: One contact reported severely extended lead times on appliances, with some extending up to 6 months. The higher prices of wood and steel are making new construction less profitable, with the price of lumber almost doubling since the beginning of the pandemic. Contacts indicated that new residential development is needed to meet the ongoing rise in housing demand.\nBanking and Finance\nBanking conditions in the District have improved modestly since our previous report. Outstanding loan volumes have grown moderately over the past three months and remained much higher than year-ago levels. Contacts noted strong growth in residential real estate lending and slight growth in consumer and commercial loans. Commercial real estate loan volumes decreased slightly. Banks reported ample liquidity, high asset quality, and decreasing deferral requests on loan payments. Contacts noted that the demand for the second round of PPP loans was much lower than for the first round. A contact in Memphis cited changes in eligibility requirements combined with higher-than-expected revenues as a possible explanation for this trend.\nAgriculture and Natural Resources\nDistrict agriculture conditions differed little from the previous reporting period. Row crop acres planted was relatively unchanged compared with the same period in 2020, although planting was up moderately in Kentucky, Tennessee, and Mississippi. Corn and rice were planted in lesser quantities compared with last year, while cotton and soybean acreage increased. A national agricultural lender contact indicated an optimistic outlook for the industry. They noted they are returning to operating at pre-pandemic levels and expect strong growth in 2021.\nNatural resource extraction conditions declined moderately from January to February, with seasonally adjusted coal production down 7%. February production was also down moderately compared with a year ago, falling over 8%.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Dallas | 2021-04-14T00:00:00 | /beige-book-reports/2021/2021-04-da | "April 14, 2021\nSummary of Economic Activity\nThe Eleventh District economy accelerated to a solid pace during the reporting period. Growth in the manufacturing, retail, and nonfinancial services sectors picked up markedly, though activity stayed below normal levels. Home sales and single-family construction remained vibrant, and apartment demand increased. Overall loan volume rose, supported by continued strength in real estate lending. Energy activity increased. Employment rose and wages increased moderately. Supply chain disruptions led to longer lead times and intensified upward price pressures in the construction, manufacturing, and retail sectors. Most contacts reported being adversely affected by Winter Storm Uri in mid-February, and some noted damages to facilities, equipment, and inventories. Outlooks were more optimistic and less uncertain than in the last report, though there was some trepidation about the impact of supply shortages and/or tighter regulation on activity.\nEmployment and Wages\nPayrolls expanded during the reporting period. Solid hiring continued in manufacturing and residential construction. Service-sector hiring, including retail, picked up. Contacts in the restaurant industry said staffing was one of their biggest headwinds in being able to open to 100 percent capacity. Shortages of specialty trades, such as framers, plumbers, and electricians, persisted in homebuilding. Reports were mixed in the energy sector, with exploration and production companies citing flat employment levels and oil-field services firms noting some hiring to meet increased demand.\nWage growth was moderate, though there were reports of significant wage pressure in industries having trouble finding and retaining workers. One professional and technical services firm noted that even with signing bonuses and an increase in starting pay to over $15 per hour, they were unable to attract qualified entry-level workers. A manufacturing firm said they were able to successfully hire for higher-paid professional positions but filling positions that paid below $20 per hour was particularly difficult. A restauranteur reported recently increasing wages by 10-15 percent to attract labor.\nPrices\nPrice pressures intensified during the reporting period. Input costs rose strongly in the construction, manufacturing, and retail sectors driven in part by supply chain issues. There were reports of higher prices of fuel, chemicals, agricultural commodities, lumber, aluminum, and steel. Selling prices rose at an above-average pace in most sectors. Exceptions included airline ticket prices, which remain depressed due to weak demand. Shortages of semiconductor chips slowed new-vehicle production, driving up used-vehicle prices. Homebuilders reported increasing base prices by as much as $10,000 and/or rolling back incentives to offset rapidly rising costs. Land and lot prices continued to climb as well.\nManufacturing\nExpansion in the manufacturing sector picked up steam in March. The acceleration was widespread, and firms noted that a portion of the rebound reflected catch-up following the outages caused by the freeze in mid-February which reduced February revenues on average by 21 percent. Some manufacturers, however, noted slower activity due to lingering delays from storm-related and other supply chain disruptions. In particular, petrochemical production has been slow to come back online, and contacts expect the ripple effects of these closures on supply chains to persist into the second half of the year. Refineries said domestic and export fuel demand was moderate over the past six weeks, drawing down product inventories during the outages. Outlooks improved markedly, although some contacts voiced concern about the dampening effect of supply constraints, extended lead times, and increased federal regulation on activity.\nRetail Sales\nRetail sales rose sharply in March after being relatively flat for four straight months. Auto sales rebounded strongly as well during the reporting period and demand for building materials stayed robust. However, a few firms commented that the lingering effects of the mid-February winter storms continued to hamper activity. Supply chain interruptions persisted, causing severe inventory shortages and driving up costs. Outlooks turned positive for the first time since yearend 2020, though materials and parts availability and low inventories were a concern.\nNonfinancial Services\nGrowth in the nonfinancial services sector surged in March following subdued activity in the previous reporting period. Accommodation and food services firms cited very strong activity, particularly during spring break, and a few restaurant owners said traffic was at or above pre-pandemic levels. Airlines also cited increased ticket sales thanks to spring break travel. Leisure travel continued to dominate airline bookings, and contacts noted a pickup in reservations beyond the spring break period. Professional and technical services continued to see robust revenue growth, and staffing firms reported broad-based increases in demand. In transportation services, air cargo volumes were down in part due to seasonality, while shipments coming through the Port of Houston stayed healthy. Outlooks were boosted by the vaccine rollout and reopening of the economy, although some respondents expressed apprehension regarding rising interest rates and increased regulation.\nConstruction and Real Estate\nActivity in the single-family housing market remained robust. Sales continued to be characterized as broad-based and solid, with builders noting capping sales and putting prospective buyers on wait lists. The winter storm resulted in moderate damage and exacerbated existing production challenges for builders, including lengthening building-cycle times and worsening shortages of skilled labor and materials. Lot supply remained very tight as did home inventories. Outlooks were favorable, with continued concern about tight lot supply, labor and material availability and costs, and the recent uptick in mortgage rates.\nApartment demand was higher than normal in the first quarter. Renters continued to favor the suburbs, and contacts noted slight upward momentum in pricing, particularly in middle-market product. Monthly rent collections were stable, but renters were paying later than usual. Industrial construction and leasing activity remained strong. The office and retail markets were still finding their footing, and the glut of office sublease space in some markets continued to be a concern.\nFinancial Services\nLoan demand strengthened, pushing up overall loan volumes over the past six weeks. Commercial and residential real estate loan volumes expanded strongly, while consumer lending dipped, and commercial and industrial lending was flat. Loan pricing remained competitive, and credit standards remained somewhat tight. Sentiment regarding general business activity improved significantly, with nearly half of respondents reporting an increase. Outlooks were optimistic, with contacts expecting a decline in non-performing loans, higher loan demand, and increased general business activity six months from now. One contact indicated that due to increased optimism, community banks were engaging in merger and acquisition activities that were halted in 2020.\nEnergy\nDrilling and completion activity rose further during the reporting period. Oil field services firms noted improved margin outlooks and a pickup in hiring driven by higher demand. Exploration and production firms said they expect continued incremental increases in drilling and completion activity in the second quarter. While sentiment in the oil and gas industry has notably improved, contacts remained anxious about the adverse impact of tighter federal regulations, ample spare capacity, and worsening COVID statistics in Europe on demand, profitability, and pricing.\nAgriculture\nDrought conditions eased somewhat in parts of the District but intensified in others. Row crop planting was underway with low soil moisture a concern. Crop prices remained largely profitable and some pushed higher over the reporting period, spurring optimism among producers. While the winter wheat crop did not suffer much damage from Winter Storm Uri, damage to other areas of Texas agriculture (citrus, livestock, and vegetables) is estimated to exceed $600 million.\nFor more information about District economic conditions visit: www.dallasfed.org/research/texas\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
San Francisco | 2021-04-14T00:00:00 | /beige-book-reports/2021/2021-04-sf | "Beige Book Report: San Francisco\nApril 14, 2021\nSummary of Economic Activity\nEconomic activity in the Twelfth District expanded at a moderate pace during the reporting period of mid-February through March. Employment levels increased moderately, accompanied by higher wages. Inflation picked up, driven largely by increased material costs and supply chain disruptions. Retail sales growth accelerated, while activity in the consumer and business services sectors rose slightly. Manufacturing activity continued to expand modestly, and conditions in the agriculture and resources sectors remained generally stable. Contacts reported ongoing strength in residential real estate markets, but largely unchanged conditions in the commercial real estate sector. Lending activity grew modestly, with some tapering observed in mortgage refinancing activity.\nEmployment and Wages\nOverall employment levels increased moderately, although conditions varied significantly by region and sector. In general, employment has recovered faster in regions where mobility and commerce restrictions were lifted sooner. Labor demand remained strong in the finance, health-care, construction, and professional services sectors. Employers in hospitality, tourism, and food services sought to rehire former or furloughed employees as local restrictions eased over the reporting period. Employment levels in the entertainment and education sectors remained subdued. Some contacts reported facing difficulties in attracting and hiring workers, but many others highlighted an adequate labor supply. Employers in technology, construction, and transportation reported being especially constrained by labor shortages. Some contacts also reported increasing hours for hourly employees. Conversely, a few contacts throughout the District in the utilities, manufacturing, and agricultural sectors mentioned scaling back work hours, reducing hiring activities, or stipulating hiring freezes. These cost-cutting decisions were brought about partially by shortages in input materials, disruptions to supply chains, and a tightening of capacity constraints.\nWages increased further over the reporting period. Employers in sectors that reported difficulties in attracting and retaining workers also highlighted tight wage competition, especially for hourly workers. Wages and benefits for positions in construction, food services, hospitality, security, and custodial services were boosted at a relatively faster pace. Wages for telework positions were more stable. A contact in California highlighted more complex wage structures brought about by a more widely dispersed remote workforce.\nPrices\nInflation picked up modestly over the reporting period. Price pressures built up across the region as manufacturers, homebuilders, and providers in health care and in logistics reported rising costs for material, energy, transportation, and labor. Supply chain disruptions and production bottlenecks played a major role in inflationary pressures in recent weeks. Many contacts in construction, health care, and retail reported partially passing these costs onto final prices, while other sectors generally mentioned more stable final prices. Select agricultural products also saw some price increases, which translated into higher prices at grocers.\nRetail Trade and Services\nRetail sales accelerated over the reporting period. Contacts highlighted a loosening of business restrictions by local governments, a national downward trend in new daily COVID-19 cases until mid- to late March, improving vaccine distribution, and large government transfer payments which jointly bolstered consumers' willingness and ability to spend. Contacts also mentioned pent-up demand and accumulated household savings as additional factors increasing sales. Appetite for online shopping continued to grow at a faster pace than for shopping at brick-and-mortar stores. Home improvement centers and specialty retailers reported stable or slightly higher sales in recent weeks. Retail outlets that depend on tourist traffic continued to observe only a fraction of pre-pandemic sales. Contacts also mentioned a number of supply factors, including logistical delays and misallocation of empty shipping containers at the international stage which led to insufficient inventories in some retail categories, including paper goods and cleaning supplies. A contact familiar with the textile trade mentioned that inclement weather conditions outside of the Twelfth District led to impacts on the availability of chemicals and yarn used in fabric production, thereby affecting sales.\nActivity in the services sector increased slightly. Conditions in food services, tourism, leisure, entertainment, and hospitality improved marginally following the relaxation of pandemic-related restrictions in some areas, but overall activity in these sectors remains significantly subdued relative to pre-pandemic levels. Demand for transportation services continued to be strong, though capacity was strained by worldwide logistical complications. Demand for health care rose modestly as capacity shifted from COVID-19 testing to other services. Demand for technology, legal, and other professional services remained largely stable relative to the prior reporting period.\nManufacturing\nManufacturing activity rose modestly. Demand remained strong for manufactured metals, food and beverage products, wood and paper products, computers, electronics, and appliances. Contacts reported widespread shortages of input materials and parts, such as semiconductors and wood adhesives, which held back production, thereby reducing inventories and postponing sales. An increase in air traffic and the resolution of aviation certification issues helped restart demand somewhat for aircrafts and parts. Capacity utilization rates in metal fabrication picked up reasonably after a temporary drop in early March but are still below historical averages for the sector. A contact in California reported improved investment conditions for manufacturers in sectors that proved more resilient to the pandemic, which helped initiate plans for new plants in some areas.\nAgriculture and Resource-Related Industries\nConditions in the agriculture and resources sectors remained stable overall. Inclement weather negatively affected some crop yields, but sales of wheat, corn, raisins, nuts, fruit, and soybeans were generally steady. Inventories moved down but from relatively high levels earlier in the year. Growers reported seeing some tapering in demand from abroad on account of an appreciating dollar. Others noted ongoing negative effects of international supply chain disruptions, which were exacerbated by the temporary closure of the Suez Canal. Contacts also mentioned continued concerns about COVID-related labor shortages. In California, producers highlighted low water availability as a risk to production. Demand for timber remained elevated, and higher oil prices and additional permit issuances bode well for drillers even though little activity was observed in terms of new oil wells over the reporting period.\nReal Estate and Construction\nResidential real estate demand and construction continued to grow at a fast pace. Demand for single family homes, in particular, remained strong. Nonetheless, contacts mentioned that the rapid rise in home prices, the recent rebound in mortgage rates, and continued tightness of housing inventories have begun to weigh on home sales growth. Although construction activity has been strong, homebuilders reported constraints stemming from labor costs, shortages of raw materials, and lack of available land have exacerbated construction backlogs across the District. Demand for multifamily homes was more varied, with suburban locations receiving more inquires and observing higher rents than their urban counterparts. Contacts raised concerns about affordability, especially for low- and moderate-income families.\nConditions in the commercial real estate market remained mostly unchanged. Demand for new office, retail, and hospitality space remained depressed due to disruptions stemming from the pandemic. Contacts reported elevated vacancy rates and some softness in commercial space valuations. Demand for warehouse and industrial properties remained strong. One contact in Southern California noted that commercial space was being converted into warehouses in order to meet this long-observed shift in demand. Another contact reported that demand for overall commercial space held steady in Utah.\nFinancial Institutions\nLending activity grew modestly during the reporting period. Most banks reported further growth in business loan originations, mostly due to demand for smaller, second- round PPP loans. Demand for commercial real estate loans remained tepid outside of those involving industrial properties. Growth in residential loan origination was robust but slower than in the previous reporting period as rising mortgage rates reduced somewhat the appetite for mortgage refinancing. Banks reported rising deposits, ample liquidity, and high asset quality. Activity in the financial markets from professional investors also drove up demand for private equity and mergers and acquisitions financing. A contact in Hawaii mentioned that lending activity related to the tourism sector remained subdued.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Atlanta | 2021-04-14T00:00:00 | /beige-book-reports/2021/2021-04-at | "April 14, 2021\nSummary of Economic Activity\nOn balance, economic activity in the Sixth District expanded modestly from mid-February through March. Labor market conditions improved, and wage pressures remained muted. Some nonlabor costs continued to rise, and pricing power was mixed. Retail sales activity rose, and auto sales increased. Tourism and hospitality activity strengthened as hotels reopened and capacity limits were eased. Housing demand was steady, but inventories of new and existing homes remained constrained. Overall, home prices continued to rise. Commercial real estate conditions were mixed. Manufacturing activity was strong and new orders and production levels increased. Conditions at financial institutions were steady, however loan demand remained slow.\nEmployment and Wages\nSixth District contacts reported improvements in labor market conditions since the previous report. While the remote work stance remained in place for many firms, some began bringing employees back into the office or were making plans to do so over the coming months as vaccine accessibility increases. A majority of contacts anticipate hybrid work models will become the norm for many office workers, and some firms plan to utilize full-time remote positions to attract and retain workers for hard-to-fill positions. Among on-site workers, absenteeism due to illness was down sharply and some firms have eliminated pay premiums and leave policies related to COVID-19. The ability to attract and hire employees varied considerably among contacts, depending on the industry. For example, challenges to fill commercial driver and nursing positions remained. While firms in the hospitality sector were generally successful at filling permanent positions, temporary positions were extremely difficult to fill. Employers noted that unemployment insurance benefits have made it hard to attract workers for temporary and low-wage positions. Some noted that child-care and concerns about COVID-19 exposure continued to lessen worker availability as well.\nMost contacts noted that wage pressures remained subdued and mostly limited to occupations in short supply such as nurses, commercial drivers, and warehouse workers. Despite shortages of low-wage workers, there seemed to be less talk of raising wages as compared with reports of late last year. Many expect normal merit increases during 2021, with higher increases in critical and high-demand fields.\nPrices\nConsistent with previous reports, input costs, particularly for lumber, steel, transportation, and shipping continued to rise over the reporting period. Some contacts expect a portion of these increases to diminish as supply chain constraints ease. Reports on pricing power were mixed. Industries with strong demand have managed to pass through most input cost increases, while others plan to implement price increases over the coming year as activity returns. The Atlanta Fed's Business Inflation Expectations survey showed year-over-year unit costs were relatively unchanged at 2.2 percent on average in March. Year-ahead expectations increased to 2.4 percent in March, up from 2.2 percent in February.\nConsumer Spending and Tourism\nDistrict retailers reported an increase in sales since the previous report. Some contacts noted that spending by consumers, driven by increases in tourism, rose above 2019 levels. Automobile dealers noted that auto sales levels continued to improve, even as production and inventory levels have been adversely affected by chip shortages.\nDistrict travel and tourism contacts reported a significant uptick in leisure travel activity since the previous report. Many hotels fully reopened and reported occupancy levels in the 80-90% range over the first three weeks in March. Restaurants and attractions reported a continuation of COVID-19 capacity limits; however, demand in some areas of the District exceeded capacity. Hospitality contacts noted solid bookings for the remainder of spring and through the summer months and beyond.\nConstruction and Real Estate\nDespite a slight uptick in mortgage interest rates, housing demand throughout the District remained steady. Existing home sales continued to increase over year-earlier levels. Meanwhile, existing home inventory levels contracted as homes for sale did not keep pace with demand. As demand for new homes continued to surge throughout the District, builders noted persistent challenges with rising material and labor costs. Both existing and new home prices continued to rise. Although low interest rates have kept housing moderately affordable overall, affordability declined in many markets as prices rose. Mortgages either in forbearance or in delinquency remained elevated, especially in tourism-dependent markets like Central and South Florida, as well as rural areas along the Gulf Coast.\nCommercial real estate contacts reported that the sector remained somewhat hindered by the effects of the COVID-19 pandemic. Conditions in the retail segment improved modestly as more stores reopened, and consumer spending at traditional retail establishments rose. Multifamily conditions were mixed; however, leasing activity appeared to pick up in some of the harder hit areas. Office dynamics struggled across the District as more space was delivered and absorption was negative.\nManufacturing\nManufacturing contacts reported a solid increase in overall business activity since the previous report. New orders and production levels rose at a robust pace. Supply delivery times increased significantly due to challenges in supply chains, while finished inventory levels grew slightly. Expectations for future production remained optimistic, with almost two-thirds of contacts expecting higher levels of production over the next six months.\nTransportation\nTransportation activity expanded moderately, on net, since the previous report. Railroads experienced considerable growth in intermodal traffic as compared with year-earlier levels, largely offset by substantial declines in shipments of grain and farm products, petroleum and petroleum products, aggregates, and motor vehicles and parts. Air cargo contacts noted significant improvements in freight volumes over the reporting period. District ports saw strong container cargo activity. Most transportation contacts expect continued growth in activity over the next six months.\nBanking and Finance\nConditions at District financial institutions were steady. Banking contacts reported that cash balances continued to increase as deposits remained elevated, and overall loan demand weakened. Net interest margins remained compressed. Financial institutions also continued to add to their securities portfolios. Loan portfolio balances remained flat across most portfolios with commercial real estate balances declining slightly. Increases to loan loss reserves have slowed as credit quality has not deteriorated.\nEnergy\nContacts reported that domestic demand for energy products picked up gradually over the reporting period. Fuel delivery and carrier capacity remained tight as trucks worked to clear backlogs resulting from February's winter storms and fuel supply issues caused delivery delays. Renewable generation projects geared up, especially solar power, biodiesel, and renewable diesel. Industrial construction contacts noted that craft workers remained sidelined, waiting for activity to pick up. Utilities contacts cited continued softness in commercial and industrial segments, while residential markets remained elevated. Overall, District energy contacts noted an improved recovery outlook.\nAgriculture\nAgricultural conditions remained mixed. Abnormally dry conditions persisted in some areas. On a month-over-month basis, the March production forecast for Florida's orange crop was down while the grapefruit production forecast was unchanged; both forecasts were below last year's production. The USDA reported year-over-year prices paid to farmers in February were up for corn, cotton, soybeans, broilers, and eggs but down for cattle and milk; rice was unchanged. On a month-over-month basis, prices increased for corn, cotton, rice, soybeans, cattle, broilers, and eggs, but decreased for milk.\nFor more information about District economic conditions visit: www.frbatlanta.org/economy\u2010matters/regional\u2010economics\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Richmond | 2021-04-14T00:00:00 | /beige-book-reports/2021/2021-04-ri | "April 14, 2021\nSummary of Economic Activity\nThe Fifth District economy grew moderately in recent weeks. Manufacturers experienced robust growth and demand that often-exceeded production capacity, due in part to labor constraints and shortages and shipping delays of raw materials. Ports also saw strong increases in shipping volumes, particularly for retail and medical goods. Trucking volumes were little changed at near-record high levels. Retailers reported moderate growth in consumer spending but also faced shortage and delays receiving inventories. Travel and tourism picked up modestly in recent weeks and vacation rental bookings were strong. Residential real estate demand remained strong and low inventory levels led to higher selling prices. Commercial real estate leasing rose modestly, overall, but some firms downsized their office space. Loan activity grew moderately, lifted by new PPP applications, plus strong deposit growth from stimulus payments. Nonfinancial service demand also picked up moderately, overall. Employment rose modestly as hiring was constrained by challenges filling open positions. Prices rose moderately, on balance. Manufacturers reported sharp increases in both prices paid and prices received while construction materials were little changed at elevated levels and service sector prices rose moderately.\nEmployment and Wages\nEmployment increased modestly in recent weeks, with wide variation across sectors. Several contacts noted that they had open positions, but difficulties recruiting workers constrained employment growth. A hotelier said they were able to hire some front desk workers but had unfilled cleaning staff positions and little interest from workers in those jobs. Several firms also reported increased turnover and challenges retaining workers. One manufacturer said that they needed to hire and train three workers to retain one. In contrast, a professional business firm said it was difficult to find engineers and technical professionals because those workers were hesitant to change jobs. Wages rose moderately, on balance. A staffing agency noted that firms seeking hourly and lower-wage workers were raising wages due to challenges filling open positions.\nPrices\nOverall, prices rose at a moderate rate in recent weeks, but price growth was uneven across sectors. Manufacturers reported sharp increases in both prices paid and prices received. In particular, prices for durable goods, such as autos and home appliances, increased amid strong demand and low inventories, due in part to the shortage of microchips. Prices for construction materials were little changed in recent weeks but remained considerably higher than year-ago levels, particularly for copper, steel, and lumber. Service sector prices rose moderately, on balance. Some legal and professional business services were able to increase prices in response to strong demand.\nManufacturing\nFifth District manufacturers reported robust growth since our last report, as both shipments and new orders increased sharply. Producers of furniture and food saw especially high demand, often exceeding supply. Contacts reported that decreases in COVID cases were leading to fewer delays from labor constraints. However, manufacturers saw capacity constraints resulting from supply side disruptions, particularly lengthening lead times on imports. Shortages of packaging and raw materials were especially pronounced. Manufacturers also struggled to ship finished goods amid limited trucking supply and a shortage of containers for exports. While input costs were elevated, profits remained strong as manufacturers were able to pass costs through to customers.\nPorts and Transportation\nPorts continued to see robust growth in shipping volumes in recent weeks. Growth of imports far exceeded growth of exports. Furniture, retail goods, and medical products drove much of the growth on the import side, but auto imports weakened somewhat. Agricultural exports increased, and contacts noted a decrease in the number of empty containers being exported. Sea ports struggled with delayed arrivals but reported efficient processing of goods once they reached shore, as turn times for loading trucks fell significantly. Air shipments increased, and a Fifth District airport relied on temporary workers to handle high cargo volumes.\nFifth District truckers reported that volumes held fairly steady at near-record highs since our last report. Demand for freight was strong across many industries, as shipments of home improvement goods and manufacturing inputs remained particularly high. In many cases, companies were unable to meet demand for freight, as capacity was constrained by a lack of drivers and delays in orders of trailers. Contacts expected these constraints to continue and demand to rise, leading to longer delays in shipments.\nRetail, Travel, and Tourism\nFifth District retailers saw moderate growth in demand and revenue since our last report. Contacts reported increased shopper traffic, although some clothing retailers reported that many shoppers did not make purchases. Meanwhile, retailers of food and home goods saw especially high demand. Retailers reported shipping delays, shortages, and higher prices for some inventories. Profit margins on both new and used cars increased, as inventories of new cars shrank, which auto dealers attributed to microchip shortages.\nTravel and tourism in the Fifth District grew modestly in recent weeks. Vacation rentals saw strong bookings and restaurants had more business, particularly on the weekends. Beach destinations saw high visitation, and other outdoor attractions and activities registered strong demand. Hotel rates remained low, although occupancy picked up in some areas. In the District of Columbia, tourism remained low, and some restaurants and hotels closed, both temporarily and permanently. However, museum visitation increased and restaurants were hopeful that warm weather would attract more outdoor diners.\nReal Estate and Construction\nDemand for homes remained strong in recent weeks, although some realtors noted a slight decrease in sales, resulting from shrinking inventories of both new and existing homes. Prices continued to rise, and days on the market remained low, with most homes selling in less than a week and many selling within hours. Builders limited their number of weekly sales to preserve inventory and some were holding lotteries to accept customers. Home builders experienced delays in and high costs of materials and appliances. Realtors reported due diligence payment prices are rising.\nCommercial real estate leasing grew modestly since our last report but remained below pre-pandemic levels. Multifamily saw strong demand and new construction. Retail conditions were mixed as some businesses closed, but new ones expressed interest in vacated spaces. Many office tenants downsized, and office vacancies rose, even as landlords increased concessions. Businesses continued to ask for short-term extensions on leases. One contact noted an increased interest in small office spaces for individuals working remotely who want to leave home. Demand for industrial real estate was strong, as rates increased and new construction continued, both speculative and built to suit.\nBanking and Finance\nOverall, loan activity grew moderately this period and was attributed to improving sentiment. Respondents indicated modest growth in business lending, led by a new round of PPP. Contacts stated that commercial real estate lending also experienced slight growth. Mortgage volume remains moderately strong despite rates moving off of historic lows and the lack of housing inventory. Deposit growth was strong due to the new round of stimulus payments. Interest rates on deposits continued to decline slightly, but respondents noted significant market pressure to increase loan rates on the long end. Overall credit quality and delinquencies remained good.\nNonfinancial Services\nOverall, the demand for nonfinancial services rose moderately. Firms in the legal and professional business services saw increased revenues and demand as some in-person visits and travel resumed. Life science companies reported steady to increasing business. Demand for health care services was little changed, overall, as non-COVID-19 related demand rose to offset the decline in COVID-19 related care. One health care administrator saw a return to surgical procedures and huge demand for physician services but noted a steep decline in the maternity care unit as births were down almost 10 percent compared to last year.\nFor more information about District economic conditions visit: www.richmondfed.org/research/data_analysis\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Kansas City | 2021-04-14T00:00:00 | /beige-book-reports/2021/2021-04-kc | "Beige Book Report: Kansas City\nApril 14, 2021\nSummary of Economic Activity\nGrowth in the Tenth District economy accelerated in March, with most sectors expanding at a moderate pace. Consumer spending increased moderately as retail, restaurant, auto, and tourism sales rose. A quarter of consumer spending contacts reported that the pace of vaccinations had boosted demand, and sales were expected to rise further in the coming months. Manufacturing activity also expanded moderately, and new orders rose above year-ago levels for both durable and non-durable goods. Contacts reported moderate gains in wholesale trade, transportation, and professional and high-tech sales, with additional gains anticipated in the months ahead. Home prices rose further as inventories declined and sales increased. Commercial real estate conditions held steady as vacancy rates edged down and absorption rates increased slightly. Energy activity increased moderately, with most District firms reporting higher revenues and profits. Agricultural conditions remained favorable, supported by strong crop prices. Employment and wages rose at a modest pace. Input prices continued to rise faster than selling prices, but more than half of firms experiencing price pressures indicated that they were able to pass through a majority or all of their cost increases onto customers.\nEmployment and Wages\nDistrict employment growth accelerated in March, with jobs added at a modest pace in both the services and manufacturing sectors. Recent gains pushed manufacturing employment above year-ago levels, but employment in the services sector remained slightly lower. Services sector gains were driven by the retail, tourism, and restaurant sectors, while employment in auto sales and health services edged down. Despite recent gains, employment in the tourism, restaurant, and transportation sectors remained moderately below year-ago levels. Overall, contacts in both the services and manufacturing sectors expected modest increases in employment in the coming months.\nThe majority of contacts reported labor shortages, with strong demand for truck drivers, information technology staff, and skilled technicians. Wages rose modestly, and additional modest gains were anticipated in the months ahead. The majority of firms indicated that the passage of the most recent fiscal stimulus package had no effect on their hiring plans for the rest of 2021.\nPrices\nInput prices continued to rise at a faster pace than selling prices in both the services and manufacturing sectors, putting additional pressure on profit margins. However, among firms experiencing price pressures, more than half indicated that they were able to pass a majority or all of their cost increases through to customers. Overall, input prices increased robustly, while selling prices rose moderately in both the manufacturing and services sectors. Contacts expected similar trends in the months ahead, with slightly faster increases in selling prices. Construction supply selling prices also increased moderately and were expected to continue at this pace in the coming months.\nConsumer Spending\nConsumer spending increased moderately in March, with a quarter of survey contacts indicating that the pace of vaccinations and the trajectory of the pandemic led to stronger demand for their product or service. Sales in the restaurant, retail, and auto sectors increased moderately, and tourism sales were well above their levels earlier this year. Despite recent gains, tourism and restaurant sales remained moderately below pre-pandemic levels. However, retail sales moved modestly above year-ago levels, and auto sales rose above year-ago levels for the first time since early last summer. Sales in health services fell moderately and were even with year-ago levels. Contacts across all sectors expected a moderate rise in sales in the upcoming months.\nManufacturing and Other Business Activity\nManufacturing activity expanded moderately over the survey period as both production and new orders rose. Activity was slightly stronger among non-durable goods firms, with production rising moderately above year-ago levels. Durables goods manufacturing also increased, and although production remained below pre-pandemic levels, new orders rose above levels from a year ago. Production and new orders for both durables and non-durables were expected to increase moderately in the coming months, while capital expenditures were projected to rise modestly. About 20 percent of manufacturing firms reported that the pace of vaccinations and trajectory of the pandemic had increased product demand, and a quarter indicated that they had relaxed COVID cautionary measures in the workplace.\nOutside of manufacturing, sales in transportation, wholesale trade, and professional and high-tech services rose moderately and additional moderate gains were anticipated in the months ahead. Wholesale trade and transportation sales were moderately above year-ago levels, while sales in professional and high-tech services remained slightly lower. Capital expenditures edged down in professional and high-tech services but increased among transportation and wholesale trade firms. In the coming months, capital expenditures were expected to increase slightly in transportation but fall slightly in the wholesale trade and professional and high-tech sectors.\nReal Estate and Construction\nResidential real estate activity expanded moderately, and commercial real estate activity held fairly stable. Home prices rose notably in March as inventories declined moderately and sales increased. These trends were expected to continue moving into the spring buying season. Construction supply sales fell modestly but were expected to rise in the coming months. Vacancy rates for commercial real estate edged down and prices and absorption rates increased slightly. Commercial construction activity held steady. However, sales and rents fell slightly, and contacts noted that developers' access to credit had become modestly more difficult. Commercial real estate contacts expected modest increases in sales, prices, absorption rates, and construction in the months ahead. Vacancy rates and rents were expected to remain flat and developers' access to credit was expected to get modestly more difficult.\nBanking\nBanking contacts reported increased loan demand and improved loan quality in March, and expectations for the next six months were increasingly positive. Overall loan demand increased slightly, driven by modest increases in the demand for residential and commercial real estate loans. Bankers reported a slight increase in consumer, commercial, and industrial loan demand, while agricultural loan demand decreased slightly. Commercial and industrial loan interest rates decreased modestly, with comments indicating a highly competitive market. One business reported that capital was \"extremely available\", and the terms were the \"best that [the company] has ever experienced.\" Overall credit standards held constant, and loan quality improved modestly in comparison to a year ago. Bankers expected a slight improvement in loan quality over the next six months. Deposit levels increased robustly in March, with anecdotal evidence suggesting stimulus checks led to the large gains.\nEnergy\nDistrict energy activity increased moderately since the previous survey. Revenues and profits expanded for most firms, while employment continued to lag year-ago levels. The number of active oil and natural gas rigs expanded slightly, mostly due to more active oil rigs in New Mexico. On average, most District firms reported needing higher prices for drilling to be profitable for oil, but lower prices for natural gas to be profitable compared to previous survey periods. Across the District, financing options and access to credit improved. Most firms indicated increased regulation (federal, state, or local) and OPEC production decisions posed the greatest risks to their business over the next year. However, firms' expectations for future oil and gas prices remained higher than in recent survey periods, and more drilling and business activity was anticipated over the next six months.\nAgriculture\nAgricultural economic conditions in the Tenth District remained favorable, but prospects in the cattle industry were slightly weaker than for other major commodities. Contacts continued to report that strong crop prices were supporting a profitable outlook for most producers. However, the price of fertilizers used in crop production increased rapidly in March, and while many farmers likely had already purchased inputs for the 2021 growing season, a sustained increase in expenses could reduce profit margins going forward. In the livestock sector, hog prices increased sharply in March, while cattle prices remained stable and below pre-pandemic levels. In addition to weak price conditions, drought and higher feeding costs, cattle producers in the southern portion of the District also were adversely impacted by recent winter weather events.\nFor more information about District economic conditions visit: https://www.kansascityfed.org/research/regional-research/\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Philadelphia | 2021-04-14T00:00:00 | /beige-book-reports/2021/2021-04-ph | "April 14, 2021\nSummary of Economic Activity\nOn balance, business activity in the Third District picked up to a moderate pace of growth during the current Beige Book period from a more modest pace in the prior period. The share of adults who have received at least one dose of a COVID-19 vaccine climbed past one-third. With the reduced risk from the coronavirus and the return of spring weather, contacts expressed sentiments ranging from \"hot demand\" and \"on fire\" to \"giddy and euphoric.\" Still, supply constraints were noted in nearly every sector, including a tighter labor market, a diminishing inventory of for-sale homes, and severe supply chain disruptions. Thus, activity in most sectors remained below levels observed prior to the onset of the pandemic. Net employment picked up to a modest pace of growth. Positive wage and price growth trends continued at modest and moderate paces, respectively. More than 60 percent of the firms expressed positive expectations for continued growth over the next six months \u2013 the percentage has broadened further among all firms since the prior period.\nEmployment and Wages\nEmployment appeared to increase modestly overall \u2013 an uptick from the slight pace of growth in the prior period. The share of firms reporting employment increases broadened to one-fifth among nonmanufacturers, while reported increases remained near one-third among manufacturing firms. The smaller share of firms that reported employment decreases fell further for manufacturers and held steady for other firms. Moreover, average hours worked rose again for a still larger share of all firms.\nStaffing firm contacts reported that demand for new orders continued to be strong, while hiring and retaining qualified job candidates remained a challenge. Numerous manufacturing contacts lamented a growing lack of machinists and other skilled workers. Contacts from several sectors noted challenges because of a lack of delivery drivers for trips ranging from commercial long-haul to last-mile deliveries. A homebuilder related that a landscaper had hired 20 laborers in early February and none showed up for work.\nWages continued to rise modestly. The percentage of nonmanufacturing firms reporting higher wage and benefit costs per employee remained near one-third, while the share reporting lower wages fell to near zero. Firms are competing more aggressively for lower-wage workers. One contact noted a bidding war for housekeepers in that resort location. Signing bonuses \u2013 a common practice in the warehouse sector \u2013 were reported by several contacts in the hospitality sector; for example, one restaurant had begun offering $1,000 if workers stayed for at least 90 days. Another retail contact reported possibly raising the firm's minimum wage to $15.00 an hour sooner than previously planned.\nPrices\nOn balance, prices continued to rise moderately over the period. About three-fourths of the manufacturers reported higher prices for factor inputs, but those receiving higher prices for their own products remained near one-third. Similarly, about one-third of the nonmanufacturers reported that prices rose for their inputs, but about one-fourth noted higher prices received from consumers for their own goods and services.\nOngoing disruptions of the supply chain were cited by nearly every sector. In addition to the persistent COVID-related disruptions to production and logistics, the Texas freeze and the Suez Canal blockage further contributed to commodity shortages and price spikes.\nNearly three-fourths of the manufacturing contacts reported expectations of paying higher prices over the next six months, and half expected to receive higher prices for their own goods.\nManufacturing\nOn average, manufacturing activity continued growing at a moderate clip. About 40 percent of the firms reported increases of shipments, and about 50 percent reported increases in new orders. On net, manufacturing activity remained below pre-pandemic levels, although some firms have reported increased demand for their products.\nSeveral contacts described demand as nearing pre-pandemic levels in much of the world. However, most contacts continued to note supply chain disruptions from COVID-19 cases and protocols at plants and ports. Order backlogs and inventories grew further and delivery times were reaching record levels.\nConsumer Spending\nContacts noted modest growth of nonauto retail sales with ongoing incremental gains among retailers and more of a surge for restaurants as vaccinations and spring weather combined to release \"cooped-up demand.\" However, pockets of weaker demand persist, especially in urban retail neighborhoods that are oriented toward daytime office workers.\nReports from auto dealers suggest that sales may have grown slightly. As with other sectors, demand is strong, but a lack of inventory on dealer lots is constraining the upside on volumes; however, profit margins are stronger.\nOverall, tourism appears to have grown modestly, with the greatest demand from leisure travelers outside of urban areas. Contacts describe business and group travel as still inching back and anticipate several years before those return to pre-pandemic levels.\nNonfinancial Services\nOn balance, nonmanufacturing activity appeared to pick up to a moderate pace of growth following a modest increase in the prior period. About half of the firms reported increases of sales or revenues; however, most firms continued to note that output remains below pre-pandemic levels.\nFinancial Services\nThe volume of bank lending rose modestly during the period (not seasonally adjusted); in the same period in 2020, by contrast, loan volumes grew sharply. Commercial and industrial loans rose sharply this year, but not nearly as much as the massive surge last year when the first Paycheck Protection Program loans were issued. Commercial real estate lending rose modestly, but auto lending and other consumer loans fell modestly, and home mortgages and home equity lines fell moderately. Seasonal factors drove credit card volumes down moderately \u2013 roughly equal to the pace over the same period in 2020.\nBankers, accountants, and bankruptcy attorneys continued to report relatively few problems with loans or debt. Contacts noted that the latest stimulus package had eased the concerns for many harder-hit businesses. Contacts noted that some businesses are beginning to make investment decisions, especially mergers and acquisitions; however, other firms are still waiting. Some firms that provide direct services are unsure whether consumer demand will return to pre-pandemic levels. A few firms are in \"deep financial trouble\" and are beginning to explore bankruptcy.\nReal Estate and Construction\nHomebuilders continued to report moderate growth in contract signings stemming from very strong demand across most demographics. Contacts noted that sales and construction would be higher still, but for continued myriad supply chain disruptions and a tight labor market.\nDespite strong demand, existing home sales grew slightly, at best, as the supply of available for-sale homes continued to shrink. Growth slowed in nearly all local markets, and several reported declining sales but rising prices.\nAnalysts reported modest declines in demand for commercial office space \u2013 citing negative net absorption and rising vacancy rates throughout the Greater Philadelphia region. Rents edged down in the Wilmington and South Jersey submarkets but edged up in Philadelphia. Many major office tenants continued to operate remotely. Meanwhile, accounting contacts noted that some of their clients (and some of their own firms) have made the decision to permanently increase remote work. In particular, some smaller nonprofits have gone completely virtual.\nFor more information about District economic conditions visit: www.philadelphiafed.org/research-and-data/regionaleconomy\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Cleveland | 2021-04-14T00:00:00 | /beige-book-reports/2021/2021-04-cl | "April 14, 2021\nSummary of Economic Activity\nThe pace of business activity accelerated in recent weeks, and the pickup appeared widespread across the Fourth District and by industry segments. Contacts often suggested that additional government stimulus and progress in the fight against the COVID-19 pandemic were the key factors supporting the recent improvement in current conditions. Those same factors were cited as leading to a decidedly more optimistic outlook for demand moving forward. The improved outlook likely contributed to an increase in capital spending plans as some firms appeared more willing to move forward with projects that had been delayed as a result of uncertainty surrounding the pandemic and its effects on demand. More firms also appeared ready to increase staffing, although their plans to do so were often constrained by a dearth of qualified applicants for open positions. These labor constraints contributed to supply chain disruptions such as shortages of key inputs and freight and shipping delays. The effects of supply chain constraints included longer lead times and project delays and higher nonlabor input costs. Many firms reported that they were trying to pass through these higher costs to their customers, with varying degrees of success.\nEmployment and Wages\nStaffing levels increased modestly, according to our contacts, even as firms continued to face a dearth of available talent. Staffing services firms said that demand for their services increased further from already strong levels, with search requests coming from clients in a wide array of industries. Among these were manufacturers, some of which had been using overtime to keep up with demand but had recently decided to add more permanent workers rather than overextend their existing workforce. Even some firms in the hard-hit energy and accommodation sectors recently added to their staffs. Quite often, however, plans to add workers were hampered by the limited availability of qualified applicants to fill open positions. In some cases, contacts indicated that they were planning to adopt more technology (in lieu of more employees) to keep up with demand.\nA little more than 40 percent of our survey respondents reported that they had raised wages over the past two months, with the remainder indicating that wages had not changed. Reports of wage increases spanned a variety of industries but were particularly prominent in reports from staffing services firms, construction contacts, manufacturers, and transportation firms. One staffing services firm, which has been surveying its employees for five years, noted that in its latest survey for the first time pay had surpassed the type of work as the top priority of job seekers.\nPrices\nReports of increases in input costs and selling prices have grown more frequent in recent weeks. Two-thirds of our contacts reported that nonlabor input costs increased in the last two months. This is the highest share to report an increase in more than two years. As was the case with wages, the increases were widespread across industries, with contacts' suggesting that prices were rising meaningfully for many materials (such as wood, steel, plastics, and glass products) and for some services (such as shipping, logistics, and advertising). In many instances, rising input costs were attributed to supply chain disruptions that have been rippling through the economy for several months.\nAt the same time, about half of our survey respondents said that selling prices had increased over the prior two months. This number compares with roughly a third who reported the same toward the end of 2020. As was the case with input costs, reports of price increases were evident in every industry. Some contacts said they increased prices to offset higher costs, in most cases only partially. But a few acknowledged that strong demand allowed them to boost margins. Contacts generally expected cost pressures to persist in the near term, with one suggesting that \"the imbalances causing costs to rise are not likely to be resolved quickly.\" However, many expect supply chain challenges to dissipate later in the year, and this will ease cost and price pressures.\nConsumer Spending\nReports suggest that consumer spending grew significantly toward the end of the reporting period, primarily supported by recent fiscal stimulus and continued progress in the fight against the pandemic. General merchandisers and apparel retailers said that demand was up notably in recent weeks, and auto dealers commented that sales remained very strong. Restauranters and hoteliers reported improvements in leisure activity and group events, and one hotelier said that although business travel remained weak, there was an uptick in recent weeks. Contacts were optimistic that consumer spending will continue to recover in the coming months thanks to fiscal stimulus, rollback of government-mandated restrictions, and expanded vaccination efforts.\nManufacturing\nManufacturing orders increased strongly across a range of end-user markets. Some firms reported stronger orders from customers who are seeking to replenish inventories. Conversely, aerospace remained depressed but saw modest gains. As a sign that activity in this sector might improve, one supplier said it recently received double the normal number of requests for quotes. Supply chains continued to be disrupted for many manufacturers, especially for products sourced from abroad. A number of contacts said that future delays in acquiring raw materials and intermediate products from foreign suppliers were likely. On balance, the majority of respondents expected conditions to improve in the coming months, though difficulty in hiring, rising input and transportation costs, and material shortages tempered expectations for continued growth.\nReal Estate and Construction\nDemand for residential construction and real estate remained strong. However, exceptionally lean inventories and elevated materials costs pushed up home prices, a situation which, along with moderately higher mortgage interest rates, has reduced average affordability. Looking ahead, contacts worried that demand will begin to diminish if home prices continue to rise.\nNonresidential construction and real estate activity increased since our last report, although this increase was uneven across segments. Demand for light-manufacturing and industrial space remained solid, and demand for office and retail space, while still weak, experienced a modest rebound. Contacts attributed the increase in activity to the loosening of business restrictions and improved consumer confidence. Overall, contacts were optimistic that demand would increase further as governments continue to roll back restrictions and vaccines become more widely distributed.\nFinancial Services\nBanking activity increased moderately during the reporting period. Contacts noted that demand for auto loans and mortgages remained strong, although the recent uptick in mortgage rates dampened refinancing activity. While business lending remained relatively soft, multiple contacts reported an improvement in demand, especially for commercial real estate loans. Lenders said that delinquency rates for consumer and commercial loans were still low and that the number of active forbearance agreements continued to drop. Most banks saw growth in core deposits as households received fiscal stimulus funds. Looking ahead, bankers were optimistic that loan demand would continue to pick up as COVID-19 restrictions ease and more vaccines are distributed.\nProfessional and Business Services\nStrong demand persisted for professional and business services firms as many of their client businesses began to return to normal operations. The owner of a construction and real estate publication noted that business optimism had increased significantly, and an increasing number of firms was willing to put more of a focus on advertising. Contacts anticipated demand will continue to grow as the business climate improves and the broader distribution of vaccines gives firms the confidence to implement projects and initiatives that had previously been put on hold.\nFreight\nDemand for freight services remained strong in recent weeks as the recovery continued to spread across geographies and sectors. While many freight haulers reported a need to increase freight capacity, a scarcity of truck drivers made growth difficult. Looking forward, more than two-thirds of transportation contacts expected demand to improve further in coming months even as driver shortages persist.\nFor more information about District economic conditions visit: clevelandfed.org/region\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Chicago | 2021-04-14T00:00:00 | /beige-book-reports/2021/2021-04-ch | "April 14, 2021\nSummary of Economic Activity\nEconomic activity in the Seventh District increased moderately in late February and March but remained below its pre-pandemic level. Contacts expected growth to pick up in the coming months, but most did not anticipate full recovery until at least the first half of 2022. Employment, consumer spending, business spending and manufacturing production increased moderately, while construction and real estate was flat. Wages and prices rose modestly. Financial conditions were little changed. Prospects for agriculture income in 2021 improved.\nEmployment and Wages\nOverall, employment increased moderately over the reporting period and contacts expected a robust increase over the next 12 months. Contacts indicated that employee absenteeism due to Covid-19 infections or exposures was minimal. Numerous contacts reported difficulty finding workers, particularly at the entry level. Some said that hiring challenges were greater than prior to the pandemic. Manufacturers indicated that turnover of new temporary workers was elevated, with some never showing up for work. Employers, temp agencies, and workforce development organizations pointed to a number of factors limiting labor supply, including health safety concerns, childcare challenges, cutbacks in public transportation schedules, job search fatigue, and financial support from the government. Overall, wages and benefit costs increased modestly, though multiple contacts in manufacturing noted strong wage pressures, particularly at the entry level.\nPrices\nPrices increased modestly overall in late February and March, and contacts expected a moderate increase in prices over the next 12 months. Consumer prices moved up modestly overall, though there were larger increases in new and used vehicle prices. Business output prices generally moved up only modestly even though input costs were up moderately, led by higher shipping rates and large increases in energy and raw materials prices. Prices for metals, metal products, and lumber were noticeably higher. Many manufacturers reported passing on at least some higher wage and materials costs to their customers, though one indicated that he could not raise prices until contracts come up for renewal in the summer. A construction contact noted that some single-family homebuilding contracts are now being written with allowances for changes in the cost of lumber.\nConsumer Spending\nConsumer spending increased moderately over the reporting period. Contacts said that looser pandemic-related restrictions and stimulus checks from the American Rescue Plan helped support activity. Demand for leisure and hospitality services, most notably air travel and restaurants, was noticeably stronger. Nonauto retail sales increased moderately, with high levels of demand for groceries, appliances, furniture, electronics, home furnishings, and jewelry. E-commerce spending continued to be robust. New and used vehicle sales increased at solid rates despite low inventories in both markets, leading to increased profits for some dealers. Spending on vehicle services and parts rebounded to normal levels.\nBusiness Spending\nBusiness spending increased moderately in late February and March. Inventories continued to be lean in many retail segments due to high demand, and shortfalls in select categories were expected to persist into the second half of this year. Shortages were particularly notable in motor vehicles, with some dealers reporting stockouts of certain popular light truck models and many expressing uncertainty over deliveries from manufacturers. Contacts expected little improvement in the supply situation over the remainder of 2021. Manufacturing inventories were slightly below comfortable levels. Contacts continued to report supply chain issues related to raw materials (particularly steel and lumber), microchips, specialty parts, and appliances to outfit new construction. Some contacts reported that shipping bottlenecks, made worse by the Suez Canal closure, were delaying deliveries. Capital expenditures were up moderately, and contacts expected a moderate increase over the next twelve months. There was a small increase in commercial energy consumption, helped by greater demand from restaurants, but little change in industrial energy consumption. One contact noted that higher natural gas prices resulted in greater usage of coal for electricity generation.\nConstruction and Real Estate\nOn the whole, construction and real estate demand was flat over the reporting period. Residential construction increased somewhat, led by a rise in home remodeling activity. Residential real estate activity increased slightly. Although demand was at a strong level, very tight inventories were slowing the pace of sales, especially for starter homes. Home prices increased moderately, while rents increased slightly. Nonresidential construction fell marginally, led by a decline in the office segment. One contact noted an increase in backlogs because developers had to pause building while they obtained additional financing to cover rising construction costs. In commercial real estate, sales, prices, and vacancy rates all were relatively unchanged. Demand for industrial properties remained high while demand for office and retail properties remained low. Contacts noted that, as rental deferrals expired, a growing number of retailers were signing contracts where rent is specified as a percentage of sales. In addition, there were reports that contracts were either being written for shorter periods or with gradual rent increases over the life of the lease.\nManufacturing\nManufacturing production increased moderately in late February and March. Some manufacturers reported that business was above pre-pandemic levels. Auto output declined slightly as some assemblers and suppliers were constrained by shortages of parts, such as microchips. Steel production increased moderately, driven by rising demand from the construction and energy sectors. Demand for heavy machinery increased slightly, led by growth in agriculture. Specialty metals manufacturers reported a moderate increase in sales, with growth spread across a wide range of sectors. Many contacts in specialty metals said that materials shortages were resulting in delayed deliveries. Demand for building materials increased moderately, supported by growth in new homebuilding and remodeling.\nBanking and Finance\nFinancial conditions were little changed on balance over the reporting period. Participants in the equity and bond markets reported a small improvement in conditions, though volatility remained elevated. Business loan demand increased slightly, led by growth from manufacturing and healthcare. Contacts reported continued aggressive pricing of financial products and that lending standards loosened slightly. Business loan quality improved slightly on balance, though there were declines in the hospitality sector. In consumer markets, loan demand was little changed overall and across most sectors. Residential mortgage activity was solid, though refinancing slowed. Contacts reported a decrease in consumer loan balances following the latest round of stimulus payments. Consumer loan quality increased slightly, while standards loosened slightly.\nAgriculture\nProspects for agriculture income in 2021 improved as many agricultural prices rose and more federal support was announced. Corn and soybean prices moved higher during the reporting period, while wheat prices lagged. Dry conditions in much of the District set the stage for a fast planting season, with some types of planting already having begun. Cattle, egg, hog, and dairy prices increased during late February and March. While higher feed costs hurt livestock producers, the outlook for profits was still good. Farm equipment sales continued to be strong, and farmland values again rose.\nFor more information about District economic conditions visit: chicagofed.org/cfsbc\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Boston | 2021-04-14T00:00:00 | /beige-book-reports/2021/2021-04-bo | "April 14, 2021\nSummary of Economic Activity\nEconomic activity among First District contacts increased at a modest to moderate pace. Retail sales strengthened in the first quarter at two of three firms, advance travel bookings increased, and sales were either stable or up modestly among contacts in the manufacturing sector and in software and IT services. On a year-over-year basis, more than half of manufacturers and two of three retailers saw robust gains, while air travel remained below pre-pandemic levels as did sales at software and IT services firms and at one retailer. Commercial and residential real estate markets extended their earlier trends, as industrial properties and single-family homes remained in high demand and short supply, and year-over-year gains in home sales moderated. Hiring activity was mixed and wage increases were moderate on balance. The outlook was stable or increasingly optimistic but concerns about inflation intensified at several firms.\nEmployment and Wages\nHiring activity was mixed and wage increases were moderate. One manufacturer and one travel industry contact laid off large numbers of workers in recent months, but otherwise headcounts were either flat or up. A few manufacturing contacts added significant numbers of employees in 2020 and modest numbers recently, and others were trying to hire new workers with little success. A life sciences manufacturer paused an ambitious hiring plan for 2021 pending the resolution of regulatory uncertainty. Software & IT contacts were engaged in limited to modest hiring activity, following a 20 percent increase in headcounts at one firm in 2020. Hospitality contacts anticipate seasonal worker shortages this summer due to limits on visas. Among contacts in software and IT, manufacturing, and retail, more than half implemented wage increases for 2021 ranging from 3 to 4 percent, one held wages fixed, and others did not provide wage information. One manufacturer raised its minimum wage to $15 to attract more workers, and two retailers also boosted pay for low-wage workers to reduce turnover.\nPrices\nReports raised the possibility that inflation could increase in the coming months. Most manufacturers and one retailer reported steep input price increases\u2014in the double digits on a year-over-year basis in most cases\u2014for goods such as paper and paper pulp, wood, pollock fish, fabric, foam, plastics, and shipping and transportation services. A furniture retailer had already raised prices (as did their competitors) to pass along increased materials costs, and three manufacturers planned to raise their prices in 2021 in response to cost pressures. Some cost increases were attributed to logistical issues, weather-related disruptions, and/or to higher oil prices, but several contacts also mentioned robust demand as a factor. Based on a recent surge in advance bookings on Cape Cod, one contact forecasted that hotel room and vacation rental rates could reach record levels in the coming months. Among software and IT contacts prices were unchanged but margins increased year-over-year on cost savings from remote work postures.\nRetail and Tourism\nRetailers reported strong sales throughout the first quarter of 2021. A furniture retailer experienced a record setting March, which was attributed to customers accessing stimulus funds, but also faced extended delays in receiving goods. A clothing retailer said that recent sales were up 30 percent over their pre-pandemic levels on the strength of online sales; the same retailer saw a sharp reduction in post-holiday returns relative to 2020. A home d\u00e9cor retailer reported steady sales across US stores throughout the winter months, but added that sales remained below pre-pandemic levels by low single-digit percentages.\nTravel industry respondents continued to report major disruptions related to COVID-19 for air travel. The number of airline passengers through Boston remained down about 70 percent in February and March compared with the same months in 2019, and the decline for international flights was estimated at nearly 80 percent. Contacts expected leisure travel to increase in the coming months as vaccination rates progress, and scheduled flights are already on the rise. Advance hotel bookings and short-term rentals for summer stays on Cape Cod are up dramatically from their typical April levels, and occupancy rates, hotel room rates, and short-term rental rates there are on track to break records this summer.\nManufacturing and Related Services\nMost contacts said that sales were roughly stable in recent months, and two reported modest increases. Year-over-year sales results were mixed, as 5 of 8 contacts reported robust increases and others saw moderate declines or flat sales compared with 2020Q1. Firms with double-digit sales increases from 2020 included a manufacturer of membrane materials that said growth was strong across all business lines and all regions of the world, including Europe. Several contacts said that sales were limited only by their capacity. Firms that posted over-the-year declines included a drug company that lost patent protection on a key product, and a toy manufacturer that depends on new entertainment products to boost sales and so was hit hard by the pandemic.\nCapital investments were ongoing at most contacts, although only a few had revised their spending plans upward in response to strong sales. Several contacts reported that delays in the delivery of capital goods had reduced capital expenditures in 2020 and that they planned to spend more in 2021 as a result.\nAll contacts were optimistic for 2021 but most had not changed their forecast in recent months. A frozen fish manufacturer held a cautious outlook because, despite exceptionally strong recent sales, the end of the pandemic was seen as a potential damper on demand for their products. Contacts also expressed concern about rising inflation over the rest of the year.\nSoftware and Information Technology Services\nMost contacts enjoyed steady or improved activity in recent weeks but also said that demand remained well below pre-pandemic levels. At two firms, demand for subscription-based cloud computing services extended an upward trend. Most contacts were optimistic for the remainder of 2021. Contacts forecasted that progress in vaccinations and the return of in-person activities would boost consumer and business confidence as 2021 unfolds, translating into stronger demand for their products.\nCommercial Real Estate\nCommercial real estate conditions in the First District were mostly unchanged in recent weeks. Industrial vacancy rates remained extremely low and rents increased further at a strong pace. Investors and users alike sought to build new warehouses and distribution centers despite high construction costs. A lender to commercial real estate faced increased competition from large national banks on mid-priced deals, as the large banks faced weak demand for larger commercial real estate loans. Construction activity in the life sciences sector remained robust, and extended to the conversion of vacant office space. Retail leasing was better than expected for smaller urban spaces but remained weak for big box stores and malls. The office sector continued to struggle with large quantities of sublease space, and although rents held mostly steady, contacts expect downward pressure on rents to increase moving forward. Reportedly, some landlords were holding office space off the market in anticipation of stronger demand in late summer, although office footprints are expected to stay well below pre-pandemic levels for an extended period. Contacts remained concerned that speculative construction of lab space at current rates could yield a glut by 2023-2024.\nResidential Real Estate\nExtremely low inventory and high demand continued to characterize the residential real estate market in the First District through January and February. (Vermont reported changes from January 2020 to January 2021, most other areas provided changes from February 2020 to February 2021, and Connecticut provided no data). Closed sales increased in all reporting areas, but by a smaller margin than in recent reports. The Rhode Island contact attributes the slowdown to reduced inventories. Home inventories were down by double digit percentages for all reporting markets except Boston condos, where inventory again posted a year-over-year gain. Some contacts noted that while interest rates increased slightly in February, the increase so far had not blunted demand. Prices increased in all reporting areas. Extending a pandemic-related trend, suburban single-family homes remained the most favored product type. Contacts expected demand to strengthen further moving forward but they expressed concern that low inventories would crimp sales and limit affordability for many potential buyers.\nFor more information about District economic conditions visit: www.bostonfed.org/regional-economy\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
New York | 2021-04-14T00:00:00 | /beige-book-reports/2021/2021-04-ny | "Beige Book Report: New York\nApril 14, 2021\nSummary of Economic Activity\nEconomic activity in the Second District has accelerated sharply in the latest reporting period, growing at a strong pace, despite an upturn in reported COVID cases across the District. Moreover, business contacts have grown increasingly optimistic about the near-term outlook. The labor market has strengthened, with contacts reporting a pickup in hiring activity, hiring plans, and wages. Input price pressures have continued to intensify, and more businesses report that they are raising their selling prices. Consumer spending has strengthened, with retail sales exceeding expectations. Tourism has continued to strengthen, though it remains well below pre-pandemic levels. Housing markets have generally remained robust, while markets for office and retail space appear to have stabilized at weak levels. Finally, contacts in the broad finance sector reported modest improvement in conditions, while regional banks reported steady to higher loan demand and little change in delinquency rates.\nEmployment and Wages\nThe labor market strengthened moderately in March, with businesses in most major industry sectors reporting a pickup in employment. A major New York City employment agency noted that financial sector hiring, though still subdued, has improved to levels not seen since before the pandemic. An upstate employment agency reported that hiring activity has picked up across the board and that it remains difficult to fill lower-wage jobs.\nHiring plans for the months ahead increased markedly\u2014particularly in the manufacturing, leisure & hospitality, and information sectors. Hiring and retaining tech workers has been cited as a particular challenge, due to competition from major tech firms as well as visa restrictions.\nWages have continued to grow moderately, at a similar rate as in the last report. Wage increases were particularly widespread in the retail, transportation, information, and construction sectors. Looking ahead, more businesses reported plans to raise wages than at any time during the pandemic, with the most widespread hikes expected in the leisure & hospitality, professional & business services, transportation, and retail trade sectors.\nPrices\nFirms' input prices have continued to accelerate, with exceptionally widespread increases reported from contacts in manufacturing, as well as sizable increases in construction, transportation, retail trade, and leisure & hospitality. Businesses in most sectors continue to expect widespread hikes in the prices they pay in the months ahead.\nSelling prices have also continued to accelerate but more moderately. Still, contacts in the manufacturing and distribution sectors report widespread increases in their selling prices and also in their plans to hike prices in the months ahead.\nConsumer Spending\nConsumer spending has strengthened in recent weeks. Non-auto retailers reported that both business and foot traffic have picked up but were still short of normal levels. One retail chain noted that its sales across the District have exceeded plan, though sales at New York City stores continued to lag. Demand for home goods remained strong and luggage sales have reportedly picked up, whereas clothing sales have picked up somewhat but remain weak. Sales in some categories, notably furniture, have reportedly been constrained by inventory shortages due to supply chain delays. Retail contacts remained optimistic about the near-term outlook, but the uncertainty associated with the long lead time between ordering and receiving merchandise has been a concern.\nNew vehicle sales showed signs of picking up noticeably in March, despite low inventories\u2014a constraint that is expected to persist for several months, due to various factors including a shortage of microchips used in new vehicles. Used auto sales have been somewhat constrained by low inventories. Dealers indicate that credit availability is not much of an issue.\nConsumer confidence among New York State residents climbed in March to its highest level in a year, led by a surge in expectations.\nManufacturing and Distribution\nManufacturing activity picked up further in March, expanding at a robust pace. Contacts in wholesale trade and transportation & warehousing also reported that activity picked up briskly. Contacts in these sectors continued to report supply disruptions and delays\u2014particularly in getting shipments from overseas.\nLooking ahead, businesses in all these sectors expressed increasingly widespread optimism about future business prospects.\nServices\nService industry contacts also reported a strong pickup in growth in the latest reporting period. Contacts in information and professional & business services reported a brisk pickup in business, while education & health providers noted a moderate pickup. Contacts in the leisure & hospitality sector noted a significant upturn in activity for the first time since the onset of the pandemic. Looking to the months ahead, contacts in all these sectors expressed widespread optimism about business prospects.\nTourism has continued to trend up. Leisure air travel reportedly increased sharply in March, and flight bookings are being made longer in advance. In New York City, weekend hotel occupancy rates have risen steadily since the last report, recently surpassing 50 percent, though nightly room rates are still substantially below pre-pandemic levels. Future bookings have also expanded. Some hotels that had previously announced permanent closures have more recently announced plans to reopen. Museums and restaurants have also seen a steady uptrend in business. Most of the rebound in tourism has been from day-trippers and other domestic visitors, though tourism from Central and South America has reportedly increased.\nReal Estate and Construction\nHousing markets have strengthened further in the latest reporting period. Sales markets in upstate New York have been particularly robust, with brisk sales volume, lean inventories, and strong price appreciation, with many homes reportedly selling for well above asking price. Home sales activity in areas around New York City has strengthened as well, with prices holding steady but running 5-10 percent ahead of pre-pandemic levels. Inventory levels remain low but have been stable since the start of the year.\nNew York City's co-op and condo market has picked up further since the last report, with apartment sales volume so far this year surpassing comparable 2020 levels. However, price trends have been mixed, down nearly 10 percent in Manhattan but edging up to record highs in the outer boroughs. The inventory of unsold units has come down but remains somewhat above historical norms. New York City's rental market has stabilized, though rents are still down 15-20 percent from early-2020 levels in Manhattan and down 8-10 percent in Brooklyn and Queens. However, leasing activity has remained fairly brisk.\nCommercial real estate markets have been mixed across the District. Office markets in New York City and northern New Jersey have continued to soften, but markets elsewhere across the District have steadied. The market for retail space has been fairly steady in recent weeks, though still quite slack, especially in New York City.\nNew office construction has remained sluggish, but residential construction has picked up outside New York City. Contacts in the District's construction industry remained somewhat negative about current conditions but have grown increasingly optimistic about the near-term outlook; the main concerns expressed pertain to costs of materials and shortages of materials and skilled workers.\nBanking and Finance\nBusinesses in the broad finance sector reported modest improvement in business activity. Small to medium sized banks in the region reported rising demand for business loans, as well as commercial and residential mortgages, but steady demand for consumer loans. Bankers reported unchanged credit standards for all categories, steady loan spreads, and no change in average deposit rates. Contacts reported little change in delinquency rates, with bankers reporting some decrease in lenient policies for delinquent consumer loan and home mortgage accounts.\nFor more information about District economic conditions visit: www.newyorkfed.org/regional-economy\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Minneapolis | 2021-03-03T00:00:00 | /beige-book-reports/2021/2021-03-mi | "March 3, 2021\nSummary of Economic Activity\nEconomic activity in the Ninth District increased modestly since early January. Employment was flat, with rising labor demand offset by labor supply constraints. Wage and price pressures were both modest. Sources reported growth in consumer spending, residential construction and real estate, manufacturing, energy, and agriculture. Commercial real estate was mixed, and commercial construction activity declined. Conditions for minority- and women-owned businesses were difficult.\nEmployment and Wages\nEmployment was flat since the last report, though hiring demand appeared to be picking up. Job postings increased steadily across the District through the first five weeks of the year. Staffing firms also reported healthy demand in job orders but reported difficulty filling available jobs. \"There are way more job orders than available workers,\" especially for jobs paying less than $20 an hour, said a Minnesota staffing contact. A mid-January survey (with more than 1,000 respondents) found that nearly 30 percent of firms Districtwide had reduced staff since October, while just 8 percent added staff. However, small firms were much more likely to report staffing cuts and large firms to add staff, balancing net employment levels to some extent. Recent employment losses continued to be more prevalent in entertainment, hospitality, and retail firms, while firms adding staff were more evenly spread across sectors, led by finance and manufacturing.\nWage pressures were modest overall, but stronger in some sectors seeing higher labor demand. Construction firms reported the strongest wage pressure, followed by finance and manufacturing firms. Wage pressures in many other sectors were soft but were expected to increase modestly over the coming year. Staffing firms consistently reported growing wage pressures due to healthy hiring demand but persistent lack of interested workers.\nWorker Experience\nDespite increased job openings, labor supply constraints contributed to a continued disconnect between workers and opportunities. Multiple workforce contacts noted greater demand for employees to fill 12-hour and/or rotating shifts. But prospective employees continued to find these shifts unattractive for a variety of reasons\u2014family care responsibilities, remote learning in many school districts, fears of infection\u2014that have increased the relative cost of work and imposed limits on flexibility. Other contacts noted that transportation remained a hurdle for low-wage workers. A staffing contact reported that there was less migration of laid-off hospitality workers to opportunities in fields like manufacturing than they expected. A job service contact suggested that some of the inertia may be due to employers providing false hope that workers will be called back to their previous jobs. Some contacts said the prospective continuation of enhanced unemployment benefits created a disincentive to return to work; however, others noted that the closure of workforce offices also eliminated a high-touch opportunity to push job openings and other services to the unemployed when applying for or collecting benefits.\nPrices\nPrice pressures increased moderately since the last report. According to the January survey of District businesses, half of respondents reported that prices for final goods and services were unchanged compared with pre-pandemic levels, but more than a third reported that nonlabor input prices were up by more than 5 percent. Contacts in manufacturing reported greater ability to pass on increases in costs for transportation and certain other inputs to customers. Retail fuel prices in District states have increased briskly since the previous report. Prices received by farmers increased in December from a year earlier for corn, soybeans, wheat, chickpeas, and hogs, while prices for potatoes, dry beans, hay, milk, chickens, eggs, and cattle decreased.\nConsumer Spending\nConsumer spending rose moderately, likely spurred by federal stimulus to households. January gross and taxable sales both grew robustly in South Dakota. Vehicle sales were strong. A dealership in the western part of the District reported robust sales of new vehicles in December and January. Minnesota vehicle sales taxes through the first six weeks of the year were notably higher than last year. Winter and other recreational vehicle sales were also positive, held back in some cases by lack of inventory. Firms catering to outdoor recreation generally reported good traffic. However, extreme cold for an extended period in February dampened activity Districtwide. Increased sales were reported at eating and drinking establishments in Minnesota and Montana after COVID-19 infection rates fell and operating restrictions were lessened, but conditions in that sector remained difficult. Passenger activity out of the District's eight largest airports remained flat at low levels through the first seven weeks of the year.\nConstruction and Real Estate\nCommercial construction continued to slow overall. Total active, major construction projects across the District were lower than a year earlier. A majority of contacts reported that recent revenue fell compared with both 2019 and fall of 2020, and expectations for the first quarter of this year were similar. The frequency of project delays and cancellations has potentially peaked, according to sources; however, more reported a decrease in new projects out for bid than those reporting increases. Some places, like Rapid City, S.D., and certain subsectors, like utilities, reportedly have not seen a similar slowdown. Residential construction also remained a bright spot, with contacts reporting healthy demand and January permitting activity seeing increases over last year in many locations.\nCommercial real estate was mixed. Industrial property remained generally stable, with steady leasing activity and low vacancy rates in many markets. However, other sectors like office and retail saw increases in vacancy rates and available sublease space. Residential real estate saw strong growth. January home sales grew by double digits over last year across much of the District.\nManufacturing\nDistrict manufacturing activity increased moderately since the previous report. Respondents to the Minneapolis Fed's annual survey of manufacturers indicated that orders, production, employment, profits, productivity, and investment all decreased in 2020 on average (with substantial variability among firms). Expectations for 2021 called for growth to resume, likely due to stronger activity in recent months. However, nearly half of respondents reported that they don't expect to return to pre-pandemic activity levels for six months or longer. An index of regional manufacturing activity indicated brisk expansion in North Dakota in January compared with the previous month; activity in Minnesota and South Dakota grew more moderately.\nAgriculture, Energy, and Natural Resources\nDistrict agricultural conditions improved moderately since the previous report, due to continued rallies in commodity prices and to government support programs. Respondents to the Minneapolis Fed's fourth-quarter (January) survey of agricultural credit conditions reported increased farm income and capital spending compared with a year earlier, and the outlook for the next quarter was for continued growth in farm incomes. District oil and gas exploration activity increased slightly compared with the previous report. Iron ore mines continued to operate at normal capacity since a previously idled plant resumed operations in mid-December.\nMinority- and Women-Owned Business Enterprises\nMost minority- and women-owned business enterprises (MWBEs) reported negative revenue trends compared with the same period last year and with the previous quarter. Some expected modest improvement for the first quarter of 2021. A strong majority said federal stimulus programs have helped their business to some degree; among those not benefiting, most did not either qualify or apply for assistance. Contacts noted hesitancy among immigrant business owners to apply for assistance out of concern for jeopardizing the immigration status of themselves or family members. Financial instability was high among these firms. In a survey across the District, a significantly higher share of MWBEs said they would be insolvent within three months if current economic conditions persisted compared with non-MWBEs. They were also more likely to have cut wages, for staff or for themselves.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Richmond | 2021-03-03T00:00:00 | /beige-book-reports/2021/2021-03-ri | "March 3, 2021\nSummary of Economic Activity\nThe Fifth District economy continued to grow at a modest rate. On balance, manufacturers reported modest growth in shipments and new orders, with some food and furniture manufacturers experiencing strong growth. Port volumes increased further from already-high levels. Trucking volumes rose modestly and were constrained by shortages of drivers and trailers. Retail sales declined modestly as many stores experienced low foot traffic and supply chain issues affecting inventories. Travel and tourism picked up modestly and short term rentals saw increased occupancy rates. Sales of both existing and new houses increased, as did prices, but sales growth was limited by low inventory levels. Commercial real estate leasing rose modestly and contacts saw new interest in vacant restaurant spaces. Lending activity declined slightly as demand for commercial real estate loans remained soft and residential demand slowed down due to the low inventory of available homes for sale. Demand for nonfinancial services increased moderately, overall, with some sectors seeing strong demand, such as technology consultancy services. Employment rose slightly as firms struggled to find employees to fill open positions and were reluctant to raise wages. Only a few manufacturers reported slight increases in wages in recent weeks. Prices increased at a moderate rate as firms faced increased costs of raw materials and non-labor inputs. Food manufacturing inputs and construction materials prices were particularly high and increased further in recent weeks.\nEmployment and Wages\nEmployment in the Fifth District rose slightly since our previous report. Many contacts reported having difficulties finding workers, with several of them noting that fewer women were returning to their jobs due to childcare and homeschooling needs while others cited skills mismatches as a hinderance. One contact said that there were many hospitality workers out of a job and manufacturers who need workers, but those skills don't easily translate. Additionally, a staffing agency contact believed that workers were hesitant to change jobs right now and firms were unwilling or unable to raise wages. Indeed, there were few reports of firms raising wages outside of a few manufacturers that reported slight wage increases.\nPrices\nPrices rose moderately in recent weeks. According to our most recent surveys, manufacturers and service sector firms reported increases in over-the-year growth of prices received, which slightly exceeded two percent. Manufacturers experienced a sharp increase in input prices paid, some of which were explained by supply shortages and some by strong demand. Food manufacturers noted rising prices for some raw materials while meat prices remain at historically high prices. Construction materials prices, lumber in particular, rose from already-high levels.\nManufacturing\nManufacturing in the Fifth District grew modestly since our last report as shipments and new orders increased. Furniture and food manufacturers had particularly strong business and were often unable to meet demand. Many firms reported supply chain disruptions as shortages of materials and packaging, both domestic and imported, led to longer lead times and higher input prices. Some manufacturers were also constrained by labor shortages and employee absences. Several manufacturers reported transportation delays and high prices both from trucking and from sea transport.\nPorts and Transportation\nShipping volumes strengthened somewhat from already high levels since our last report, with import volumes remaining well above export volumes. Contacts reported strong growth in imports and modest growth in exports, noting export growth was constrained by a shortage of shipping containers. Import volumes of furniture, perishable food, and toys were particularly high. Autos and lumber showed strength on the export side. An airport contact reported that there are not enough cargo planes to meet demand, leading companies to use passenger planes for cargo shipments.\nFifth District trucking volumes rose modestly in recent weeks. Companies were unable to meet demand and had to turn away business as driver shortages and delays in acquiring new and replacement trailers limited capacity. Shipping rates increased, and customers offered to pay extra to have their goods shipped. Firms saw increased shipments in a broad range of goods, with particular strength in home goods such as furniture, appliances, and building materials. Meanwhile, spot market demand and rates remained high.\nRetail, Travel, and Tourism\nRetailers in the Fifth District saw modest declines in business in recent weeks, and sales remained well below pre-pandemic levels for most retailers. Many contacts reported supply chain issues, including longer lead times and higher prices of inventories. Several retailers, such as clothing and jewelry stores, saw very low foot traffic and depressed sales. However, hardware stores, food providers, and furniture shops reported strong demand, and some looked to expand. Meanwhile, auto sales were constrained by low inventories of new vehicles, but low supply increased profit margins\nTravel and tourism in the Fifth District increased modestly since our last report but remained below pre-pandemic levels. Restaurants saw healthy demand but struggled with capacity constraints on indoor dining and cold weather affecting outdoor dining. Outdoor attractions such as ski resorts saw strong visitation, and some indoor attractions reopened with limited hours. Hotel rates and occupancy remained low. Lack of business travel and conventions persisted, but one contact noted increased travel for weddings and athletic events. Short term rentals saw increased occupancy, and in some beach destinations, rentals were already booked through the summer.\nReal Estate and Construction\nHome sales in the Fifth District increased modestly since our last report and were well above pre-pandemic levels. Inventories of both new and existing homes were very low, as demand exceeded supply. Prices continued to increase sharply, and average days on the market decreased. Realtors reported that houses frequently sell within an hour, often sight-unseen. Many builders limited the number of houses they sold each week so as to have some inventory available in the spring market. Construction of new homes was strong, but long lead times for appliances led to delays and some houses closing before appliances arrived.\nFifth District commercial real estate leasing increased modestly in recent weeks but was below year-ago levels. While retail vacancies remained elevated, more businesses looked to add locations, and vacated restaurant space sparked interest. Office tenants continued to ask for short-term lease renewals, and many downsized, but others added space and some landlords found new clients. Industrial leasing was very strong, as inventories were low and new construction continued. Multifamily leasing remained soft, with some landlords upping incentives and reducing rent.\nBanking and Finance\nOverall, loan activity declined slightly for this period. Respondents indicated tepid conditions for commercial real estate lending. Business lending picked up slightly despite companies being uncertain about economic conditions and less demand for round three of PPP funding. Mortgage volume remains strong but down from previous periods due to the limited supply of available homes for sale. Deposit growth was tempered as financial institutions reduced rates on interest bearing accounts. Overall credit quality and delinquencies remained good despite an ending of most deferrals and forbearances. The respondents reported increased competition as financial institutions are struggling for loan growth.\nNonfinancial Services\nOn balance, the demand for nonfinancial services increased moderately in recent weeks. A technology consulting firm saw robust growth and the demand for health services remained high. A digital marketing contact noted a recent uptick in radio advertising from local restaurants and small businesses, particularly from home improvement and repair companies. College enrollment, on the other hand, was down considerably. The president of a community college in North Carolina said that majority of the students not returning were black or Hispanic and enrollment in high school equivalency programs was down the most substantially.\nFor more information about District economic conditions visit: www.richmondfed.org/research/data_analysis\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
National Summary | 2021-03-03T00:00:00 | /beige-book-reports/2021/2021-03-su | "Beige Book: National Summary\nMarch 3, 2021\nThis report was prepared at the Federal Reserve Bank of Atlanta based on information collected on or before February 22nd. This document summarizes comments received from contacts outside the Federal Reserve System and is not a commentary on the views of Federal Reserve officials.\nOverall Economic Activity\nEconomic activity expanded modestly from January to mid-February for most Federal Reserve Districts. Most businesses remain optimistic regarding the next 6-12 months as COVID-19 vaccines become more widely distributed. Reports on consumer spending and auto sales were mixed. Although a few Districts reported slight improvements in travel and tourism activity, overall conditions in the leisure and hospitality sector continued to be restrained by ongoing COVID-19 restrictions. Despite challenges from supply chain disruptions, overall manufacturing activity for most Districts increased moderately from the previous report. Among Districts reporting on nonfinancial services, activity was mixed, though most reported modest growth over the reporting period. Some Districts noted that financial institutions experienced declines in loan volumes, but most cited lower delinquency rates and elevated deposit levels. Historically low mortgage interest rates continued to spur robust demand for both new and existing homes in most Districts, and home prices continued to rise in many areas of the U.S. On balance, commercial real estate conditions in the hotel, retail, and office sectors deteriorated somewhat, while activity in the multifamily sector remained steady and the industrial segment continued to strengthen. Districts reporting on energy observed a slight uptick in activity related to oil and gas production and energy consumption. Overall, reports on agricultural conditions were somewhat improved since the previous report. Transportation activity grew modestly for many Districts.\nEmployment and Wages\nMost Districts reported that employment levels rose over the reporting period, albeit slowly. Labor demand varied considerably by industry and by skill level, and many contacts noted continued difficulties attracting and retaining qualified workers. Labor supply shortages were noted by contacts as most acute among low-skill occupations and skilled trade positions. Constraints on labor supply included those related to COVID-19, childcare, and unemployment benefits. Overall, contacts expect modest improvements in employment levels in the near term. Several Districts reported modest wage increases for high-demand positions with many also noting upward pressure on wages to attract and retain employees. On balance, wage increases for many Districts are expected to persist or to pick up somewhat over the next several months.\nPrices\nOn balance, nonlabor input costs rose moderately over the reporting period, with steel and lumber prices increasing notably. In many Districts, the rise in costs was widely attributed to supply chain disruptions and to strong overall demand. Transportation costs continued to increase, in part due to rising fuel costs and capacity constraints. Reports on pricing power were mixed, with some retailers and manufacturers affected by input cost increases reporting the ability to pass prices through, while many others were unable to raise prices. Several Districts reported anticipating modest price increases over the next several months.\nHighlights by Federal Reserve District\nBoston\nEconomic activity remained mixed in the First District, with strong performance at manufacturers and ongoing weakness at hospitality outlets. Labor markets were tight for skilled workers. Manufacturers faced new upward pressures on input prices. Single-family home sales increased further. Contacts in the restaurant and hotel industries expressed a more optimistic outlook.\nNew York\nThe regional economy declined modestly, with particular weakness in the service sector. The labor market has remained sluggish, though wage growth accelerated. Businesses reported further acceleration in prices, as well as increasingly widespread supply disruptions. Contacts across a wide variety of sectors expressed increased optimism about the near-term outlook.\nPhiladelphia\nBusiness activity rebounded to a modest pace of growth during the current Beige Book period. COVID-19 cases waned and restrictions eased, but economic disruptions continued. On the whole, activity remained below levels attained prior to the pandemic. Employment rebounded \u2013 growing slightly \u2013 as wage growth and prices picked up to modest and moderate paces, respectively.\nCleveland\nThe District's economy regained momentum, reflecting declining numbers of coronavirus infections and various fiscal support measures. That said, activity remains below prepandemic levels for most firms, and supply chain disruptions restrained output for many firms. Such disruptions also led to sizable increases in nonlabor costs. Hiring activity remained modest, although a greater share of firms reported they were raising wages.\nRichmond\nThe regional economy continued to grow modestly. Manufacturing activity picked up, as did port and trucking transportation. Travel and tourism also rose in recent weeks. Retail sales, on the other hand, declined. The housing market remained strong and commercial real estate leasing rose modestly. Employment increased slightly while wages were little changed. Prices increased moderately in recent weeks.\nAtlanta\nEconomic activity expanded modestly. Labor market conditions improved, and wage pressure was subdued. Some nonlabor costs rose. Retail spending was steady. Tourism and hospitality activity rose slightly. Residential real estate demand increased, and home prices rose. Commercial real estate conditions were mixed. Manufacturing activity improved. Conditions at financial institutions were stable.\nChicago\nEconomic activity in the Seventh District increased modestly. Manufacturing and consumer spending increased moderately; business spending and construction and real estate increased slightly; and employment was little changed. Wages and prices rose modestly. Financial conditions were little changed. Contacts expected agricultural income to be solid in 2021.\nSt. Louis\nReports from contacts indicate that economic conditions have been generally unchanged since our previous report. Overall, the outlook among contacts continued to improve and is generally optimistic. Contacts noted a high degree of uncertainty about the pace of recovery, which they linked to vaccine rollout and efficacy.\nMinneapolis\nDistrict economic activity increased modestly. Hiring demand rose, but employment growth remained flat, likely due to labor supply constraints and workers' hope of being rehired by previous employers. Manufacturers expected a recent uptick in business to carry forward, while construction and real estate were seeing hot-and-cold activity across the District. Conditions for minority- and women-owned businesses remained difficult.\nKansas City\nEconomic activity expanded slightly, with gains in most sectors. Stronger retail, restaurant, and healthcare sales drove consumer spending higher in January, but consumers pulled back in February. Activity rose in the manufacturing, professional and high-tech services, wholesale trade, residential real estate, energy, and agriculture sectors. Contacts were generally optimistic about future growth, driven in part by the COVID-19 vaccine rollout.\nDallas\nThe District economy expanded at a moderate pace, though output in most industries remained below normal levels. Unprecedented winter storms and widespread power outages in mid-February severely disrupted economic activity, though the impact is mostly expected to be transitory. The housing market continued to be a bright spot, and energy activity improved further. Employment rose and wages increased moderately. Outlooks were generally positive, but uncertainty persisted.\nSan Francisco\nEconomic activity in the District expanded at a modest pace as labor markets deteriorated somewhat. Wages and inflation picked up. Retail sales improved, but activity in the services sector declined moderately due to ongoing pandemic-related restrictions. Conditions in the agricultural and manufacturing sectors strengthened modestly. Residential construction and lending activity continued to be strong.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
St Louis | 2021-03-03T00:00:00 | /beige-book-reports/2021/2021-03-sl | "Beige Book Report: St Louis\nMarch 3, 2021\nSummary of Economic Activity\nReports from contacts indicate that economic conditions have been generally unchanged since our previous report. Firms continue to report mixed changes in employment levels. Firms reported difficulties attracting candidates for positions despite increasing wages. Inflation pressures have increased, as contacts reported moderate increases in prices; however, most contacts believe it will be difficult to pass on further price increases. Overall, contacts' outlooks continued to improve and are generally optimistic. Most cited a high degree of uncertainty about the pace of recovery, which related primarily to the pace and efficacy of vaccinations.\nEmployment and Wages\nEmployment trends have been mixed since the previous report. On net, 12 percent\u00a0of respondents reported employment levels lower than a year ago. Contacts noted stagnant or declining employment, especially among small businesses and leisure and hospitality firms, with continuing closures in a slower-than-expected recovery. Transportation and manufacturing firms reported their desire to expand their workforce has been stymied by a scarcity of workers. Many contacts ascribed this scarcity to unemployment benefits and other government aid: A grocery store contact expects some warehouse workers will quit when they receive another stimulus check, looking to return to work at a later time. Some reported turning to automation, with one contact emphasizing that robots were doing jobs for which they couldn't find workers. COVID-19 exposure has also depressed existing workers' hours: One manufacturer reported more than 10 percent\u00a0of his workforce was quarantined on any given day.\nWages grew slightly. On net, 23 percent\u00a0of respondents reported wages higher than a year ago. Many contacts emphasized the need to raise wages while workers remained scarce; some, however, reported more stagnant wages, especially in the worst-hit sectors. One restaurant owner reported recently giving his workers much-delayed raises, fearing they would otherwise be lured away by other businesses as the recovery continues.\nPrices\nPrices charged to consumers have increased moderately since our previous report. However, contacts believe they have less ability to further increase prices. A regional grocer reported lowering some prices due to competitive pressures and making up profits on higher volumes. A restaurant contact reported an inability to increase prices amid already slow business. A supplier for a contact in the graphic design industry unexpectedly increased the prices for paper and packaging products. Multiple contacts noted the price of silver has increased. A contact in the jewelry industry reported this increase will lead to higher prices to consumers but is allowing customers to switch to brass. A manufacturing contact noted the increase in silver prices has increased the costs of producing its antimicrobial products. Contacts also noted that ocean freight costs have more than doubled, which a warehouse contact believes will lead to higher prices for consumers. A retail industry contact is passing increased shipping costs to consumers. Contacts also reported higher steel and soft-lumber prices since our previous report. A warehouse contact expects the elevated price of steel to increase the cost of maintenance and replacement for the company's forklift fleet.\nConsumer Spending\nReports from general retailers, auto dealers, and hospitality contacts indicated that consumer spending has been mixed since our previous report. General retailers reported sales met or fell short of expectations over the past six weeks, but they have an improved outlook for the coming quarter due to vaccines and stimulus payments. A local furniture store reported that sales increase the same weekend that customers receive stimulus checks. Auto dealers reported that sales over the past six weeks generally fell short of expectations. The outlook for auto sales for the coming quarter was mixed, with contacts citing stimulus, low inventories, and interest rates as determining factors. Restaurants continue to struggle. A local restaurant owner expects conditions to hold steady until at least the third quarter. Hospitality contacts reported low business activity but remain optimistic that when vaccines are widely distributed the industry will recover quickly.\nManufacturing\nManufacturing activity has modestly increased since our previous report, though the change from firm to firm varied considerably. Contacts reported that production and capacity utilization remained unchanged, while new orders have modestly increased. However, some firms reported strong upticks in production and new orders. Several firms in the region reported labor force shortages have inhibited production. Beyond that, auto manufacturers in the region reported the semiconductor shortage has led to temporary production shutdowns. On average, firms reported they expect moderate increases in production, capacity utilization, and new orders in the second quarter. One salt products manufacturer in the region reported the expected closure of a mine poses future supply chain challenges.\nNonfinancial Services\nActivity in the nonfinancial services sector has decreased slightly since our previous report. Passenger traffic at regional airports remains depressed, down 60 percent\u00a0from one year ago. Half of all nonfinancial services contacts reported sales below expectations this quarter, reflecting clients who are cautious to spend due to uncertainty about the near-term economic recovery, as well as pandemic-related difficulties meeting new clients. Revenues at several small regional colleges have fallen due to declines in enrollment. Logistics contacts reported first-quarter sales were stronger than expected despite the post-holiday slowdown. Most contacts expect sales next quarter to be at least as good as this quarter given vaccinations are becoming more widespread.\nReal Estate and Construction\nResidential real estate activity has slipped since our previous report. Pending home sales in St. Louis, Memphis, and Louisville have fallen slightly while pending sales in Little Rock have dropped sharply since early January. Contacts reported that home inventory remains low and expect it to remain so. A contact in Arkansas reported local rents are rising at an unreasonable rate.\nResidential construction activity has risen this quarter, with many expecting further increases. A contact in St. Louis reported residential construction projects are severely backlogged due to labor and material shortages. Contacts also reported problems and price increases stemming from high lumber and steel prices. Also, shipping delays and production issues have increased lead times on most building supplies and appliances.\nCommercial real estate activity has been mixed since our previous report, as office and retail demand are lower this quarter. A contact in Louisville reported the increase in telework has decreased demand for office space, and, going forward, contacts are uncertain if and how telework will continue to impact demand. Meanwhile, demand for industrial properties is up due to e-commerce and micro-fulfillment facilities. Commercial construction is similarly mixed, as multi-family projects, warehouses, and logistics facilities are the main projects currently being built. Some developers also reported switching hotel projects for apartment buildings.\nBanking and Finance\nBanking conditions have been unchanged since our previous report. Banking contacts continued to report a slight decrease in overall loan demand. Consumer loan demand declined modestly, particularly for credit cards, while commercial and industrial (C&I) loan demand rose slightly. Low loan demand, combined with consistently high deposit levels, further increased reserves held at District banks. A contact reported trying to deploy excess funds through bond purchases but faced challenges as bonds were harder to obtain due to high demand. Overall delinquencies decreased primarily in auto and C&I loans. All bankers contacted expect this year to be a relatively slow year but hope activity will pick up toward the end of 2021.\nAgriculture and Natural Resources\nAgriculture conditions have improved moderately relative to the previous reporting period. The number of acres of winter wheat planted this season throughout the District increased sharply relative to the previous year, although acres planted declined slightly in Kentucky. Despite pessimism in early 2020, farmers expressed optimism after a strong finish in 2020, with prices and sales up well above what was expected.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Cleveland | 2021-03-03T00:00:00 | /beige-book-reports/2021/2021-03-cl | "March 3, 2021\nSummary of Economic Activity\nThe District's economy regained momentum after it had slowed in the previous reporting period. Customer demand in the current period proved to be better than what contacts had expected, reflecting declining numbers of coronavirus infections and various fiscal relief measures. That said, activity remains below prepandemic levels for most firms. In addition, many firms, particularly those in construction, retail, and manufacturing, reported that delayed deliveries from suppliers and coronavirus-related employee outages constrained their output. Hiring activity was modest, even though customer demand improved, and wage pressures increased moderately. Nonlabor costs rose strongly as supply chain disruptions coincided with stronger demand for inputs. Selling prices rose moderately as firms attempted to keep up with mounting input costs. Looking ahead, contacts expected moderate improvement in customer demand over the next couple of months, and they expected stronger gains in the second half of the year as coronavirus vaccines are more widely distributed.\nEmployment and Wages\nStaff levels increased modestly, on balance, and hiring activity cooled somewhat despite the pickup in business activity. Labor demand varied across sectors. In the freight sector, labor demand was especially strong, and many firms noted they would like to hire more drivers but experienced shortages. By contrast, labor demand was weakest in financial services, wherein several firms reported they were cutting costs and reducing their physical footprints. Consistent with activity in the last several reporting periods, a number of firms in manufacturing, retail, and construction noted that they wanted to add staff but found it difficult to fill open positions. Aside from typical staffing challenges, one in four firms reported that coronavirus-related staff outages impeded their ability to meet customer demand. Such reports were more common among manufacturers and construction firms where close to one third of firms expressed these difficulties.\nOverall, upward pressure on wages was moderate, and more firms reported increasing wages than at any point in the pandemic. Pay raises were often between 2 percent and 3 percent, although several retailers and manufacturers commented that there were pockets of more sizeable increases for lower-wage workers and some skilled tradespeople such as machinists.\nPrices\nReports suggest that upward pressure on costs and selling prices increased since the last report. Nonlabor costs rose strongly during this period, a change from the last several periods when costs were reported to have risen moderately. Manufacturers and construction firms indicated that steel and lumber costs continue to increase significantly. Other input costs also rose, including for aluminum, copper, resins, and some concrete products. Many firms attributed these price increases to supply chain disruptions occurring at the same time as demand was improving. Finally, firms in a range of sectors reported that transportation costs were up significantly because of capacity constraints among shippers and higher fuel costs.\nSelling prices rose moderately, on balance, and a greater share of firms reported they increased their prices as compared with the share in the previous report. Price hikes were most prevalent among freight haulers, who, faced with very strong demand and tight capacity in the industry, were able to command higher prices with ease. Many construction and manufacturing firms raised their prices to keep up with escalating input costs, although several of them were concerned that doing so would not be adequate to preserve their margins. Price changes for consumer goods and services were less pronounced than for goods producers and transportation firms. Auto dealers commented that low inventories of vehicles continue to push up prices for new and used cars. Department stores and apparel retailers said they reduced their sales promotions. By contrast, most restaurants and hotels held their prices. Professional services firms broadly held their prices, as they have done for several reporting periods.\nConsumer Spending\nReports suggest that consumer spending improved following weaker activity in the previous reporting period. The lifting of government-mandated restrictions on operating hours improved business activity somewhat for restauranteurs. Sales for general merchandisers and apparel retailers were slightly better recently, although some noted that in-store sales remained soft. Auto dealers said that low inventories were limiting sales, while hoteliers indicated that the lack of business travel continued to delay the sector's recovery. Contacts were cautiously optimistic that consumer spending will continue to recover in the coming months thanks to additional fiscal stimulus and the apparent drop in coronavirus infections.\nManufacturing\nManufacturing orders increased moderately, on balance, although demand varied by industry segment. Contacts noted that demand for home goods, shipping materials, construction equipment, and logistics equipment was particularly strong. By contrast, demand for products related to commercial aerospace and to oil and gas production remained depressed. Many manufacturers experienced delayed deliveries of inputs, which impeded their ability to meet demand. Most manufacturers expected that demand will improve over the coming months, although many were concerned about rising input costs and turnover of entry-level employees.\nReal Estate and Construction\nHousing demand remained strong, thanks partly to low interest rates. Homebuilders also indicated that low inventories of existing homes motivated consumers to move forward with new-home construction. One contact commented that demand for suburban homes had increased. Despite the strong level of activity, a significant share of homebuilders experienced delayed deliveries from suppliers that resulted in extended lead times. Contacts anticipated sales would remain strong through the spring as pent-up demand is released. However, there was some concern that rising prices would eventually price some buyers out of the market.\nNonresidential construction and real estate activity edged higher, on balance, as demand for industrial and distribution space increased. By contrast, activity in the office and retail segments remained weak. Contacts anticipated that nonresidential construction and leasing activity would improve modestly in the next few months.\nFinancial Services\nBanking activity increased moderately. Contacts noted that low interest rates continued to support demand for mortgages. Also, the current round of the Paycheck Protection Program (PPP) boosted lending to businesses, although some bankers commented that demand for the program was not as strong this round as it was in the first round. Aside from the PPP, demand for business loans was reportedly flat. Lenders indicated that delinquency rates for commercial and consumer loans were still low because of forbearance agreements and various fiscal relief measures, although some noted that delinquency rates were slightly up from those of two months ago. Multiple contacts reported that core deposits increased as customers deferred spending and investment. Looking ahead, bankers were optimistic that loan demand would pick up in the near term and even more so later in the year as more coronavirus vaccines are distributed.\nProfessional and Business Services\nDemand for professional and business services continued to increase, albeit at a slower pace than in the last reporting period. Authentication and cloud services and human resources and payroll software providers all continued to benefit from the shift toward more remote work and online purchases. One contact noted that demand for the firm's cloud offerings increased significantly because many firms have begun to outsource certain functions to software vendors rather than investing in their own IT resources or equipment. Contacts anticipated further increases in activity in the coming months as the economy continues to recover and more firms shift to remote channels of commerce and communication.\nFreight\nDemand for freight services increased strongly, and contacts expect the high level of activity to persist in the near term. Contacts commented that activity was driven by stronger import volumes, continued demand from home construction suppliers, and customers' replenishing their inventories. On the downside, several firms said their deliveries to customers were delayed because they struggled to find qualified drivers.\nFor more information about District economic conditions visit: clevelandfed.org/region\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
San Francisco | 2021-03-03T00:00:00 | /beige-book-reports/2021/2021-03-sf | "Beige Book Report: San Francisco\nMarch 3, 2021\nSummary of Economic Activity\nEconomic activity in the Twelfth District expanded at a modest pace during the reporting period of January through mid-February. Employment levels decreased somewhat, while wages increased slightly on net. Inflation has picked up, driven largely by increases in energy prices. Retail sales continued to expand, while activity in the consumer and business services sectors declined moderately due to ongoing pandemic-related restrictions. Manufacturing activity continued to expand modestly, and conditions in the agriculture sector improved marginally. Contacts reported ongoing strength in residential real estate markets, but weak conditions in the commercial sector. Lending activity continued to grow robustly, mostly concentrated in origination of second-round PPP loans.\nEmployment and Wages\nEmployment levels decreased slightly, although conditions varied significantly by region and industry. Employers in the hospitality and tourism sectors generally reduced their workforce and extended furloughs due to the ongoing effects of the most recent wave of COVID-19 infections. An increasing number of contacts reported difficulty filling open positions, both for high-skilled and low-skilled workers. Employers in the construction, manufacturing, auto mechanics, and healthcare sectors continued to be constrained by shortages in qualified labor. Rising employee turnover was another commonly cited concern, mainly due to workers switching industries, moving, or leaving the workforce altogether. A few contacts in financial services, energy, and logistical services reported implementing hiring freezes or plans to reduce their workforce later in the year. On the other hand, demand for labor in consulting, legal services, technology, and healthcare sectors remained stable.\nWages increased marginally on balance. In addition to mandatory minimum wage increases in some areas, a few contacts also reported increasing compensation for frontline essential workers. Employers in manufacturing, construction, and health-care services also noted upward wage pressures, mainly due to labor supply issues. By contrast, a few contacts in the financial services and hospitality sectors mentioned plans for decreased wages and merit-based bonuses compared to previous years. Most other reports mentioned little to no change in wages.\nPrices\nInflation picked up modestly over the reporting period. Most of this increase was driven by hikes in oil and electricity prices, with only a few firms being able to pass on the higher costs to final consumers. Prices of building materials, such as lumber, wallboard, steel, and asphalt, continued to rise from already high levels. Select agricultural products also saw modest price increases, including wheat, corn, and soybeans. Contacts in the hospitality and financial services sectors reported either flat or decreasing prices.\nRetail Trade and Services\nRetail sales growth has improved overall, partly owing to the effects of the second round of fiscal relief transfers to households. Online sales continued to be strong, as did sales by brick-and-mortar grocery and convenience stores. Although most contacts reported reduced foot traffic in retail centers, a contact in Southern California noted that thrift and secondhand stores experienced a rise in demand. Auto sales have continued to increase, although more purchases are being made online rather than in person at auto dealerships. Contacts across the District noted ongoing supply chain disruptions and port delays, especially for imports from China.\nActivity in the consumer and business services sector declined moderately. Conditions in the tourism, leisure, and hospitality industries continued to be severely impacted by ongoing restrictions due to the pandemic, with one contact in Southern California anticipating its weakest quarterly performance since the onset of the pandemic. Many restaurants continued to only offer delivery or pickup services to limit operating costs. Automotive service providers continued to see decreasing sales volumes, reflecting a general trend in reduced vehicle miles driven. Some production work in the entertainment industry returned in February, but many producers chose to further delay projects halted in January. The inability to secure business insurance coverage against pandemic-related risks continued to limit activity in the film, television, and sports production industries. In health care, activity has mostly rebounded back to pre-pandemic levels, with increasing demand for mental health and related services. Demand for logistics and transportation services continued to be strong. A medical laboratory in the Mountain West noted that demand for COVID-19 testing has substantially fallen in recent weeks as vaccines and point-of-care rapid testing has reduced the reliance on traditional testing.\nManufacturing\nActivity in the manufacturing sector continued to strengthen modestly, although the pace of expansion has slowed somewhat since the last reporting period. Demand for metals and wood products remained strong, driven by the continued expansion in residential construction. Sales of recycled metals and fabricated steel products have declined somewhat since their multi-year highs at the end of 2020, which one contact attributed to the potential effects of chip shortages in the auto manufacturing industry. Capacity utilization rates in renewable energy and steelmaking industries picked up, although they are still below U.S. historical averages. Energy usage has returned to pre-pandemic levels for most manufacturers, except for those in the aerospace sector.\nAgriculture and Resource-Related Industries\nAgricultural activity expanded marginally across the District. Demand for wheat, fruits, and nuts increased among both domestic and international consumers. Most growers benefitted from a depreciating dollar, although a few noted the ongoing negative effects of international trade restrictions on U.S. exports. Several contacts in the Pacific Northwest and California mentioned that COVID-related labor and supply chain disruptions continued to put upward pressure on costs and to reduce inventories in some cases. A large energy provider in Southern California reported that lower-than-normal revenue from non-residential customers was mostly offset by higher-than-normal revenue from residential customers, although the number of overdue payments has increased.\nReal Estate and Construction\nResidential construction activity continued to grow at a brisk pace. Demand for residences continued to increase, especially for multifamily homes, although inventories were at historically low levels. Construction of single-family homes continued to fail to meet the high demand. Home prices climbed further, which raised some concern among contacts in California and the Pacific Northwest about the decrease in affordable housing, especially in coastal metropolitan areas. Contacts across the District noted ongoing constraints due to shortages of construction labor, raw materials, and available land. As a result, several in the Pacific Northwest noted that construction projects are sold as soon as they are started, and most builders are at capacity. Demand for remodeling projects was also noted to have increased. Rents fell in metropolitan areas but increased slightly in suburban areas. One contact in Oregon noted that the upcoming enforcement of stricter green codes for energy consumption might put even greater upward pressure on construction costs.\nActivity in the commercial real estate market weakened slightly on net. Demand for retail spaces, office buildings, and hospitality real estate continued to be negatively affected by disruptions stemming from the pandemic. On the other hand, demand for warehouse and industrial properties remained strong, and a few contacts also noted a rise in public construction projects. One contact in the Mountain West reported that demand for office space held steady in the area, partly due to the redesign of some offices to better accommodate social distancing measures.\nFinancial Institutions\nLending activity grew robustly during the reporting period. Most banks reported significant growth in new loan originations, concentrated in second-round PPP loans. Several contacts noted that demand was lower compared with the first round of PPP loans, primarily due to changes in eligibility requirements and the increasing ability of businesses to remain open through the pandemic. Demand for residential mortgages also remained strong, particularly for refinancing. Banks reported ample liquidity, high asset quality, and low delinquency rates, which a few contacts attributed to individuals using stimulus checks to pay down existing loans. One contact in Hawaii noted the increasing importance of community development financial institutions (CDFIs) in providing access to capital and technical assistance to low-income communities.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Chicago | 2021-03-03T00:00:00 | /beige-book-reports/2021/2021-03-ch | "March 3, 2021\nSummary of Economic Activity\nEconomic activity in the Seventh District increased modestly in January and early February but remained below its pre-pandemic level. Contacts expected growth to pick up in the coming months, but most did not expect to see full recovery until at least the first half of 2022. Manufacturing and consumer spending increased moderately; business spending and construction and real estate increased slightly; and employment was little changed. Wages and prices rose modestly. Financial conditions were little changed. Contacts expected agricultural income to be solid in 2021.\nEmployment and Wages\nOverall, employment was little changed over the reporting period, though contacts expected a moderate increase over the next 12 months. Contacts reported that staffing challenges related to COVID-19 cases or exposures and childcare needs had become less severe. In addition, a staffing firm that primarily supplies manufacturers with production workers noted that reduced risk of contracting COVID-19\u2014because of modifications to worksites, training, and falling case counts\u2014was helping support the supply of workers. That said, many contacts continued to experience difficulty in hiring workers, especially at the entry level. One electronics manufacturer was still struggling to fill open positions despite implementing training programs and building relationships with technical schools. Several contacts expressed concern that unemployment benefits were putting a damper on worker availability. Wages across skill levels and benefits costs increased modestly.\nPrices\nPrices increased modestly overall in January and early February, and contacts expected a moderate increase in prices over the next 12 months. Consumer and producer prices both increased modestly. Input costs, however, increased moderately, driven by rising prices for raw materials, shipping, and energy. Numerous manufacturing contacts reported large price increases for primary metals and metal products, particularly copper and steel. Energy prices increased, with some prices spiking because of cold weather.\nConsumer Spending\nConsumer spending increased moderately on balance over the reporting period. Nonauto retail sales increased moderately, supported by robust demand in the home improvement, appliances, furniture, and sporting goods segments and a pickup in sales at apparel and discount stores. Contacts said that stimulus checks received as part of the federal coronavirus relief bill passed in December helped increase activity. While e-commerce continued to be strong, contacts also noted an increase in brick-and-mortar sales as the decline in COVID-19 cases made some consumers feel safer shopping in-store. Light vehicle sales were up modestly, with low inventories of many popular models leading to price increases. Demand for travel, hospitality, and other leisure-related activities remained weak.\nBusiness Spending\nBusiness spending increased slightly in January and early February. Inventory levels continued to be lean in many retail segments due to high demand. Contacts anticipated that vehicle inventories would decline even further because a shortage of microchips had slowed production, and dealers expected inventory levels to be uncomfortably low until at least the second half of the year. Manufacturing inventories were generally at comfortable levels, though several contacts reported supply chain issues related to raw materials (particularly steel and copper), microchips, and specialty parts. Capital expenditures were little changed overall. And while some said they were holding back because of uncertainty over the pandemic, contacts overall expected a moderate increase in their capital spending over the next twelve months on the anticipation that the pandemic will continue to recede. Demand for transportation services increased slightly on top of a high level. Contacts continued to report that bottlenecks in shipping, particularly at West Coast ports, were causing delayed deliveries. There was a small increase in commercial and industrial energy consumption.\nConstruction and Real Estate\nConstruction and real estate activity increased slightly on balance over the reporting period. Residential construction was flat, but the level of activity remained high. Contacts noted that difficulties in obtaining building materials, especially steel and lumber, were pushing up costs and slowing construction activity. Residential real estate activity increased slightly, with reports that tight inventories were holding back sales. Home prices and rents increased modestly on balance, though contacts in parts of the District reported that some homes were receiving multiple offers and selling for well over asking price. Nonresidential construction activity increased modestly. Contacts in southeast Michigan said there was a noticeable increase in industrial and warehouse construction in vacant areas of Detroit. Commercial real estate activity was flat. The office sector continued to struggle. Contacts indicated that some office tenants were downsizing their footprint in response to the pandemic. There were also reports of leasing deals that included long periods of free rent. Prices and rents fell slightly, and the availability of sublease space increased slightly.\nManufacturing\nManufacturing production increased moderately in January and early February, with overall activity approaching pre-pandemic levels. Auto output slowed despite solid demand because of supply chain problems. Production of steel and aluminum increased moderately, responding to a broad increase in demand across most manufacturing subsectors. Manufacturers' sales of specialty metals increased moderately, driven by demand from the automotive, construction, and agriculture sectors. Demand for heavy machinery remained flat, while demand for heavy trucks increased moderately.\nBanking and Finance\nFinancial conditions were little changed on balance over the reporting period. Participants in the equity and bond markets reported a small improvement in conditions, though volatility remained elevated. Business loan demand decreased modestly, with declines concentrated in commercial real estate and in leisure and hospitality. That said, contacts noted that round two of the Paycheck Protection Program was supporting activity. Business loan quality edged down, with declines reported in the commercial real estate, hospitality, and retail sectors. Business loan standards tightened slightly overall. In consumer markets, loan demand decreased slightly, though residential mortgage activity remained strong. Standards for consumer loans tightened slightly and loan quality remained unchanged on balance. A contact at an organization that assists consumers in obtaining home loans noted that many clients who were participating in the federal government's COVID-19 mortgage forbearance program were concerned about whether their incomes would recover enough for them to resume making payments in June, when the program is set to expire.\nAgriculture\nContacts expected agricultural income to be solid in 2021, though down some from 2020's strong results: Direct income from agricultural products could be higher in 2021, but federal government payments were expected to be lower. Corn, soybean, and wheat prices moved up during January and early February. Higher crop revenues helped boost demand for farm equipment, and there were reports of low inventories of new equipment in some areas. Cattle and hog prices also moved up from the prior reporting period. Dairy prices were generally down, and producers faced uncertainty regarding demand from government food programs and schools. Looking ahead, recent adverse weather was expected to support prices, particularly for milk and cattle. Cold weather boosted costs for District farmers; more generally, contacts reported rising input costs for both crop farmers and livestock producers driven by higher fertilizer and feed prices. Farmland values continued to increase strongly.\nFor more information about District economic conditions visit: chicagofed.org/cfsbc\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Atlanta | 2021-03-03T00:00:00 | /beige-book-reports/2021/2021-03-at | "March 3, 2021\nSummary of Economic Activity\nEconomic activity in the Sixth District expanded modestly, on net, from January to mid-February. Labor markets improved some as employers added to headcounts, and wage pressures remained muted. Increases in certain nonlabor costs were noted, and pricing power among firms was mixed. Retailers reported continued strong demand in home furnishings and recreational products. Online sales continued to outpace brick-and-mortar sales. Auto sales increased, exceeding expectations. Tourism contacts saw an uptick in activity over the reporting period as domestic travel rebounded slightly. Demand for housing remained robust, inventories of new and existing homes fell, and home prices rose. Commercial real estate markets were mixed. Manufacturing activity accelerated as new orders and production levels increased. Conditions at financial institutions were stable, but loan demand weakened.\nEmployment and Wages\nOn balance, contacts indicated that employment levels and hours worked rose modestly over the reporting period. Most reported that employment levels were even with or below pre-pandemic levels, and about half of contacts expect to increase employment levels slowly as demand improves. Large leisure and hospitality firms reported a strong willingness from furloughed employees to return to work when called back. Among firms planning to reduce employment levels over the coming months, most planned to downsize through attrition rather than layoffs. Those hiring indicated that most jobs were easy to fill with the exception of lower-skilled positions, nurses, and long-haul drivers. The remote work stance was largely unchanged since the previous report, and several noted that this has allowed them to fill higher-skilled positions more easily. Many firms indicated that they planned to encourage employees to get the COVID-19 vaccine but at this point would not require it. Some contacts were offering paid time off to get the vaccine or were looking to provide the vaccine onsite.\nMost contacts noted that wage pressure remained subdued. Shortages of nurses, skilled trades workers, warehouse workers, and commercial drivers were putting upward pressure on wages in those occupations according to several contacts. In Florida, most employers anticipate little impact from the mandated increases in the minimum wage (by 2026), although a few noted they were investing in capital to replace some of this labor. Many expect normal merit increases during 2021, with higher increases in critical and high-demand fields.\nPrices\nConsistent with previous reports, input costs, particularly for lumber and steel, continued to rise notably over the reporting period. Transportation and shipping costs continued to increase as well, with some contacts noting supply chain constraints creating upward cost pressures. Reports on pricing power were mixed. Sectors such as construction, manufacturing, and transportation that were affected by rising input costs implemented increases, while others were unable or unwilling to raise prices. The Atlanta Fed's Business Inflation Expectations survey showed year-over-year unit costs increased notably to 2.1 percent in February, up from 1.8 percent in January. Year-ahead expectations remained relatively unchanged at 2.2 percent.\nConsumer Spending and Tourism\nHome furnishings and recreation goods retailers reported a continuation of strong demand that began last March. Online sales continued to grow at a faster pace than brick and mortar sales. Auto sales in January outpaced expectations, and dealers reported a positive outlook for the balance of 2021; however, suppliers to the industry noted that shortages of semiconductors could impact future volumes.\nTravel and tourism contacts reported a slight uptick in activity since the previous report. Domestic travel rebounded slightly and is expected to continue to strengthen as the COVID-19 vaccine is more widely distributed. Contacts expect that leisure travel will begin to normalize towards the end of summer, while business travel is expected to pick up in the fourth quarter of 2021 but remain well below pre-pandemic levels.\nConstruction and Real Estate\nThe District's housing market maintained its momentum as rising home sales continued to be fueled by low interest rates. In many markets, sales increased sharply from a year ago. Inventory shortages were prevalent as available homes for sale did not keep pace with demand. New home construction also fell short of market demand, and shortages of lots, materials, and labor increased costs for builders. As a result, both existing and new home prices have experienced significant upward pressure. Though low rates have helped offset rising prices, home ownership affordability declined overall. The level of mortgage delinquencies, while elevated due to the pandemic, remained stable over the reporting period.\nCommercial real estate (CRE) contacts reported that the sector continued to be hampered by the effects of the pandemic; however, some areas of CRE showed improvement. Conditions in the retail sector improved modestly and rent collections recovered from the dismal results experienced in mid-2020. Multifamily conditions were mixed; however, leasing activity appeared to be picking up in some of the harder hit areas. The hospitality sector continued to be negatively impacted by low levels of tourism. Banks reported that financing for commercial projects was available and demand for new construction rose.\nManufacturing\nManufacturing firms indicated that business activity accelerated since the previous report. Contacts reported an increase in new orders and production levels, while purchasing managers continued to see longer supply delivery times and slightly elevated finished inventory levels. Expectations for future production remain optimistic, with almost two-thirds of contacts expecting higher levels of production over the next six months.\nTransportation\nOn balance, transportation activity was consistent with the previous report. Railroads noted further improvements in overall traffic buoyed by double-digit increases in intermodal shipments. Freight brokerage firms reported robust demand and revenue growth as limited trucking capacity boosted rates per mile. Port contacts noted record container volumes amid surges in imports and an uptick in exports. Trucking contacts continued to benefit from strong demand for consumer staples; however, driver shortages remained a constraint in the industry despite rising wages. Inland barge and relocation contacts, however, continued to experience challenges due to COVID-19, and a return to pre-pandemic levels of activity is not expected until 2022 or beyond.\nBanking and Finance\nConditions at financial institutions were steady. Net interest margins stabilized even as loan yields declined due to lower funding costs. Earnings also improved slightly as a result of lower provisions for credit losses. Loan growth declined due to tepid demand, especially among commercial customers, resulting in higher balances in banks' cash accounts and securities portfolios amidst healthy deposit growth. Despite concerns that increased unemployment levels might negatively impact loan payments, credit quality stayed strong at most banks. Customer loan payment performance continued to improve, with some banks reporting extremely low past due loan levels; however, retail delinquencies were still elevated in comparison to other commercial borrowers.\nEnergy\nIn parts of the District, residents and businesses grappled with power outages and rolling blackouts during mid-February winter storms. Refiners, chemical manufacturers, and liquified natural gas producers in Southwest Louisiana were forced to idle production. Fuel carriers in the region reported a severe backlog of deliveries as hazardous road conditions, power outages, and terminal shutdowns created delivery congestion and delays. Crude oil production was steady, and oil and gas rig counts gradually picked up. Contacts described a moderate recovery of consumer demand for petroleum products. However, refiners continued to experience low utilization resulting from weak global demand for refined products. Some refiners took production offline while others were forced to consolidate or shut down completely. Renewables remained strong, with considerable solar, wind, and battery storage projects in the works across the country. Within the utilities sector, contacts noted energy usage remained sensitive to COVID-19 conditions. More broadly, though, energy contacts continued to express optimism about COVID-19 vaccinations stimulating economic activity.\nAgriculture\nAgricultural conditions remained mixed. Abnormally dry conditions prevailed across much of the District. On a month-over-month basis, the February production forecast for Florida's orange crop was up while the grapefruit production forecast was unchanged; both forecasts were below last year's production. The USDA reported year-over-year prices paid to farmers in December were up for corn, cotton, rice, and soybeans but down for cattle, broilers, eggs, and milk. On a month-over-month basis, prices increased for corn, cotton, rice, soybeans, cattle, and broilers, but decreased for eggs and milk.\nFor more information about District economic conditions visit: www.frbatlanta.org/economy\u2010matters/regional\u2010economics\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Dallas | 2021-03-03T00:00:00 | /beige-book-reports/2021/2021-03-da | "March 3, 2021\nSummary of Economic Activity\nThe Eleventh District economy expanded at a moderate pace, though output in most industries remained below normal levels. Growth in the manufacturing and nonfinancial services sectors picked up in early February after stalling in January, while retail activity remained flat. Unprecedented winter storms and widespread power outages in mid-February severely disrupted economic activity, though the impact is mostly expected to be transitory. The housing market continued to be a bright spot, with vigorous new home construction. Overall loan volume decreased slightly, though real estate lending continued to rise. Energy activity improved further. Employment rose and wages increased moderately. Marked price increases were seen in the manufacturing and retail sectors, due in part to supply chain disruptions. Outlooks were generally positive, but uncertainty persisted.\nEmployment and Wages\nEmployment was up overall, with solid hiring continuing in manufacturing and service-sector hiring picking up in February after easing in January. Employment reports were mixed in the energy sector, with some reporting lingering layoffs and others reporting hiring to meet needs for drilling and completion activity. Modest job losses were seen in the retail sector, where work hours also dipped. Some firms reported short-term problems maintaining workflow while others closed temporarily amid widespread power outages and water problems from winter storms. Roughly 47 percent of contacts say headcounts are down from pre-COVID levels, by about 25 percent on average, according to a Dallas Fed survey of over 300 Texas businesses in February. Twenty-one percent of firms reported increased headcounts, and 32 percent reported no change from February 2020 levels.\nWage growth was moderate, though there were some reports of more significant wage pressure in segments experiencing difficulty finding and retaining workers. An investment firm said they had to increase wages 5\u201315 percent to keep employees from being lured away. Several contacts voiced concern over the prospect of a $15 minimum wage.\nPrices\nInput costs continued to increase at a moderate pace overall, except in the manufacturing and retail sectors where supply chain disruptions drove prices up more strongly. Some contacts also noted substantial increases in agricultural commodity prices, as well as lumber and steel. Selling prices were flat to up slightly outside of the retail and manufacturing sectors where above-average price growth was seen. A wholesaler noted that cost increases were happening so fast that they could not raise prices fast enough to keep up, and margins were suffering as a result.\nManufacturing\nThe Texas manufacturing recovery slowed dramatically in January but picked up pace in early February, with production and demand growth accelerating markedly. February growth was widespread and led by nondurables, particularly food and chemicals. Petrochemical contacts noted strong demand for consumer packaging, PPE, and construction materials like PVC. Refineries said fuel demand was decent over the past six weeks but still down year over year. A majority of manufacturers noted supply chain shortages were disrupting business, as was worker absenteeism due to COVID-19 quarantines. The full impact of the mid-February winter storms is not yet known, but some contacts reported temporary facility shutdowns. Outlooks improved further, though some contacts voiced concern about the prospect of adverse effects resulting from increased oil and gas regulation.\nRetail Sales\nTexas retail activity remained fairly flat over the past six weeks. Auto sales were weak, in part from low new vehicle inventories due to supplier issues. Demand for building materials was booming, but sales growth was limited by supply constraints. Overall, more than 60 percent of retail contacts said they were experiencing supply chain disruptions, which they noted were driving up costs and delaying order fulfillment. Severe winter storms in mid-February depressed sales activity, and outlooks worsened overall.\nNonfinancial Services\nGrowth in the nonfinancial services sector stalled out in January amid rising COVID-19 cases but resumed at a modest pace in early February. Despite the ongoing recovery, more than half of contacts report that revenues were still down from normal, though this share has slowly but steadily declined over the past eight months. Professional and technical services continued to outperform other segments, with generally robust revenue growth. Staffing firms reported increased demand as business among customers broadly recovered, with particular strength in healthcare, IT, and construction. In transportation services, air cargo volumes were up over the past six weeks with growth driven by e-commerce, while small parcel volumes were down seasonally but well above year ago levels. Airlines reported flat demand at low levels.\nSevere winter storms and power outages in mid-February significantly and adversely impacted many businesses in the short term, but overall outlooks improved, with some contacts pointing to the COVID-19 vaccine as a particular driver of optimism.\nConstruction and Real Estate\nActivity in the single-family housing market remained robust. New home construction continued to be vigorous, though there were reports of delays due to increased lead times for building materials and appliances, skilled labor shortages, and permitting delays. As a result of these production constraints, several builders noted capping sales and putting prospective buyers on wait lists. Lot supply remained very tight, and one contact said buyers camped out for lot selection at a subdivision in suburban Austin. Builders continued to increase prices to offset rising construction costs, particularly for lumber, and to slow down sales as backlogs remained high. Outlooks were favorable, with some concern about tight lot supply, labor and material availability and costs, and an unexpected rise in mortgage rates.\nApartment demand was mostly steady, and rent collections were generally holding up in major Texas markets. Industrial construction and leasing activity remained strong. Office leasing stayed weak, but contacts said market conditions appeared to be slowly stabilizing.\nFinancial Services\nOverall loan volume decreased slightly over the past six weeks, with increases in commercial and residential real estate loans offset by declines in consumer loans and commercial and industrial loans. Loan pricing continued to decline, and credit standards tightened further. General business activity increased, and contacts expect higher loan demand and general business activity six months from now.\nIn a Dallas Fed survey of more than 70 Eleventh District financial Institutions, 80 percent were issuing loans through the current round of PPP, though the majority expect the total number and total value of these loans to be substantially lower than the PPP loans they issued last year.\nEnergy\nActivity in the oil and gas sector improved somewhat, and sentiment was very cautiously optimistic. Drilling and completion activity were more robust than contacts had expected. The number of new executive orders aimed at the oil and gas industry was concerning to some contacts. Many smaller firms that operate on federal lands will not be able to shift to private lands, but most mid-sized and larger firms will. The lack of permitting and leasing in the Gulf of Mexico, if sustained, could be a more significant issue. The looming threat of tighter federal regulations and depressed global demand weighed on contacts' minds, but improving COVID-19 statistics, OPEC production discipline, and higher oil prices were tailwinds.\nAgriculture\nPrecipitation over the reporting period eased drought conditions somewhat. Higher crop prices boosted optimism among farmers heading into spring planting, though there was some concern over higher input costs. The extent of the losses from the severe winter storms are not yet known, but will likely span the livestock and dairy sectors, produce, and wheat.\nFor more information about District economic conditions visit: www.dallasfed.org/research/texas\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Boston | 2021-03-03T00:00:00 | /beige-book-reports/2021/2021-03-bo | "March 3, 2021\nSummary of Economic Activity\nEconomic activity was decidedly mixed in the First District, with moderate growth on balance. Manufacturers reported strong to very strong results, while restaurants and hotels experienced very weak demand. Retail sales were robust across a variety of outlets, and auto sales made a sharp rebound in late 2020. Performance at staffing firms was mixed but most saw growth that exceeded expectations. The commercial real estate market was split between very strong activity for industrial and laboratory space and sluggish to very weak demand for office, retail, and hotel properties. Residential real estate sales and prices continued to climb but low inventories remained a problem. The outlook took a more optimistic turn among many contacts in response to the vaccine rollout and the pending arrival of warmer weather.\nEmployment and Wages\nAccording to reports from staffing firms, labor demand was strong from manufacturing, legal services, health care, and scientific and technical firms, while the market for lower-skilled services workers exhibited significant slack. A staffing firm described the markets for health care and scientific/technical workers as being at full employment, making it difficult to find qualified workers in those fields. Among manufacturing contacts, all but one planned to add workers. Most of those were engaging in light to modest hiring but two planned on dramatic increases in headcounts, including a life sciences firm hoping to hire 12 to 15 times as many workers in 2021 as in a typical year. Several manufacturers reported having difficulties finding qualified workers and two also said that absenteeism was a problem. About half of manufacturing contacts remarked that labor costs had increased and a few had raised or were planning to raise salaries by around 3 percent in 2021. Staffing firms said that wages were up for highly skilled temporary employees and that both the duration of temporary employment and the conversion rate from temporary to permanent employment had increased for high-skilled occupations.\nPrices\nPricing reports were mixed. Some manufacturers reported higher nonlabor input prices, including one who faced extreme upward pressure on petrochemicals prices due shortages that were exacerbated by the winter storms in the south-central US, two who said that shipping costs had increased substantially, and another that paid more for gold. Nonetheless, none of those contacts planned to raise their output prices. Most other manufacturing contacts experienced level (nonlabor) input prices, but two had seen a recent easing of costs. One manufacturer planned to increase its output prices on the strength of demand for its products. Outside of manufacturing the only report on prices was that daily room rates at Boston-area hotels were down 40 percent from one year ago.\nRetail and Tourism\nRetail contacts noted continued strength in sales in early 2021 in automobiles, RVs, winter sports equipment, salvaged goods, and online sales of home furnishings. Hospitality contacts said that restaurant sales and hotel stays slumped further during the winter months amid the renewed surge in COVID-19 cases. Nonetheless, the same contacts were optimistic for the first time since the pandemic began, as they expected that more widespread vaccine distribution and warmer weather would result in a release of pent-up demand in the spring and summer. All Boston-area conventions originally scheduled to take place by summer 2021 have been postponed.\nAutomobile sales in 2020 broke records at many dealerships despite steep declines last spring. Stronger-than-expected auto sales have exacerbated the pre-existing shortage of semiconductor chips and could crimp an otherwise strong 2021. A salvaged goods chain reported strong sales despite persistent weakness in stores near the Canadian border. Online sales of home furnishings remained robust.\nManufacturing and Related Services\nAll ten firms contacted this cycle reported higher sales, and three said their company had seen its best performance ever in recent quarters. Semiconductor industry contacts reported exceptionally strong demand, coming from both the auto industry and manufacturers of personal computers and other electronic devices. Combined with supply-chain hiccups that began in 2019 and were exacerbated by the pandemic, the surging demand has led to shortages in the chips used in automobiles in particular. Other manufacturers, producing everything from almond milk to bulk chemicals to veterinary diagnostics to lab equipment, also reported very strong sales.\nMost contacts planned to increase their capital expenditures in 2021. Some of these increases were intended to compensate for COVID-19 related disruptions to investment activity in 2020. Surprisingly, however, some contacts revised their capital expenditure plans down for 2021 because they had completed more investment in 2020 than originally expected. Contacts were generally optimistic about 2021, despite expressing uncertainty about the evolution of the pandemic and vaccinations. One contact expressed concern that some of the demand increases they had experienced in 2020 would recede along with the pandemic. For example, a veterinary care products maker said that COVID-19 had led people to spend more time with pets and to adopt new ones, a pattern that could reverse in the coming months.\nStaffing Services\nA few New England staffing firms reported negative year-over-year revenue growth, but the majority experienced stronger-than-expected growth in Q4 of 2020. The demand for labor was strong in most sectors, including manufacturing and legal services, but one contact noted a surplus of lower-skilled services workers. Both bill and pay rates increased for most firms, but without any substantial changes to mark-ups, as client organizations were willing to pay higher wages. In addition, most contacts reported incurring greater costs in order to attract candidates, such as expanding their advertising efforts and/or hiring additional recruiters. Contacts were unanimous in expressing greater optimism about the coming quarters, as they expect that vaccine rollouts will allow more people to reenter the workforce.\nCommercial Real Estate\nCommercial real estate conditions in the First District were mostly unchanged since December. Throughout the District there remained significant disparities between the industrial sector\u2014which saw robust demand and extremely low vacancy rates\u2014and the retail and hospitality sectors, both of which continued to register very weak demand and declining property values. The life sciences industry, concentrated in greater Boston, extended its boom in the leasing and construction of lab space. Although office leasing was mostly sluggish, a Providence contact reported a slight uptick in leasing activity that was noteworthy in that tenants expressed interest in longer-term leases. The same contact noted that concessions on Providence office space had increased, lowering effective rents if not asking rents. Contacts expect demand for office space to remain muted or to improve modestly in the first half of 2021, and to improve significantly in the second half. Hotel demand is expected to rebound in mid-to-late 2021 as well. Nonetheless, contacts are forecasting a permanent decrease in office occupancy of 20 percent or more in the post-pandemic economy, and a glut of lab space in greater Boston remains a risk at the two-to-three-year horizon.\nResidential Real Estate\nThe residential real estate market in New England showed no signs of slowing in December and January. (Rhode Island and Vermont reported over-the-year changes to December 2020; Massachusetts, Boston, New Hampshire, and Maine reported over-the-year changes to January 2021; Connecticut data were unavailable.) The number of closed sales increased in all reporting areas. However, the inventory of homes for sale continued to fall well below year-earlier levels in all markets except the Boston condo market, which saw an uptick in inventory. The median sales price rose in all markets, but the increase was greater for single-family homes than for condos. Contacts from Massachusetts, Rhode Island, and Maine saw high numbers of out-of-state buyers, especially for homes in vacation communities. The Massachusetts contact said low interest rates and flexible work arrangements had likely provided a boost to demand for vacation homes.\nFor more information about District economic conditions visit: www.bostonfed.org/regional-economy\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
New York | 2021-03-03T00:00:00 | /beige-book-reports/2021/2021-03-ny | "Beige Book Report: New York\nMarch 3, 2021\nSummary of Economic Activity\nEconomic activity in the Second District has declined modestly in the latest reporting period. However, with vaccinations rising and the spread of COVID on a steady decline, business contacts have grown considerably more optimistic about the near-term outlook. While the labor market has remained sluggish, with employment flat to down modestly in almost all industries, wage growth and hiring plans have picked up. Input price pressures have continued to expand, and more businesses are raising their own prices or planning price hikes in the months ahead. Consumer spending has remained lackluster in early 2021, though auto sales have firmed. Tourism has picked up and prospects for the months ahead have improved. Housing markets have generally remained robust, whereas markets for office and retail space have continued to weaken. Finally, contacts in the broad finance sector continued to indicate weakening conditions, though regional banks reported increased loan demand and modest improvement in delinquency rates.\nEmployment and Wages\nThe labor market has remained sluggish since the start of the year. A major New York City employment agency characterized hiring activity as moribund, noting that it is hard to on-board and train new staff remotely and that there is still a great deal of uncertainty. On the other hand, an upstate employment agency reported a pickup in hiring activity in recent weeks and noted that it has been difficult to fill lower-wage jobs. A major upstate New York employer indicated that it has had difficulty retaining IT workers, losing them to remote work opportunities in other parts of the country.\nBusinesses in most sectors\u2014particularly construction and leisure & hospitality\u2014have continued to report weakening employment. The exceptions were manufacturing, information, finance, and retail, where employment was reported to be little changed. Looking ahead, however, a growing proportion of businesses reported plans to add staff, on net, especially in the leisure & hospitality sector.\nWages have accelerated further, with more businesses raising wages than at any time since the start of the pandemic. Wage increases were most widespread in the education & health, retail, finance, and transportation sectors. A number of contacts stated that the January\u00a01st minimum wage hike across much of the District, as well as generous unemployment benefits, have put upward pressure on wages. Looking ahead, a growing number of businesses also plan to raise wages\u2014most notably in leisure & hospitality and retail & wholesale trade.\nPrices\nFirms' input prices have accelerated since the beginning of the year, particularly among businesses in the manufacturing and construction sectors. In particular, prices of metals and construction materials are said to have escalated substantially. Businesses in most sectors expect fairly widespread increases in the prices they pay in the months ahead.\nSelling prices have picked up modestly, primarily among retailers, wholesalers, and manufacturers. Looking ahead, businesses in these same sectors plan further price increases.\nConsumer Spending\nConsumer spending has remained sluggish thus far in 2021. Retailers largely report that sales have been flat at depressed levels. However, retail contacts have become substantially more optimistic about the near-term outlook.\nNew vehicle sales were mixed but, on balance, up slightly, with scattered reports of improvement across upstate New York. In contrast, used auto sales have weakened. Contacts reported lean inventories and expressed concern about inventory issues related to a shortage of microchips used in new vehicles.\nConsumer confidence among residents of the Middle Atlantic region (NY, NJ PA), which had fallen to a multi-year low in November and December, rebounded moderately in January.\nManufacturing and Distribution\nManufacturing activity picked up somewhat in January and early February, expanding at a moderate pace. In contrast, wholesale trade contacts reported flat activity, and businesses in transportation & warehousing noted some weakening. A large and growing number of firms in these sectors reported supply disruptions and delays\u2014particularly in getting shipments from overseas.\nLooking ahead, manufacturers and wholesalers remain widely confident about business prospects for the first half of 2021, while transportation & warehousing contacts have now also become more optimistic.\nServices\nService industry contacts noted ongoing weakening in business activity in the latest reporting period. Contacts in the information, and leisure & hospitality sectors continued to report fairly widespread declines in activity, while those in education & health and professional & business services reported more moderate declines. Looking ahead, professional & business service firms expressed widespread optimism about prospects for the first half of 2021, while those in other industries have grown somewhat more optimistic and expect moderate improvement.\nTourism in New York City has shown more signs of picking up, though from depressed levels. The decline in the spread of the pandemic and increased vaccinations in recent weeks have prompted some easing in restrictions on indoor dining. The closing of many hotels catering to business travelers has contributed to a nearly one-third reduction in hotel capacity since the pandemic began. Hotels that have remained open have reported rising occupancy rates on weekends, reflecting increased leisure travel. In fact, the occupancy rate over Presidents' weekend exceeded 60 percent\u2014the highest since the start of the pandemic. Museums that are open have reportedly been at or near capacity, albeit reduced capacity. A local travel industry expert anticipates a strong rebound in leisure visitors by summer but expects business travel to lag.\nReal Estate and Construction\nHousing markets have remained mixed but generally robust in the latest reporting period. Sales markets in upstate New York have remained solid in early 2021, with homes selling quickly and lean inventories continuing to drive up prices. Home-sales activity in areas around New York City has remained strong, though restrained by record-low inventory levels, with prices up considerably from a year ago but leveling off.\nNew York City's co-op and condo market has picked up noticeably in terms of volume, but with prices running 5-10 percent below year-earlier levels, as inventory remains elevated. Both the steepest price drops and the strongest activity have been at the high end of the market. New York City's residential rental market has continued to slacken, with rents down 10-15 percent from a year ago in Brooklyn and down 20-25 percent in Manhattan and Queens. Rental vacancy rates across New York City are reported to be at multi-decade highs. However, leasing activity has been increasingly robust, with this January being the liveliest in more than a decade.\nCommercial real estate markets have weakened further, across the District. Retail and office markets have been particularly weak in New York City, where vacancy and availability rates have soared and asking rents have continued to decline, with landlords reportedly offering increased concessions.\nNew construction activity has remained sluggish in both the residential and commercial segments. Contacts in the construction industry noted widespread weakening in activity, possibly exacerbated by harsh weather, and they remain somewhat pessimistic about the near-term outlook. Contacts continued to report sharp increases in the cost of materials, as well as supply disruptions.\nBanking and Finance\nContacts across the broad finance sector continued to report weak conditions but expressed somewhat more optimism about the near-term outlook. Separately, small to medium-sized banks in the District reported increased loan demand across all categories except consumer loans. Banks reported no change in credit standards on consumer loans but tightening standards for all other categories. Finally, delinquency rates held steady for C&I loans but improved across all other categories.\nFor more information about District economic conditions visit: www.newyorkfed.org/regional-economy\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Philadelphia | 2021-03-03T00:00:00 | /beige-book-reports/2021/2021-03-ph | "March 3, 2021\nSummary of Economic Activity\nOn balance, business activity in the Third District rebounded to a modest pace of growth during the current Beige Book period \u2013 the first significant growth since midsummer. However, activity in most sectors remained below levels observed prior to the onset of the COVID-19 pandemic. Net employment appeared to rise slightly after falling slightly in the prior period. Positive wage and price growth trends increased to modest and moderate paces, respectively. Economic gains appeared to reflect waning COVID-19 cases and the relaxation of some business restrictions. However, firms continued to cite disruptions at production sites, consumer outlets, and along supply chains. Moreover, wintry weather conditions have constrained growth in several sectors. More than half of the firms expressed positive expectations for modest growth over the next six months \u2013 the percent broadened further among nonmanufacturing firms but narrowed among manufacturers.\nEmployment and Wages\nEmployment appeared to increase slightly overall \u2013 rebounding from a slight decrease in the prior period. The share of nonmanufacturing firms reporting employment increases for full-time employees just edged out those reporting decreases. Among the manufacturers, employment increases broadened to nearly one-third of the reporting firms, while reported job declines waned. Moreover, average hours worked rose for a larger share of all firms.\nStaffing firm contacts reported that strong demand continued for new orders, while qualified job candidates remained a challenge to hire and retain. Employers confirmed data reports that a significant portion of the potential labor force remains sidelined by childcare responsibilities, especially women. Contacts also noted some loss of experienced employees to other firms. Moreover, staffing firms noted an increase in the number of their own temp placements that are being hired by clients into full-time positions.\nWages picked up modestly, after maintaining a slight pace of growth since midsummer. The percentage of nonmanufacturing firms reporting higher wage and benefit costs per employee broadened to nearly one-third. Just over half of the firms reported no change. Staffing firms reported that wages were increasing across the salary spectrum. While several contacts worry about a potential minimum wage increase, one contact said that wages were rising because of demand for labor \u2013 \"the $15.00 minimum is already here.\" Another pointed to job ads offering $23 an hour for warehouse jobs.\nPrices\nOn balance, prices appeared to rise moderately over the period \u2013 following a modest increase in the prior period and modest increases over most of the prior year. Over half of the manufacturers reported higher prices for factor inputs, but less than one-third received higher prices for their own products. Similarly, about one-third of the nonmanufacturers reported that prices rose for their inputs, and less than one-tenth noted higher prices received from consumers for their own goods and services. Most firms noted no change in prices.\nMost respondents continued to cite COVID-related disruptions in production and supply chain logistics as primary reasons for shortages and price spikes of various commodities, including some agricultural products, building materials, cleaning products, and microchips.\nLooking ahead one year, firms now anticipate receiving moderately higher prices for their own goods and services \u2013 a significant increase from one quarter earlier. Firm expectations also pegged compensation paid to workers as moderately higher; firm expectations for consumer inflation were somewhat lower.\nManufacturing\nOn average, manufacturing activity appeared to pick up to a moderate pace of growth following a period of no growth. More than 40 percent of the firms reported increases of shipments and new orders. Although some firms have reported increased demand for their products through the pandemic, manufacturing activity as a whole remained below pre-pandemic levels.\nSeveral contacts noted that demand was increasing across most sectors from countries throughout the world. Plant operations continued to be plagued by COVID-19 outbreaks and supply chain disruptions. Contacts noted that backlogs have grown and delivery times have lengthened.\nConsumer Spending\nNonauto retail sales appeared to rebound slightly as COVID-19 cases and operating restrictions eased. However, wintry weather limited the snap back in consumer spending.\nAuto dealers cited snowstorms as they reported modest declines in year-over-year sales. Much more positive comparisons are anticipated over the next half year against months in which operations were restricted by states. However, dealers are concerned about the supply of new models because of the shortage of microchips needed for production.\nOverall, tourism appears to have rebounded slightly but remains constrained by travel and operating restrictions. Contacts noted significant pent-up demand and drew confidence from increases in advanced bookings. Activity is expected to grow as herd immunity is achieved \u2013 first for trips to see the grandchildren and for other leisure travel by the initial wave of senior vaccine recipients.\nNonfinancial Services\nOn balance, nonmanufacturing activity appeared to pick up to a modest pace of growth following a modest decline in the prior period. About one-fourth of the firms reported increases of sales and new orders. On balance, the firms continued to report that output remains below pre-pandemic levels.\nFinancial Services\nThe volume of bank lending fell modestly during the period (not seasonally adjusted); in the same period in 2020, by contrast, loan volumes grew modestly. Commercial real estate and auto lending were flat, while home mortgages fell slightly. Commercial and industrial loans fell modestly, while home equity lines continued to fall moderately. Other consumer loans rose modestly. Seasonal factors drove credit card volumes down sharply \u2013 at a greater pace than over the same period in 2020.\nBankers, accountants, and bankruptcy attorneys continued to report relatively few problem loans. The Paycheck Protection Program and other stimulus programs were often credited for keeping firms and households afloat. However, most contacts anticipate delinquencies and bankruptcies to increase in the future. In another sign of stress, Pennsylvania utilities have reported that nearly 1 million customers are late on payments, but they are shielded from cutoffs by a routine winter moratorium in effect until the end of March.\nReal Estate and Construction\nHomebuilders reported moderate growth in contract signings stemming from strong demand across all demographics. Contacts noted challenges to production, ranging from land acquisition to cost of lumber to availability of window packages to scheduling of specialized tradespeople. Existing home sales continued to grow modestly. Limited inventories continued to constrain otherwise strong demand and drive prices higher.\nPhiladelphia's commercial construction activity appeared to have slowed slightly. The project pipeline and COVID-19 safety protocols continue to support levels at about 80 percent of the prior year.\nCommercial leasing activity slowed slightly after falling moderately in the prior period. Contacts continued to note uncertainty about the future demand for office space and don't expect clarity until large downtown offices are able to resume normal operations.\nFor more information about District economic conditions visit: www.philadelphiafed.org/research-and-data/regionaleconomy\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Kansas City | 2021-03-03T00:00:00 | /beige-book-reports/2021/2021-03-kc | "Beige Book Report: Kansas City\nMarch 3, 2021\nSummary of Economic Activity\nThe Tenth District economy expanded slightly in January and February, with conditions strengthening in most sectors. Contacts in almost every sector anticipated stronger activity in the months ahead, although the majority also noted that the COVID-19 vaccine rollout was somewhat or very important to their outlook. Consumer spending increased slightly in January\u2014driven by gains in retail, restaurant, and healthcare spending\u2014but fell in February. Manufacturing production and new orders expanded modestly, with gains at both durable and nondurable plants. Contacts reported modest gains in professional and high-tech sales and moderate gains in wholesale trade sales. Residential real estate activity rebounded after slowing in December, and commercial real estate conditions showed signs of stabilizing, albeit at levels below a year ago. Energy activity edged higher amid stronger commodity prices and demand for natural gas. Agricultural conditions also strengthened, with the majority of contacts indicating that farm income had moved above year-ago levels. Employment continued to expand slightly, and wages rose modestly. Input prices continued to rise faster than selling prices, and a large majority of firms reported being negatively affected by higher materials prices or a lack of available materials.\nEmployment and Wages\nDistrict employment continued to increase at a slight pace but remained slightly below year-ago levels. Overall employment growth in the services sector was driven by moderate gains in retail and wholesale trade, while employment fell slightly in the transportation, tourism and restaurant sectors. Looking ahead, contacts from all service industries expected employment to remain unchanged or to increase in the coming months. Manufacturers noted slight increases in employment levels and hours and expected similar gains in the next few months.\nThe majority of contacts reported labor shortages, with strong demand for technicians, truck drivers, and information technology professionals. More generally, contacts reported severe shortages for skilled hourly workers and notable shortages for unskilled hourly positions. Wages rose modestly since the last survey, and contacts expected wages to rise at a slightly faster pace in the coming months. Although the majority of firms expected vaccinations to affect their business outlook, less than one-third of firms anticipated that the COVID-19 vaccine rollout would impact their hiring plans this year.\nPrices\nInput prices in both the services and manufacturing sectors continued to rise at a faster pace than selling prices. More than 80 percent of manufacturing firms and 60 percent of services firms reported being negatively affected by the rise in materials prices or the lack of availability. Prices of raw materials for manufactured goods rose moderately over the survey period, while selling prices increased modestly. Selling prices also increased modestly in the services sector, with slightly faster growth for input prices. Construction supply contacts noted a moderate increase in selling prices, and they expected prices to increase at a slightly faster pace in the next few months. Manufacturing and services contacts expected both input and selling prices to rise in the months ahead and anticipated that stronger input price growth would continue to put pressure on profit margins.\nConsumer Spending\nOverall consumer spending increased slightly in January but declined modestly in February. Sales rose moderately in retail, restaurant, and health services sectors in January as additional stimulus payments were distributed, but then declined in February. Restaurant sales remained modestly below year-ago levels as the pandemic continued to suppress in-person dining. Sales in the auto and tourism industries fell moderately in January, but tourism sales rose slightly in February. Contacts expected moderate gains over the next few months in the retail, health services, and tourism industries, while auto sales were expected to pick-up modestly. Restaurant contacts expected sales to remain roughly flat in the coming months. A large majority of contacts indicated that widespread COVID-19 vaccination was somewhat or very important to their firm's overall business outlook.\nManufacturing and Other Business Activity\nManufacturing activity expanded modestly since the previous survey, and activity levels rose slightly above year-ago levels. Production and new orders increased modestly for durables and slightly for nondurables. Capital expenditures rose for both durable and nondurable goods to a level slightly above a year ago. Durable and nondurable manufacturing activity was expected to increase moderately in the next few months, but the vast majority of manufacturing firms indicated that widespread COVID-19 vaccination was somewhat or very important to their firm's overall business outlook.\nOutside of manufacturing, sales rose modestly in professional and high-tech services and moderately in the wholesale trade sector. Transportation sales rose slightly in January but contracted in February. Contacts noted that sales remained below year-ago levels within the transportation and professional and high-tech services sectors, but wholesale trade sales were moderately higher than a year ago. Capital expenditures rose modestly in the transportation and wholesale trade sectors but edged lower in professional and high-tech services. Respondents from all industries expected sales to increase modestly in the coming months.\nReal Estate and Construction\nResidential real estate activity expanded moderately, while the deterioration in commercial real estate conditions stabilized somewhat. All residential real estate contacts reported an increase in home prices and the majority indicated a decrease in inventories. Home sales also increased modestly, following a moderate decline during the previous survey period. Home sales were expected to rise further in the coming months despite low inventories and higher prices. Commercial vacancy rates decreased for the first time in over a year, and absorption rates remained flat. In addition, commercial construction activity increased slightly. However, sales, prices, and rents fell modestly, and developers' access to credit became modestly more difficult. Overall, commercial real estate conditions remained worse than a year ago. Expectations for further declines in vacancy rates and increases in absorption and construction pointed to a gradual improvement in the commercial real estate sector over the next few months.\nBanking\nDistrict bankers reported modest growth in loan demand in January and February, driven by increased demand for residential and commercial real estate loans. However, demand fell for agricultural, consumer, and commercial and industrial loans. In the past few weeks, many banking respondents indicated that interest rates charged on new commercial and industrial loans moved moderately lower. Overall credit standards generally remained stable, although standards tightened slightly for commercial and residential real estate and for agricultural lending. Consumer loan standards eased slightly. Bankers reported a slight increase in loan quality compared to a year ago and expected similar quality over the next six months. Deposit levels continued to expand robustly.\nEnergy\nDistrict energy activity edged higher since the previous survey period but continued to slightly lag year-ago levels. Revenues and profits varied by firm, while employment levels continued to decline. The number of active oil and natural gas rigs was flat across the District overall, with a slight uptick in active oil rigs in Colorado. Oil and natural gas stocks eased somewhat lower in early 2021 after expanding in 2020. Commodity prices rose further since the last survey period, due in part to stronger demand for natural gas across the District and country. Moving forward, regional firms indicated that the changing regulatory landscape may impact business activity and profitability in the future. Expectations for future drilling and business activity were generally positive though as District firms anticipated widespread vaccination rollouts to boost mobility and transportation activity in the coming year.\nAgriculture\nThe Tenth District farm economy strengthened alongside a sharp rebound in farm income and agricultural credit conditions. In the most recent survey period, a majority of District contacts indicated that farm income was higher than a year ago for the first time since 2013, leading to increased loan repayments and slight increases in farm real estate values. Crop prices rose modestly since January and remained considerably higher than a year ago. Contacts located in regions more dependent on livestock revenues and exposed to severe drought, however, were less optimistic. Although cattle prices also increased modestly since January, they remained lower than a year ago, and higher crop prices could lead to higher feeding costs for livestock producers in the coming months.\nFor more information about District economic conditions visit: https://www.kansascityfed.org/research/regional-research/\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Dallas | 2021-01-14T00:00:00 | /beige-book-reports/2021/2021-01-da | "January 14, 2021\nSummary of Economic Activity\nThe Eleventh District economy expanded at a moderate pace, but activity in most industries remained below normal levels. Recovery in the manufacturing and service sectors picked up, while retail activity remained weak. The housing market continued to be a bright spot, with robust home sales and strengthening apartment demand. Overall loan volume increased, led by real estate lending. Energy activity showed mounting signs of improvement after a prolonged contraction. Employment rose moderately, though wage growth remained subdued. Input cost increases continued to outpace growth in selling prices. Outlooks were generally positive, but uncertainty remained high. Several contacts voiced concern about rising COVID-19 infection rates impacting their short-term business prospects, though there was optimism about the vaccine paving the way to a resumption of more normal activity this year.\nEmployment and Wages\nEmployment rose moderately overall. Hiring was most robust in the manufacturing sector but also picked up in the service sector after stalling out in the prior period. Several contacts noted hiring freezes and, among those adding to payrolls, there were scattered reports of recruiting difficulty. Layoffs continued in the energy sector, although they abated somewhat. Energy contacts said more layoffs and early retirements were in the works, but the worst is past despite mounting bankruptcies. Outside the energy sector, just over half of Texas businesses surveyed expect to add to headcounts in 2021, while 38 percent expect to keep employment levels flat and 10 percent expect declines. Airline contacts noted the new COVID-19 relief bill would likely prevent further layoffs in the first quarter.\nWage growth remained subdued, except in manufacturing where it picked up after a nine-month slump. Still, several service sector contacts noted implementing bonuses or increased wages, with an accommodations firm citing the increasing minimum wages in California and Florida contributing to their decision. Looking ahead, most firms expect wage growth in 2021 to be well above what was seen in 2020.\nPrices\nInput costs continued to increase at a moderate pace overall, though retailers saw more substantial rises and several manufacturers noted sharply increased raw materials prices, particularly steel. Selling prices were flat to up slightly, with more marked increases reported in the retail and manufacturing sectors. While contacts overall noted subdued growth in selling prices in 2020, most expect a rebound to average or above-average selling price growth this year.\nManufacturing\nThe Texas manufacturing recovery gathered steam in December, with production and demand growth accelerating from November. Growth was widespread and led by nondurables, particularly petrochemical products. Petrochemical contacts noted healthy demand for PVC, driven by construction, and very strong plastic packaging demand. The pandemic remained a drag on business overall, with nearly half of manufacturers saying revenues were still below normal. The vast majority expect 2021 revenues to be stronger than last year, with growth peaking in the third quarter. Outlooks among manufacturers pushed further positive, despite considerable uncertainty.\nRetail Sales\nTexas retail activity was flat in December following a decline in November. Auto sales picked up, though contacts voiced concern that rising COVID-19 infections could negatively impact buying activity. A Dallas Fed survey of about 50 Texas retailers showed that a nearly equal share\u2014about 30 percent\u2014expect revenue to decrease in the first quarter versus increase, but that by the second quarter the share expecting a decrease falls to 17 percent while the share expecting an increase grows to 53 percent. Overall, well over half of retail firms expect 2021 revenues to exceed 2020 levels.\nNonfinancial Services\nGrowth in the nonfinancial services sector resumed but remained muted as rising COVID-19 cases restrained demand. Continued contraction was seen in leisure and hospitality. In transportation services, cargo volumes through Texas ports and via small parcel delivery services were up quite strongly, and much of the leftover passenger air capacity was used to move freight air cargo. Airlines noted that increasing COVID-19 cases were impacting leisure air travel and that despite a seasonal pickup in passenger demand, airline bookings remained well below year-ago levels. Business air travel continued to be virtually nonexistent. Recovery continued, however, among professional and business services firms, with revenue growth accelerating in December. Staffing services firms said demand was broad-based and had increased drastically over the last couple of months.\nLooking ahead, a majority of businesses expect 2021 revenues to exceed 2020 levels, by about 30 percent on average. Even still, a sizeable share expects flat or reduced revenue this year. Overall, outlooks remained marginally positive, with many contacts pointing to the COVID-19 vaccine as a particular driver of optimism.\nConstruction and Real Estate\nHome sales remained solid during the reporting period. Several contacts noted seasonal softness; however, sales were up year over year. Builders said they continued to push up prices, and a few noted solid margins. New home development remained vigorous, though there were continued reports of supply chain issues and skilled labor shortages. Outlooks were favorable, with continued concern about political uncertainty and a weak labor market negatively impacting future sales.\nApartment demand in the fourth quarter was better than expected. Nevertheless, demand lagged completions, putting downward pressure on occupancy and rents. There was slight deterioration in apartment rent payments in December. Office leasing stayed weak and contacts noted concern about the growing amount of sublease space. The industrial market continued to perform remarkably well.\nFinancial Services\nOverall loan volume increased modestly over the reporting period, with declines in consumer and commercial and industrial (C&I) loans offset by increases in residential and commercial real estate loans. Loan pricing continued to decrease, and some contacts voiced concerns about margin compression. Credit standards tightened further, particularly for C&I loans. Nonperforming loans rose over the past six weeks, though at a markedly slower rate than what was seen in mid-2020. While assessments of current general business activity remained mixed, nearly 70 percent of contacts expect an increase in business activity six months from now.\nEnergy\nThe rebound in the energy sector solidified further over the reporting period, though the level of activity remained below year-ago levels. The Eleventh District rig count rose markedly, and drilling and well completion activity continued to improve. Contacts on both the exploration and production side and the oilfield services side reported stronger levels of business activity for the first time since the onset of the COVID-19 pandemic, and oil production stabilized after several months of decline. Outlooks generally improved, though rising COVID-19 cases and the prospect of tighter regulations weighed on contacts' sentiment about future activity.\nAgriculture\nDrought conditions intensified further, particularly in the western part of the District. Demand for agricultural products remained solid. Crop and cattle prices rose over the past six weeks, though cheese prices fell dramatically. Higher crop prices boosted sentiment, as current levels are profitable for many producers given normal yields.\nFor more information about District economic conditions visit: www.dallasfed.org/research/texas\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Atlanta | 2021-01-14T00:00:00 | /beige-book-reports/2021/2021-01-at | "January 14, 2021\nSummary of Economic Activity\nBusiness contacts in the Sixth District indicated that economic activity continued to expand at a modest pace from mid-November through December. Labor markets continued to gradually improve, and wage pressures were muted, on balance. Nonlabor costs related to construction and supply chains rose further over the reporting period. Although retail contacts reported overall holiday sales were subdued, ecommerce activity remained strong. Auto dealers noted sales declined since the previous report. Tourism and hospitality activity softened. Residential real estate demand remained strong, but challenges in commercial real estate markets persisted. Overall manufacturing activity rose moderately. Banking conditions remained stable, but some contacts noted an uptick in delinquencies, mostly with residential mortgages.\nEmployment and Wages\nOn balance, contacts noted that employment levels and hours worked rose over the reporting period. However, labor conditions were strained in several parts of the District as COVID-19 cases rose and absenteeism slowed activity. Labor markets continued to remain bifurcated with low turn-over and small steady improvements occurring among higher skilled positions where most can work remotely, while markets for positions that require in-person work (many of which are low-skilled) were tighter and had higher turnover. Looking ahead, many employers anticipate adding to headcounts as the pandemic subsides and demand increases. However, because of efficiencies realized during the pandemic, staffing levels for some firms are not expected to return to pre-pandemic levels. Most contacts also agree that flexible work arrangements will be a part of their staffing model going forward, allowing them to retain and attract higher-quality talent, and for some, reducing their real estate footprint.\nDespite high demand for low-skilled workers, most employers resisted raising wages, though many increased referral, signing, and productivity bonuses to attract and retain workers. The upward pressure on wages at the lower end of the pay-scale, along with challenges to sourcing the required skills, accelerated talks of increasing automation. In Florida, the majority of employers expect little impact from the mandated increases to minimum wage as market forces have already begun to push wages to $15 per hour or will before the 2026 deadline.\nPrices\nConsistent with previous reports, input costs, particularly for lumber, aluminum, and steel, continued to rise notably. Transportation, shipping, and packaging costs increased as well. More contacts mentioned an ability to pass through increased costs to retailers and consumers. The Atlanta Fed's Business Inflation Expectations survey showed year-over-year unit costs increased significantly to 1.7 percent on average in December, up from 1.3 percent in November. Year-ahead expectations remained relatively unchanged at 2 percent.\nConsumer Spending and Tourism\nRetailers reported that, as expected, holiday sales were softer than in the previous year. Brick-and-mortar stores continued to struggle, while on-line sales were strong. Contacts expressed having little visibility into 2021 as some expect consumer spending behavior to change as a result of the pandemic. After experiencing a slight recovery in vehicle sales levels during the Fall, auto dealers reported softening demand through the end of the year, which was largely attributed to a resurgence in COVID-19 cases.\nTravel and tourism activity softened since the previous report. Contacts noted that properties affected by recent hurricanes, primarily in Alabama, had not completed repairs as quickly as anticipated, which led to canceled reservations. Drive-to destinations across the District continued to experience solid activity; however, some contacts anticipate that surges in COVID-19 cases would dampen demand in the near term.\nConstruction and Real Estate\nHome sales throughout the District remained strong as low interest rates continued to fuel demand. Existing home inventory remained extremely low in many markets, continuing to place upward pressure on home prices. The pace of new home construction continued to lag behind demand and lumber and labor costs remained a concern for builders. However, builders noted the ability to pass along rising costs to buyers through higher home prices. Though down from peak levels, mortgages either in forbearance or in delinquency remained elevated throughout the District, especially in rural areas of Alabama, Mississippi, and Louisiana, as well as urban markets in South and Central Florida, and North Georgia.\nCommercial real estate (CRE) activity continued to be impacted by the pandemic. Hospitality, which was especially hard hit earlier in the year, experienced declining occupancies over the reporting period. The retail sector remained challenged due to a combination of rising ecommerce activity and an oversupply of retail space. Low levels of tourism and travel were reported as having a notable impact on activity across the hospitality and retail sectors. The number of new CRE borrowers seeking relief continued to moderate. Recent CRE asset valuations confirmed that values have deteriorated and may be creating impediments to new lending along with tighter underwriting standards.\nManufacturing\nManufacturing contacts reported a moderate rise in overall business activity since the previous report. While new orders increased only slightly, production levels rose at a stronger pace. Contacts indicated that finished inventory levels had fallen, while purchasing managers described delivery times as getting somewhat longer. Expectations for future production levels increased notably, with over half of contacts expecting higher levels of production over the next six months.\nTransportation\nTransportation firms reported increased levels of activity since the previous report. Freight forwarders experienced robust volumes and increased revenue due to sustained growth in ecommerce activity. Air cargo contacts noted year-over-year revenue growth as capacity constraints pushed up rates and congestion in Asian seaports drove some cargo, particularly high-dollar goods, to air transportation. Distribution of the COVID-19 vaccine is expected to bolster activity for both air cargo carriers and freight forwarders in the near term. Railroads reported considerable improvements in total traffic, including double-digit growth in intermodal freight and increased shipments of grain, food products, non-metallic minerals, iron and steel scrap, and waste and nonferrous scrap. Nevertheless, some industry contacts do not expect a recovery to pre-pandemic levels until 2022 or beyond.\nBanking and Finance\nConditions at financial institutions remained stable. Loan balances across most portfolios continued to trend downward, attributed to economic uncertainty, concerns about credit quality, and collateral valuations. Deposit levels remained elevated, and financial institutions continued to hold higher balances in cash accounts and their securities portfolios. Although a majority of loans modified earlier in the year have exited forbearance arrangements, credit quality did not significantly deteriorate. Still, financial institutions reported some higher noncurrent balances, primarily associated with residential mortgages.\nEnergy\nWeak demand for crude oil, fuels, and other energy products persisted over the reporting period. Refinery output remained low, resulting in further consolidation among refiners. Industry contacts reported increasing optimism surrounding COVID-19 vaccine news, which has helped to strengthen crude oil prices, although concerns about oversupply diminished some of that confidence. While many planned petrochemical processing expansion projects and liquified natural gas export terminal construction projects remained stalled, some contacts reported renewed interest in moving projects forward. Within the utilities sector, contacts noted energy usage remained sensitive to COVID-19 conditions. Nevertheless, investments remained solid in renewables, grid modernization, and other infrastructure.\nAgriculture\nAgricultural conditions were mixed. While drought-free conditions prevailed in most of the District, some abnormally dry conditions were reported. Some counties in Alabama, Florida, Louisiana, and Tennessee were designated as natural disaster areas due to losses suffered from earlier hurricanes and storm damage. December production forecasts for Florida's orange and grapefruit crops were down from the previous report's forecasts and below last year's production. The USDA reported year-over-year prices paid to farmers in November were up for corn, cotton, and soybeans but down for rice, cattle, broilers and eggs while milk prices were unchanged. On a month-over-month basis, prices increased for corn, cotton, rice, soybeans, cattle, broilers, and milk but decreased for eggs.\nFor more information about District economic conditions visit: www.frbatlanta.org/economy\u2010matters/regional\u2010economics\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
St Louis | 2021-01-14T00:00:00 | /beige-book-reports/2021/2021-01-sl | "Beige Book Report: St Louis\nJanuary 14, 2021\nSummary of Economic Activity\nReports from District contacts indicate that economic conditions have been generally unchanged since our previous report. Firms reported mixed changes in employment levels. Overall, wage pressures have increased slightly, with contacts citing tight labor market conditions. Reports on consumer spending were mixed, while reports on holiday sales focused on the accelerated shift to online shopping. Activity in the manufacturing sector continued its robust growth, but activity remains below year-ago levels. District banking contacts reported slowing growth in loan volumes but anticipate stronger demand in coming months from new PPP loans.\nEmployment and Wages\nReports on hiring have been mixed since the previous report. Firms across many industries, especially manufacturing and transportation, continued hiring in what remains a tight labor market. Businesses increasingly reported seeking workers nationwide due to the labor shortages and, when applicable, allowing workers to work remotely. Many other firms reported that employment levels have remained stagnant or declined, especially small businesses and firms in the leisure and hospitality sector. A survey of manufacturers indicates that, despite continued hiring, manufacturing employment in many areas remains below the same period last year.\nWages have grown modestly since the previous report, owing to the tight labor market in several industries and annual increases in minimum wages in some District states. One transportation firm advertised entry-level positions at more than twice the minimum wage, with benefits. Small-firm wages have remained more stagnant.\nPrices\nConsumer prices have increased moderately since the previous report. Contacts reported that the prices of lumber and concrete have increased since the previous report. These increases, paired with shipping delays for supplies have increased the costs of construction projects, leading homeowners to scale back renovation and building projects. Parcel companies have increased shipping prices due to unprecedented demand from online shopping overall and holiday demand specifically. Gasoline prices have increased since the previous report but remain lower than one year ago. One contact in outdoor retailing noted that tent prices have increased due to material cost increases. A wholesale car retailer noted that a recent wave of repossessions will lead to higher used car inventories and lower prices. A contact from a brewery reported that the elevated price of aluminum is eating away at profit margins: Canned beer has made up a larger portion of sales than on-premise pints since COVID-19 social distancing regulations have reduced demand at bars and restaurant.\nConsumer Spending\nReports from District general retailers, auto dealers, and hospitality contacts indicate that consumer spending activity has been mixed since the previous report. Consumer sentiment in West Tennessee regarding both current economic conditions and future expectations has worsened since September. As of mid-December, most Tennessee consumers indicated they expected to spend less this holiday season than last year's. General retailers reported mixed business activity, with some retailers reporting sales comparable to or higher than this time last year. District auto dealers continue to report strong sales despite inventory shortages and hold an optimistic outlook for the coming months. Tourism and hospitality contacts reported lower business activity relative to late November, attributing the decline to increased COVID-19 cases and travel restrictions; contacts indicated a pessimistic outlook for the first half of 2021.\nManufacturing\nManufacturing activity has continued to increase at a robust pace since the previous report, although the rate of growth has leveled off. Firms in both Arkansas and Missouri reported a strong uptick in new orders and production. However, several contacts reported that production is still below pre-COVID levels and that inventory remains tight as manufacturers are unable to keep up with the demand. One contact in central Arkansas noted that some manufacturing plants were shutting down or slowing production due to COVID infections among employees.\nNonfinancial Services\nActivity in the nonfinancial services sector has remained unchanged since the previous report. Passenger traffic at airports has risen slightly since the previous report due to holiday travel, although it remains a fraction of the prior years' levels. Several parcel services have continued to hire both seasonal and permanent employees. A logistics contact indicated that business in 2021 would likely be better than 2020, although potential regulations on heavy industry and low oil and gas pipeline investment could impact the demand for transported commodities. Hospitals continue to deal with large numbers of COVID cases and ICU beds are near capacity.\nReal Estate and Construction\nResidential real estate activity has been unchanged since the previous report. Seasonally adjusted existing home sales in St. Louis, Little Rock, and Louisville have increased since mid-November while sales in Memphis have fallen slightly. Inventory remains low, and a contact in Missouri reported expectations of similarly low levels of inventory for the foreseeable future. Compared with this time last year, home prices are up sharply across the District, with numerous buyers making offers above listing price. One St. Louis area realtor noted that this may be the worst time to buy a house in their decades-long career. Most of the largest District MSAs saw a slight decrease in their apartment rental rates, while Memphis saw a slight uptick since the previous report. However, rental prices remain elevated compared with this time last year and with the national average.\nCommercial real estate activity has been mixed since the previous report. An Arkansas commercial real estate broker expects continued high demand for industrial space and decreasing demand for retail and office space into next year. Many construction firms in Memphis anticipate a robust 2021, with projects that were previously on hold starting back up again. Contacts in Arkansas and Louisville expect industrial properties for distribution, warehousing, and manufacturing will continue to be in high demand.\nBanking and Finance\nBanking conditions in the District have weakened slightly since the previous report. Banking contacts continued to report a modest decrease in overall loan demand. Outstanding loan volumes have declined moderately since the previous report but remained strongly above year-ago levels. Growth in residential real estate and consumer loans was down compared with the previous period and fell below year-ago levels. On the other hand, commercial real estate loan volumes increased slightly. Deposit levels at District banks remained elevated. St. Louis bankers were cautiously optimistic about the second round of PPP lending, hoping the additional funds would be helpful to some of the most distressed businesses, especially those in the entertainment industry. However, some bankers still voiced concern about the uncertain PPP guidelines that might discourage participation.\nAgriculture and Natural Resources\nDistrict agriculture conditions have remained relatively unchanged since the previous report. The percentage of winter wheat in the District rated fair or better slightly increased from the end of October to the beginning of December. Wheat conditions are modestly worse than the same period one year ago.\nNatural resource extraction conditions improved modestly from October to November, with seasonally adjusted coal production increasing 2%. November production was still down strongly compared with a year ago, falling nearly 21%.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
National Summary | 2021-01-14T00:00:00 | /beige-book-reports/2021/2021-01-su | "Beige Book: National Summary\nJanuary 14, 2021\nThis report was prepared at the Federal Reserve Bank of San Francisco based on information collected on or before January 4, 2021. This document summarizes comments received from contacts outside the Federal Reserve System and is not a commentary on the views of Federal Reserve officials.\nOverall Economic Activity\nMost Federal Reserve Districts reported that economic activity increased modestly since the previous Beige Book period, although conditions remained varied: two Districts reported little or no change in activity, while two others noted a decline. Reports on consumer spending were mixed. Some Districts noted declines in retail sales and demand for leisure and hospitality services, largely owing to the recent surge in COVID-19 cases and stricter containment measures. Most Districts reported an intensification of the ongoing shift from in-person shopping to online sales during the holiday season. Auto sales weakened somewhat since the previous report, while activity in the energy sector was said to have expanded for the first time since the onset of the pandemic. Manufacturing activity continued to recover in almost all Districts, despite increasing reports of supply chain challenges. Residential real estate activity remained strong, but accounts of weak conditions in commercial real estate markets persisted. Banking contacts saw little or no change in loan volumes, with some anticipating stronger demand from borrowers in coming months for new government-backed lending programs. Although the prospect of COVID-19 vaccines has bolstered business optimism for 2021 growth, this has been tempered by concern over the recent virus resurgence and the implications for near-term business conditions.\nEmployment and Wages\nA majority of Districts reported that employment rose, although the pace was slow, and the recovery remained incomplete. However, a growing number of Districts reported a drop in employment levels relative to the previous reporting period. Labor demand was strongest in the manufacturing, construction, and transportation sectors, with some employers noting staffing shortages and difficulty attracting qualified workers, especially for entry-level and on-site positions. These hiring difficulties were exacerbated by the recent resurgence in COVID-19 cases and the resulting workplace disruptions in some Districts. Contacts in the leisure and hospitality sectors reported renewed employment cuts due to stricter containment measures. Firms in most Districts reported that wages increased modestly, as labor market conditions improved somewhat in some areas but generally remained weak. Employers in some Districts reported raising wages or offering more generous benefits, such as year-end bonuses and flexible work arrangements, to limit employee turnover.\nPrices\nAlmost all Districts saw modest price increases since the last report, with growth in input prices continuing to outpace that of finished goods and services. Most notably, prices for construction and building materials, steel products, and shipping services were reported to have risen further. Contacts in several Districts noted an improved ability to raise final selling prices to consumers, especially in the retail, wholesale trade, and manufacturing sectors, and some cited plans to increase selling prices in coming months. Energy prices picked up in the reporting period but remained below pre-pandemic levels. Home prices continued to climb, driven by low inventories and rising construction costs.\nHighlights by Federal Reserve District\nBoston\nRecovery from the pandemic continued in the final weeks of 2020, with mixed results across sectors. In particular, hospitality and travel remained hard-hit. Among firms that were hiring, some cited difficulty finding workers; other firms held headcounts steady or allowed attrition. A substantial dose of pandemic-related uncertainty clouded an otherwise-optimistic outlook.\nNew York\nThe regional economy weakened moderately in late 2020, and the labor market has deteriorated somewhat. This weakness was concentrated in the service sector, where activity has been further constrained by a rise in COVID-19 cases, increased restrictions, and cold weather. Consumer spending declined, with holiday sales down from last year and auto sales weakening. Businesses reported some acceleration in wages and selling prices.\nPhiladelphia\nBusiness activity fell modestly during the current Beige Book period as sharply rising COVID-19 cases created disruptions at worksites and curtailed consumer spending during the holidays. On the whole, activity remained below levels attained prior to the onset of COVID-19. Meanwhile, slight wage growth and modest inflation continued, but employment appeared to edge down.\nCleveland\nThe District economy lost some momentum in recent weeks. Contacts said that rising cases of COVID-19 curbed demand for goods and services and disrupted supply through its impact on labor availability. Despite the slower growth in demand, firms generally indicated that they would hire workers if more were available. Wages and input costs rose moderately, as did selling prices.\nRichmond\nThe regional economy grew modestly in recent weeks. Employment and wages showed modest increases, while prices grew at a moderate pace. The housing market remained strong, while commercial real estate leasing remained soft. Port and trucking volumes were high, and manufacturing activity showed a moderate increase.\nAtlanta\nEconomic activity expanded modestly. Labor markets were mixed. Some nonlabor costs continued to rise. On balance, retail sales were down. Tourism activity slowed. Residential real estate demand remained strong and home prices continued to rise. Challenges persisted in commercial real estate markets. Manufacturing activity rose. Conditions at financial institutions were stable.\nChicago\nEconomic activity increased modestly but remained below its pre-pandemic level. Manufacturing increased moderately; business spending and construction and real estate increased modestly; and employment and consumer spending increased slightly. Wages rose modestly and prices were up slightly. Financial conditions were little changed. Agricultural income for 2020 was better than expected.\nSt. Louis\nEconomic conditions have been generally unchanged since our previous report. Reports on overall consumer spending were mixed, while reports on holiday sales focused on an accelerated shift to online shopping. District banking contacts reported slowing growth in loan volumes but anticipate stronger demand in coming months from new PPP loans.\nMinneapolis\nDistrict economic activity increased modestly. Hiring demand increased, but contacts said health risks and other obstacles kept some workers out of the labor force. Holiday spending was better than many feared, but below last year, especially for small retailers. Commercial construction slowed, and the outlook remained weak. Agricultural conditions improved due to increased commodity prices and government aid.\nKansas City\nEconomic activity held steady in December, but conditions varied significantly across industries. Retail sales rose sharply, but overall consumer spending fell due to lower auto, restaurant, tourism and healthcare sales. Contacts in manufacturing, professional and high-tech services, and energy all reported increased activity levels, while activity slowed in the transportation, wholesale trade, and real estate sectors.\nDallas\nThe District economy expanded at a moderate pace, but activity in most industries remained below normal levels. Recovery in the manufacturing and service sector picked up, while retail activity remained weak. The housing market continued to be a bright spot, and real estate lending spurred growth in overall loan volumes. Energy activity accelerated slightly. Employment rose moderately. Outlooks were generally positive, but uncertainty remained elevated.\nSan Francisco\nEconomic activity in the District continued to expand at a modest pace. Holiday retail sales picked up, but activity in the services sector was mixed. Conditions in the agricultural and manufacturing sectors strengthened some-what. Contacts reported strong activity in the housing market and overall healthy conditions in lending markets.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Philadelphia | 2021-01-14T00:00:00 | /beige-book-reports/2021/2021-01-ph | "January 14, 2021\nSummary of Economic Activity\nOn balance, business activity in the Third District fell modestly during the current Beige Book period after plateauing in the prior period. Activity in most sectors remained below levels observed prior to the onset of the COVID-19 pandemic. Net employment appeared to decline slightly after rising modestly in the last period. Positive wage and price growth trends continued at slight and modest paces, respectively. The sharp rise in COVID-19 cases, renewed restrictions, and colder weather further reduced economic activity across most of the District, especially within the retail, restaurant, and hospitality sectors. Numerous firms across all sectors noted disruptions to operations as COVID-19 cases emerged at worksites or employees' homes. Positive expectations for modest growth over the next six months have narrowed among manufacturers but broadened among other firms.\nEmployment and Wages\nEmployment appeared to decrease slightly overall. The share of nonmanufacturing firms reporting employment decreases exceeded the share reporting increases for both full- and part-time employees. Among the reporting manufacturers, employment increases still exceeded decreases, but by less than in the prior period. Moreover, average hours worked rose for a smaller share of manufacturing firms and fell, on net, among nonmanufacturers.\nStaffing firm contacts described continuing demand for employees and an ongoing lack of willing and qualified job candidates. During the current period, this mismatch was compounded by increased workplace disruptions, as COVID-19 cases caused temporary plant or store shutdowns and forced employees to quarantine at home. Employers and staffing agencies alike noted difficulties finding workers to fill shifts. Given childcare needs, agencies are increasingly compelled to fill some positions with such hours as a candidate can supply.\nWages continued to grow slightly. The percentage of nonmanufacturing firms reporting higher wage and benefit costs per employee remained somewhat higher than the percentage reporting lower costs. However, three-fourths of the firms reported no change.\nPrices\nOn balance, prices continued to rise modestly, although reported increases were generally less widespread than in the prior period. Nearly 30 percent of the manufacturers reported higher prices for factor inputs, but only 20 percent received higher prices for their own products. Similarly, about 20 percent of the nonmanufacturers reported that prices rose for their inputs, and 20 percent noted higher prices received from consumers for their own goods and services. Over half of all firms noted no change in prices.\nSupply disruptions, shortages, and price spikes became more prevalent again, as COVID-19 cases rose. However, few contacts noted significant lasting price hikes.\nManufacturing\nOn average, manufacturing activity was essentially unchanged as trends continued to soften from November into December. The diffusion indexes for shipments and for new orders remained positive, but just barely so for new orders. Firms also reported that sales and new orders were about 7 percent below what had been anticipated pre-pandemic \u2013 only slightly better than in the prior month.\nContacts offered a diversity of comments, including several firms noting gradual improvement. One firm noted overwhelming orders and huge backlogs for packaging materials, while another observed a return to caution from buyers of electrical equipment. A primary metals firm observed weak demand from customers serving the energy and hospitality sectors, while strong demand emanated from the utility and transportation sectors. Other contacts noted strong demand for pharmaceuticals and medical devices.\nConsumer Spending\nNonauto retail sales appeared to fall modestly as rising COVID-19 cases, cold weather, and new restrictions further hampered consumer spending. Restaurants and the hospitality sector were most heavily impacted, especially compared with a typically busy holiday season. Stores selling food or other necessities observed some operating difficulties but little deterioration in demand.\nAuto dealers reported slight growth in year-over-year sales but noted that consumer activity had slowed since late October as COVID-19 cases spiked. Black Friday sales were lackluster, and December sales were hampered by snow.\nAlthough ski resorts have opened, the destinations are operating at lower capacity and with restrictions on restaurants and other attractions. Overall, tourism activity has slipped below half of prior-year levels \u2013 trending modestly lower as the weather grows colder and COVID-19 spreads.\nNonfinancial Services\nOn balance, nonmanufacturing activity has fallen modestly since the prior period. Firms reported that sales or new orders had edged down to 19 percent below pre-pandemic expectations. Another measure of firms' new orders and sales (which had been slightly negative) deepened \u2013 significantly for sales or revenues \u2013 indicating that declines were more widespread among firms.\nFinancial Services\nThe volume of bank lending fell slightly during the period (not seasonally adjusted); in the same period in 2019, by contrast, loan volumes grew modestly. Residential mortgages and commercial real estate lending grew modestly, while home equity lines fell moderately and commercial and industrial loans continued to fall sharply. Auto loans and other consumer loans were essentially flat on net. And while seasonal trends drove credit card volumes up moderately, they rose at a significantly greater pace over the same period in 2019.\nBanking contacts were preparing for another round of Paycheck Protection Program loans, even as some uncertainty remained about the dispensation of the first round. Although some problem loans have begun to emerge, bankers continued to note that overall loan delinquencies remain low.\nReal Estate and Construction\nBeginning in November, homebuilders reported some slowdown to a modest pace of growth. However, the level of demand remained strong \u2013 in part reflecting first-time buyers moving out of apartments and well-heeled buyers seeking more space or second homes. Existing home sales also grew modestly \u2013 a slower pace than in the prior period. Strong demand for limited inventories continued to drive prices higher and reduce affordability. Appraisal challenges were rising but were often avoided by cash purchases.\nPhiladelphia's commercial construction activity appeared to remain busy but at lower levels than had been anticipated before the pandemic. Although the pipeline of new construction has thinned, construction should remain active through the first half of 2021. Commercial leasing activity continued to fall moderately, as contacts noted sublease office space being dumped onto the market and growing retail vacancies. Demand remained strong for warehousing construction and leasing.\nFor more information about District economic conditions visit: www.philadelphiafed.org/research-and-data/regionaleconomy\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Boston | 2021-01-14T00:00:00 | /beige-book-reports/2021/2021-01-bo | "January 14, 2021\nSummary of Economic Activity\nEconomic activity continued to expand in the First District through December, according to business contacts. Retailers reported revenue increases in recent weeks compared with a year earlier, while travel and hospitality remained well below pre-pandemic levels. Manufacturers also cited increased revenues in recent weeks, but some were up only in comparison to earlier in the pandemic, while others saw gains from a year ago. Software and information technology services firms reported gradual improvement, but new bookings remained below year-earlier levels. Reports from commercial real estate contacts were mixed, as in the last report, and residential real estate markets remained strong. Most responding firms were optimistic in their outlooks, but still quite uncertain about the first half of 2021.\nEmployment and Wages\nLabor market reports from business contacts were mixed. Some retailers were holding headcounts steady; one was hiring \"aggressively.\" Manufacturers' reports on hiring varied. Several contacts reported difficulty finding workers, including a furniture maker suffering significant production delays due to a worker shortage. Another contact, however, said that it was much easier to find factory workers now than just before the pandemic. Most software and IT services contacts reported restarting hiring plans, and one noted upward pressure on wages for technical positions.\nPrices\nObservations on pricing were limited. One retail contact noted no price changes; others said little about prices. Manufacturing contacts for the most part reported no unusual pricing pressure. A producer of cardboard boxes said that paper prices had increased after remaining flat for five years. Several contacts noted significant logistics issues both domestically and internationally, causing both higher prices and delays. Software and IT services contacts reported no changes in prices across the board, although one mentioned potentially restarting their annual increases in the next few months.\nRetail and Tourism\nTravel industry contacts continued to report major disruptions related to COVID-19, but responding retailers reported strong sales throughout the fall and into the holiday season. A furniture retailer noted sustained year-over-year growth averaging about 15 percent in 2020, notwithstanding persistent delays of 8 to 12 weeks for most furniture orders. One clothing retailer reported store foot traffic remains down 30 percent compared to a year earlier, but a higher conversion rate and strong online sales led to a year-over-year increase of about 5 percent in total November sales. With modest increases in sales throughout 2020, this retailer had greater profits because of reduced store operating costs and smaller promotions than in recent years. An online retailer continued reporting substantial growth relative to last year, with year-over-year increases in revenue, profits, and sales to repeat customers throughout 2020.\nAirline passengers into Boston remained down 70 percent in November, an improvement from year-over-year declines of over 95 percent this spring. International passengers were down nearly 80 percent in November. International travel to Europe was down sharply, but passengers heading to South America ticked up recently. Scheduled flights in early 2021 are up modestly.\nManufacturing and Related Services\nAll seven firms contacted this cycle reported a good fourth quarter. For some contacts, including a furniture manufacturer and a frozen fish producer, results were significantly stronger than a year earlier. For others, like a producer of motors and brakes for industrial uses, sales were up significantly versus earlier in the year but still down from a year ago. Five of the seven contacts reported that sales would have been substantially higher were it not for capacity problems. A semiconductor manufacturer said that automotive customers drew down inventories to conserve cash in Q2 and demand has now increased dramatically both because they are producing more cars and because they are restocking inventories.\nContacts were generally optimistic. Although all respondents expressed uncertainty about the vaccine and the evolution of the pandemic, most expected the economy to be back on trend in the second half of 2021. The furniture maker expressed concern about labor shortages and his inability to fulfill orders quickly, which might lead to a reduction in demand for his products. A supplier of components to capital goods manufacturers said that orders started rising in Q4 2020 in anticipation of higher build rates in the second half of 2021.\nSoftware and Information Technology Services\nSoftware and IT services firms in the First District saw a gradual pick-up in demand as the calendar year drew to a close. On a year-over-year basis, demand remained muted as new bookings had not fully rebounded to last year's levels; however, the recent uptick was seen as an early sign of recovery. A contact at a healthcare software firm that was not seeing a pickup attributed the weakness to hospitals' \"preoccupation\" with the latest wave of COVID-19 cases; this firm has been relying on their backlog for the past 10 months but noted that it would run out at the end of 2020. Margins for all firms continued improving as expenses for travel and facilities remained lower.\nLooking ahead, contacts expressed optimism that things would \"return to normal\" in the second half of 2021, but they remained concerned about the timing of the recovery. Most contacts reported feeling confident that their product offerings were well suited for growth as the economy recovers.\nCommercial Real Estate\nCommercial leasing conditions in the First District remained mixed, as in the last report. The industrial and lab-space markets were still doing well, while the retail and office-space markets continued to be weak. In the industrial leasing sector, demand outpaced supply in some metropolitan markets, with one contact citing a local vacancy rate below 2 percent. Several contacts reported multiple interested buyers on any for-sale industrial building, with one noting that this has pushed cap rates \"shockingly low\" (under 4 percent) in some cases. The life sciences sector was also strong; investors continued planning for and building new lab space in and around the Boston area, despite high costs of construction.\nIn the office market, renewals of expiring leases were almost the only activity, and tenants were willing to pay slightly higher rents in exchange for shorter lease terms. With new activity thin, rents have not yet begun to reflect the downward pressure from increased sublease space. The retail and hospitality markets were still very soft, especially as some areas experienced new restraints in response to COVID-19 spikes. Many contacts predicted that some retail space will be converted to industrial over the next several years.\nMost contacts expected the first two quarters of 2021 to be similar to Q4 2020. Until the virus is more controlled and vaccines more widely administered, most commercial respondents said they would try to delay making decisions. While the first half of 2021 looks \"bumpy,\" contacts expected improvements in the second half.\nResidential Real Estate\nIn the First District, the home buying \"frenzy\" continued in November, with contacts attributing strong buyer confidence to historically low mortgage rates and historically high stock market performance. (Five states and Greater Boston reported changes from November 2019 to November 2020; Connecticut data were unavailable.)\nThe number of closed sales once again increased from a year ago in all reporting areas, with double-digit increases for all markets except Boston condos. However, severe inventory shortages persisted, with the inventory of homes for sale remaining substantially below a year earlier in all reporting markets except Boston condos, where inventories rose. Low inventory and high demand put upward pressure on prices. For single family homes, the median sale price increased by double-digit percentages in all markets. For condos, the median sale price increased in all markets except Rhode Island, but changes in prices for condos were smaller than for single family homes. Contacts noted that demand for condos has been curbed by buyers' pandemic-related desire for more space at home and less urban settings. Additionally, contacts in both Maine and Rhode Island noted a substantial influx of out-of-state buyers.\nFor more information about District economic conditions visit: www.bostonfed.org/regional-economy\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Richmond | 2021-01-14T00:00:00 | /beige-book-reports/2021/2021-01-ri | "January 14, 2021\nSummary of Economic Activity\nFifth District economic activity increased modestly in recent weeks, but several industries continued to see business below year-ago and pre-COVID levels. Manufacturers reported moderate growth in shipments and new orders amid high demand, but they were sometimes constrained by supply chain disruptions and labor shortages. Ports saw volumes hold steady at high levels as imports of consumer goods such as furniture were especially strong. Trucking volumes were little changed, remaining at high levels, which were largely attributed to home goods and packaging volumes. Retailers experienced modest declines in in-store sales as customer traffic remained low; however, online sales were strong. The travel and tourism industry saw modest drops in business as hotel occupancy decreased and restaurants had more limited seating due to COVID restrictions and inclement weather. Residential home sales and prices held steady at high levels. Commercial real estate was little changed, as office tenants continued to downsize and industrial remained strong. Financial institutions reported slight loan growth due to continued strong demand for mortgage loans. Demand for nonfinancial services decreased slightly on balance. Employment rose modestly, and many firms reported difficulty finding workers. Overall, prices grew moderately, particularly for raw materials.\nEmployment and Wages\nTotal employment in the Fifth District rose modestly in recent weeks but remained below year-ago and pre-pandemic levels. Manufacturers and technology companies in particular reported increased hiring. Trucking companies saw driver shortages. Demand for health care workers was high. Several contacts reported that they had difficulty finding qualified workers, and many businesses reported that COVID-related absences were leaving them temporarily short-staffed. On the other hand, some restaurants had to cut serving staff. Some firms, including professional and business services firms were reluctant to hire because of uncertainty around the virus. In general, wages showed modest growth.\nPrices\nThe Fifth District saw moderate price inflation since our last report. According to our most recent surveys, both manufacturing and service sector firms saw an acceleration in growth of prices received. Growth of prices paid for inputs increased moderately for service sector firms but slowed slightly for manufacturers. Inflation of prices paid outpaced that of prices received. Many firms reported rising costs of and longer lead times for raw materials, particularly those used in construction. Others reported continued elevated costs for personal protective equipment, which remained a strain.\nManufacturing\nManufacturers in the Fifth District reported moderate growth in recent weeks as shipments and new orders increased. Manufacturers of furniture, food, and construction materials saw especially strong demand. Several manufacturers pointed to supply chain issues resulting in delays and high prices of inputs. Some manufacturers also reported production constraints from understaffing while employees were on quarantine. Conversely, some manufacturers saw weak demand such as a South Carolina office supply producer and a Virginia souvenir manufacturer who were unsure how long they could remain open.\nPorts and Transportation\nFifth District ports saw little change in activity since our last report. Shipping volumes remained near record highs and were substantially above year-ago levels. While there was strength in both import and export shipments, import levels remained above export levels. Contacts reported increases in furniture, toys, and produce imports, while meat and grains were strong on the export side. One contact noted that the rush to get empty containers back to Asia for future shipments is limiting container availability for exports. Ports saw increased shipments as vessels were added to normal rotations to transport excess volumes.\nFifth District trucking volumes held fairly steady at high levels since our last report. Demand exceeded supply as a shortage of drivers, partially attributed to suspensions of training programs during the pandemic, constrained trucking capacity. Volumes of home improvement goods and cardboard were high, and demand increased among industrial and manufacturing customers. Trucking rates were elevated, with one contact reporting that customers were offering to pay more to renew their contracts early because of the capacity shortage. Spot market demand and rates were high, and trucking companies continued to invest in capital expenditures for potential expansion.\nRetail, Travel, and Tourism\nFifth District retailers reported modest declines in business since our last report and saw sales well below year-ago levels. Auto sales softened somewhat, particularly for import brands. Ecommerce was strong, but some retailers said sales were limited by customer capacity constraints that reduced foot traffic. Furniture, hardware, and home goods retailers saw strong business and depleted inventory levels as some experienced delays or shortages from suppliers. Meanwhile, some pop-up retailers developed, buying or leasing property where former retailers had gone out of business.\nTravel and tourism activity in the Fifth District declined modestly in recent weeks and was below year ago and pre-pandemic levels. Hotel occupancy declined from already low levels. Restaurants struggled as cold weather deterred outdoor dining and restrictions limited indoor dining, leading to some restaurant closures. Many attractions such as museums either closed temporarily or reported low and decreasing visitation. Group travel, business travel, conventions, and the wedding business were very weak. However, a ski resort saw strong bookings and worked to adjust schedules to maximize business while observing social distancing.\nReal Estate and Construction\nFifth District home sales decreased modestly in recent weeks but remained strong and well above year-ago levels. Realtors attributed the slight slowdown to both seasonality and COVID-related stay at home orders. However, inventories remained very low. Prices were little changed recently and were up on a year-over-year basis. Average days on the market held fairly steady at low levels since our last report. One contact reported that builders are limiting the number of home sales per week in order to not run out of inventory of quick-delivery homes. Builders described delays in and shortages of materials and appliances as well as a spike in the price of lumber.\nCommercial real estate leasing in the Fifth District was little changed since our last report and remained weak compared to pre-pandemic levels. Many office tenants downsized on space as their leases ended or sublet as some employees worked from home, and others asked for short-term renewals of leases. Retail vacancies remained elevated compared to a year ago. By contrast, industrial real estate was very strong, with tight supply and new construction, both speculative and built-to-suit. Multifamily leasing was somewhat weak as vacancies were high and rents were soft.\nBanking and Finance\nOverall, respondents reported that loan activity improved slightly for this period, mainly driven by continued strong demand for mortgage loans. However, financial institution contacts indicated a tepid demand for commercial lending given the continued challenges in the economy. Deposit growth was moderate, even with low rates on interest-bearing accounts, due to many businesses holding cash in reserve. Credit quality remained good, but a few respondents noted a slight upward trend in delinquencies as CARES Act payment deferrals expired. Still, most financial institutions remarked that credit quality deterioration and delinquencies are not as severe as they expected at the start of the pandemic.\nNonfinancial Services\nOverall demand for nonfinancial services softened slightly since our last report. Many firms reported decreases in demand and revenue. Some professional and business services firms reported struggling as they had clients, especially small firms, who were going out of business. Event-related businesses were uncertain how long they could remain open, and a marketing firm reported difficulties related to unreliable or delayed package delivery for clients. However, demand for education and health care remained strong.\nFor more information about District economic conditions visit: www.richmondfed.org/research/data_analysis\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Cleveland | 2021-01-14T00:00:00 | /beige-book-reports/2021/2021-01-cl | "January 14, 2021\nSummary of Economic Activity\nThe Fourth District economy expanded only slightly in recent weeks as it lost some momentum amid rising COVID-19 cases. Contacts reported that the growing pandemic was adversely affecting both the demand for and supply of goods and services. Household demand softened as retailers, restaurants, and hotels reported weaker sales in late November and December, in large part because of rising COVID-19 cases. By contrast, demand was solid for manufacturers, freight haulers, and professional and business services firms, although some contacts in these industries suggested that labor constraints, exacerbated by rising COVID-19 cases, made it difficult for production to keep up with demand. A larger share of our contacts indicated that they wanted to increase staffing levels during the cycle, but hiring remained difficult. Contacts were encouraged that COVID-19 vaccines were becoming more widely available, but the most recent surge in cases left them less optimistic about the near-term outlook for demand than they were during the prior reporting period. Because of continuing uncertainty, firms generally limited capital spending. On average, wages and other input cost pressures were higher than earlier in the pandemic but lower than a year earlier, while output prices increased at a modest pace.\nEmployment and Wages\nLabor demand increased modestly, on average, in spite of the broader slowdown in economic growth. Labor demand was strongest for those firms in sectors that reported strong increases in demand for their goods and services: professional and business services, freight and transportation, and manufacturing. Some contacts in these sectors noted that they had a little more success in filling open positions, but they also reported that competition for workers was intense and that they still needed more workers to keep up with demand. New orders continued to flow into staffing services firms, but their ability to fill those orders was limited by worker availability. Retailers indicated that they had increased temporary staffing during the holiday shopping season, but payrolls remained well below year-ago levels. In addition, retailers said that filling positions in fulfillment centers was made difficult by a general shortage of applicants and by competition from larger distribution and logistics firms that continue to add more permanent positions as more commerce takes place online. Restaurants and hotels said that fewer workers were needed as customer demand waned amid rising COVID-19 cases, yet they, too, faced challenges filling positions that were available.\nWage pressures were elevated relative to earlier in the pandemic. Some firms said that they were raising wages to fill open positions and to minimize turnover. Some contacts paid additional yearend bonuses to thank employees for working through a difficult year.\nPrices\nNonlabor input costs also rose for many firms. Contacts from a variety of industries reported that shipping costs were up significantly because of capacity constraints. Construction firms said that costs for many materials were increasing, particularly those for steel, lumber, and some cement products. Manufacturers also noted rapidly rising steel prices, with one contact attributing the increase to supply chain disruptions and increasing global demand for steel products.\nOn balance, selling prices continued to rise modestly. Freight haulers said that exceptionally strong demand and limited capacity has allowed them to dictate terms to their customers, pushing shipping rates materially higher. Manufacturers also reported some success in pushing through price increases to cover rising input costs. In spite of softening demand, retailers and auto dealers said that prices firmed up in recent weeks because low inventories led to less discounting.\nConsumer Spending\nReports suggest that consumer spending softened toward the end of the reporting period. Retailers noted that in spite of strong activity in October and November, the recent rise in COVID-19 cases and associated uncertainty weakened sales. Hoteliers and restauranteurs said that government-mandated restrictions on operating hours further reduced business activity. Auto dealers said that seasonal factors, along with low inventories, were limiting sales. Reports from general merchandisers and apparel retailers were mixed; while some said sales were up from those of the last reporting period because of the holiday shopping season, many noted that in-store sales were down and that online sales, while strong, were hurt by cost pressures from shippers. Looking ahead, contacts expected ongoing concerns about COVID-19 to restrain overall consumer spending in the next few months.\nManufacturing\nOverall manufacturing orders increased moderately this cycle, although demand varied by industry segment. Steelmakers reported that orders were strong and that they had difficulty maintaining inventory. Some noted particular strength in demand from auto producers, suppliers to residential builders, and transportation equipment manufacturers, along with increased demand from China. By contrast, orders for steel used in commercial aerospace and nonresidential construction applications remained depressed. A sizeable share of manufacturers said they were operating below their target capacity utilization rate because of a lack of available workers. Manufacturers' reports were replete with concerns about rising input costs, emerging supply chain disruptions in Europe, and persistent uncertainty about the pandemic. On balance, manufacturers expected demand to soften somewhat in coming months, although many indicated that this was part of a typical seasonal pattern.\nReal Estate and Construction\nDemand for residential construction and real estate leveled off in recent weeks, a circumstance which contacts attributed to a typical seasonal slowdown. Pent-up demand for home construction and remodeling helped mitigate the decline in activity normally experienced during this time of year. One residential real estate agent noted that while the pace of transactions slowed in recent weeks, activity was still much higher than it was a year earlier. Contacts expected activity to remain seasonally slow in the near term but predicted that demand will rebound in the spring.\nNonresidential construction and real estate conditions continued to vary by end market. Robust demand for industrial space persisted, with one general contractor indicating that his industrial backlogs had doubled over the past two months. By contrast, demand for retail and office space remained weak as COVID-19 cases continued to rise and corporate uncertainty persisted. Going forward, contacts remained concerned that the increase in COVID-19 cases would continue to hamper consumer demand, putting additional strain on retail and hospitality tenants.\nFinancial Services\nBanking activity remained mixed by market segment during the reporting period. Contacts noted that low interest rates continued to support demand for household loans, especially for mortgages. However, demand for business loans reportedly was flat. Lenders indicated that delinquency rates for commercial and consumer loans were still low because of forbearance agreements and various fiscal-relief measures, although one banker noted that delinquency rates were up among hoteliers. Multiple contacts reported growth in core deposits as customers held off on spending and investment. Looking ahead, bankers expected loan demand to remain unchanged in the near term but were optimistic that conditions will improve as more COVID-19 vaccines are distributed in 2021.\nProfessional and Business Services\nDemand for professional and business services continued to increase at a steady, modest pace since our last report. The surge in ecommerce brought on by the pandemic led to an increase in demand for cybersecurity, IT solutions, and transaction authentication services. Firms in these industries were optimistic about the future because consumers continue to shift to online transactions.\nFreight\nFreight volumes increased notably again in recent weeks. The rise in activity resulted from three primary factors, according to contacts: more online holiday sales this year (and subsequent home deliveries), strong imports, and firms' replenishing inventories. Seventy percent of freight contacts reported demand had increased in the last two months, and many had difficulty hiring enough drivers to keep up with demand. Looking forward, contacts expected shipments to remain strong in the near term as the pickup from holiday demand has historically continued into early February.\nFor more information about District economic conditions visit: clevelandfed.org/region\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
New York | 2021-01-14T00:00:00 | /beige-book-reports/2021/2021-01-ny | "Beige Book Report: New York\nJanuary 14, 2021\nSummary of Economic Activity\nEconomic activity in the Second District weakened moderately in the latest reporting period. The labor market has softened somewhat, with employment slipping in almost all service industries, where activity has been further constrained by a rise in COVID-19 cases, increased restrictions, and cold weather. However, businesses reported a modest increase in hiring plans and rising wage pressures. Input prices continued to rise at a moderate pace, and selling prices picked up modestly. Consumer spending declined, with holiday sales down from last year and auto sales weakening. Tourism picked up slightly in the latter half of December but was still at depressed levels. Housing markets have been mixed, while markets for office and retail space weakened further. Finally, banks reported some pickup in loan demand and little change in delinquency rates. Despite the recent weakening in business conditions, contacts grew somewhat more optimistic about the near-term outlook.\nEmployment and Wages\nThe labor market softened somewhat in the final weeks of 2020. A major New York City employment agency noted that hiring activity has been depressed, though this is typically a slow season; no significant pickup is expected until the spring at the earliest.\nBusinesses in almost all sectors, most notably construction and leisure & hospitality, reported weakening employment. The only exceptions were manufacturing and finance, where employment was reported to be little changed. Looking ahead, however, businesses expected that they would add staff, on net\u2014especially in the manufacturing, wholesale trade, and information sectors\nWages have accelerated moderately, with more businesses indicating rising wages than at any point since the start of the pandemic. The most widespread increases were reported in the retail trade sector. A number of contacts in New York State remarked that the year-end hike in the minimum wage has been burdensome. Looking ahead, businesses expect wages to accelerate somewhat\u2014particularly in retail & wholesale trade and, to a lesser extent, in construction, information and professional & business services.\nPrices\nBusinesses' input prices overall have continued to rise moderately, with contacts in the manufacturing, distribution, and construction sectors reporting substantial upward pressure on prices paid. Businesses in most sectors expect further increases in the prices they pay in the months ahead.\nSelling prices have accelerated modestly, led by fairly widespread hikes among retailers, wholesale distributors, and manufacturers. Looking ahead, a rising proportion of businesses indicated plans to raise their selling prices in the next few months\u2014most notably in the wholesale and manufacturing sectors.\nConsumer Spending\nConsumer spending weakened since the last report. Retail holiday spending has been mixed. Sales at major retailers in New York City have been dismal, reflecting a lack of both tourists and office workers. However, retailers in upstate New York and other parts of the District noted that sales improved somewhat in December and were on or a bit above plan, though still down sharply from a year earlier.\nNew vehicle sales weakened further in late 2020, falling well below comparable 2019 levels, according to dealers in upstate New York. This weakness was attributed to both weaker demand and low inventories\u2014particularly for trucks and SUV's. Sales of used vehicles also weakened, reflecting softer demand. Consumer confidence among residents of the Middle Atlantic region (NY, NJ PA) fell to a multi-year low in December, reflecting a weakening assessment of current conditions.\nManufacturing and Distribution\nManufacturing activity continued to expand at a subdued pace in December, while wholesale trade contacts reported weakening activity. Transportation firms noted a modest pickup in activity. A few contacts indicated delays in getting shipments from overseas.\nLooking ahead, manufacturers and wholesalers expressed widespread optimism about the outlook, while transportation & warehousing contacts, who had been fairly gloomy in recent months, have become mildly optimistic in the latest reporting period.\nServices\nService industry contacts reported marked weakening in business activity in the latest reporting period. Contacts in the professional & business services, information, and leisure & hospitality sectors reported widespread declines in activity, while those in education & health reported more moderate declines. Looking ahead, professional & business service firms expressed increased optimism about prospects for the first half of 2021, while those in other industries expected little change.\nTourism in New York City has remained exceptionally weak, though there was a modest pickup in the latter part of December. Restrictions on indoor dining combined with the onset of cold weather have hit restaurants hard. A number of hotels have closed, some permanently, and the occupancy rate among those still open has hovered around 35 percent\u2014higher on weekends, lower during the week. With business travel moribund, most hotel stays are from weekenders and subsidized housing for the homeless, with a bit of an uptick in late December from holiday visitors. An authority on New York City's tourism sector noted that advance bookings have grown much shorter, due to uncertainty about the pandemic, and expects visitations to rebound gradually over the next two years, with business and international visits lagging the most.\nReal Estate and Construction\nHousing markets have remained mixed in the latest reporting period. Sales markets in upstate New York remained strong in the final weeks of 2020, with homes selling quickly and prices continuing to rise. New York City's co-op and condo market has picked up in recent weeks, with both sales and prices rising modestly, though still below late-2019 levels. Housing markets in areas around New York City, on the other hand, have leveled off, following an exceptionally strong third quarter. The number of new listings is up from a year ago, while the inventory of homes on the market remains high in New York City but low elsewhere.\nThe residential rental market has continued to weaken, led by New York City. Partly reflecting increased landlord concessions, effective rents in Manhattan and Queens are reported to be down more than 20 percent from a year earlier and down 8 percent in Brooklyn. Rental vacancy rates across New York City are reported to be at multi-decade highs.\nCommercial real estate markets have weakened further, to varying degrees, across the District. Retail and office markets have been particularly weak in New York City, with asking rents trending down and well below year-earlier levels. Elsewhere, office markets have been modestly weaker, while retail markets have mostly been flat. The market for industrial space, however, has remained fairly firm.\nNew construction activity has remained sluggish in both the residential and commercial segments. Contacts in the construction industry continued to report weakening activity but have grown substantially less pessimistic about the near-term outlook. Contacts continued to report sharp increases in the cost of materials and scattered shortages and delays.\nBanking and Finance\nFinance-sector contacts generally reported widespread declines in business activity since the last report. Small to medium sized banks in the District reported higher loan demand across all categories, along with a modest increase in refinancing activity in the final weeks of 2020. Bankers reported tightened credit standards for consumer loans and commercial mortgages and narrowing spreads across all loan categories. Delinquency rates declined for consumer and C&I loans but rose for commercial mortgages. Finally, contacts reported some increased leniency for delinquent commercial mortgages.\nFor more information about District economic conditions visit: www.newyorkfed.org/regional-economy\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
San Francisco | 2021-01-14T00:00:00 | /beige-book-reports/2021/2021-01-sf | "Beige Book Report: San Francisco\nJanuary 14, 2021\nSummary of Economic Activity\nEconomic activity in the Twelfth District continued to expand at a modest pace during the reporting period of mid-November through December. Overall employment levels and the existing modest pace of price inflation were largely stable, and wages increased slightly. Retail sales picked up, but activity in the consumer and business services sectors was mixed. Manufacturing activity increased somewhat, and conditions in the agriculture sector strengthened slightly. Contacts reported continued strong activity in residential real estate markets, while conditions in the commercial sector weakened. Lending activity continued at high levels.\nEmployment and Wages\nEmployers in most reporting sectors maintained generally stable staff head counts, following a sustained period of employment volatility due to the pandemic. Some contacts reported increased employee turnover but also highlighted little difficulty finding qualified applicants. Others reported labor shortages in the construction and building materials manufacturing sectors, which was intensified in some areas by reconstruction efforts following the wildfire season. Contacts in tourism and food services noted employment cuts in response to the recent surge in COVID-19 cases and resulting renewal of mobility restrictions in some areas. A contact in automotive services reported reduced numbers of workers and hours due to slower activity. A few contacts in the financial sector mentioned operational efficiencies that led to the elimination of redundant positions. Demand for labor in the technology and health-care industries remained solid.\nWages increased slightly near year-end. Contacts reported little change in entry level wages, except for workers affected by minimum wage legislation. For higher-paying positions, employers noted either no noticeable changes to wages or only typical merit increases for existing employees. Some firms in the construction and manufacturing sectors offered extra vacation days and extended holiday season bonuses to help reduce turnover. There were a few reports of decreased wages for some financial service providers due to a reduction in interest margins. Others, however, mentioned slight increases in wages and rising pressures.\nPrices\nMost contacts reported stable and low price inflation over the reporting period. While manufacturers noted that input costs had increased, some highlighted that they had not passed those increases to end users. Consumer service providers generally did not change their price structures, but some business service providers implemented holiday season surcharges in response to strong demand. Prices for building materials rose significantly, while those for agricultural products rose modestly.\nRetail Trade and Services\nRetail sales picked up in general, but reports varied somewhat by region. Holiday sales were stronger than expected given the pandemic but weaker than past holiday seasons. Retailers in areas where local governments reinstated limitations on commerce and mobility in response to the recent virus surge saw a large negative impact on sales. Reports highlighting foot traffic varied widely, with some contacts noting empty stores and shopping malls, and others mentioning customers in long wait lines. Sales at auto dealerships were boosted somewhat by year-end tax incentives. Some specialty retailers, including for pet products, reported strong sales. Others mentioned weaker sales for discretionary products due to customers' focus on purchases for essential products. E-commerce volumes increased notably relative to brick-and-mortar stores, and contacts reported that the pandemic has further accelerated the shift toward online sales. Contacts in areas that depend more heavily on tourism, such as Alaska and Hawaii, reported that holiday retail sales were significantly below levels from past seasons.\nActivity in the consumer and business services sector was mixed. Demand for logistics and delivery services rose further, with providers working at full capacity. Shipping service quotas were implemented on many big box companies, with some reported order backlogs and shipping delays due to increased online sales volume during the holiday period. In health care, demand for elective procedures and mental health assistance continued to rebound from the pause earlier in the year, though providers expressed concerns about the recent surge in COVID-19 cases potentially limiting the volume of such services. Contacts in the tourism industry noted that demand for air travel and hotel rooms was still subdued. The pandemic continued to severely impact restaurant and dining services, with reports noting that many smaller restaurateurs have struggled to stay open. Production in the entertainment sector has returned slowly under strict safety protocols. Capacity utilization among automotive service providers remained low, and store hours were reduced to reflect the current environment. Demand for nonprofit services focused on housing assistance remained at average levels, while enrollment numbers for higher education stayed tepid.\nManufacturing\nManufacturing activity increased modestly on balance. Production and capacity utilization for renewable energy equipment and supply chain services continued to grow at a strong pace, with some factories engaging in considerable overtime to meet pent-up demand. Production and capacity utilization in metals and wood products manufacturing remained robust, and contacts reported adequate access to materials. Demand for energy from manufacturers other than aerospace rebounded faster than power providers had anticipated. Aerospace manufacturing activity continued to be plagued by the pandemic-related drop in air travel demand. One contact also mentioned that pre-pandemic technical issues continued to hamper demand for manufactured aircraft parts.\nAgriculture and Resource-Related Industries\nAgricultural activity increased slightly over the reporting period. Demand for agricultural products grown in California and the Pacific Northwest expanded both domestically and internationally, as exports benefitted from a depreciated dollar. Sales of wheat, fruit, raisins, and nuts to global markets picked up near year-end, with shipments of almonds reaching record highs according to a contact who provides transportation services for the agricultural sector. Inventories fell somewhat from the prior reporting period but remained high. Fires in California's Central Valley impacted production capacity for some farmers and livestock ranchers, but the total impact is yet to be determined.\nReal Estate and Construction\nActivity in residential real estate markets continued to grow robustly across the District, yet the pace of growth was slightly slower than in the previous reporting period. Demand for homes continued to be boosted by historically low mortgage rates and wider geographic searches by those able to work remotely. New construction and prices for housing rose further while inventories remained tight, especially for homes at more affordable price ranges. Contacts in the Mountain West noted that many homes were sold prior to completion. Across the District, contacts reported constraints on the availability of qualified construction labor, building materials, and lots with ready access to public utility services. Demand for residential rental units in metropolitan areas continued to fall. In contrast, contacts reported increased inquiries for suburban rental spaces. One contact in the Pacific Northwest highlighted an increase in the number of past due rent payments.\nDemand for new commercial construction weakened, and contacts observed that high uncertainty continued to cloud plans in the District. Reports focused on increased vacancies in retail space but continued modest competition for warehouse space. Construction permitting for industrial and storage facilities was still in high demand, partially due to increasing rents. A contact in Utah noted increased demand for office and hotel space due to population growth in the area. One contact in California mentioned that the positive news concerning vaccines was a material input in their firm's decision to partially renew their commercial space lease.\nFinancial Institutions\nLending activity remained at high levels but the pace of new loan generation slowed somewhat. Reports indicated that expectations for a new round of government-backed lending programs with favorable terms have encouraged many business borrowers to postpone their loan applications slightly. Demand for new mortgages and refinancing remained strong. Deposits were robust and banks reported having significant liquidity, high asset quality, and generally healthy balance sheets. Nonetheless, some bankers expressed concern over potential loan losses should payment deferrals and loan forbearances be terminated, especially in relation to loans extended to restaurants, bars, and hotels. In venture capital markets, contacts noted increased investor interest in clean energy and other businesses oriented around environmental sustainability.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Kansas City | 2021-01-14T00:00:00 | /beige-book-reports/2021/2021-01-kc | "Beige Book Report: Kansas City\nJanuary 14, 2021\nSummary of Economic Activity\nThe Tenth District economy held fairly steady in December, on net, albeit with large variation across sectors. However, contacts in almost every sector expected conditions to improve over the next six months. Consumer spending continued to decline due to further drops in auto, restaurant and tourism sales. But retail sales rebounded sharply in December and were above year-ago levels. Manufacturing production and new orders expanded modestly, driven by moderate gains at durable goods plants. Sales rose slightly among professional and high-tech firms, but transportation and wholesale trade contacts reported declines. Residential real estate activity slowed as home sales declined amid falling inventories and rising prices. Commercial real estate conditions continued to deteriorate, but contacts expected vacancy rates to edge down and prices to stabilize in coming months. Energy activity expanded as revenues, profits and drilling rose for most firms. The agricultural sector improved modestly as higher crop prices lifted prospects for farm incomes. Employment levels increased slightly, and wages rose modestly. Input prices continued rise faster than selling prices, leading to tighter profit margins.\nEmployment and Wages\nDistrict employment increased slightly in December, but remained slightly below year-ago levels. Within the services sector, gains were driven by retail and wholesale trade, while growth was restrained by the restaurant and tourism industries. Expectations within the services sector were mostly positive aside from the transportation, restaurant, and health services sectors. Manufacturers noted increases in both employment levels and employee hours and expected modest growth in the coming months.\nThe majority of contacts in the services sector reported labor shortages, noting a need for truck drivers, specialized information technology workers, and mechanics. One hospital noted being short on staff to care for COVID patients such as registered nurses, respiratory therapists, and certified nursing assistants. Wages rose modestly during the survey period and were expected to rise at a faster pace in the coming months. Services contacts reported that 23 percent of employees were working remotely on average, while the average among manufacturers was 9 percent.\nPrices\nGrowth in input prices continued to outpace that of selling prices in the services and manufacturing sectors, although more notably for the latter. Within manufacturing, prices for raw materials rose moderately while prices received for finished products grew slightly. Additionally, prices for raw materials were expected to continue to outpace selling prices in the coming months, putting pressure on profit margins. Retail prices increased moderately, with input prices rising slightly faster than selling prices. In contrast, contacts from the transportation and restaurant sectors indicated that selling prices rose faster than input prices in December, but expected that trend to reverse in upcoming months. Contacts in construction supply noted that selling prices rose modestly and expected them to continue to do so in following months.\nConsumer Spending\nOverall consumer spending declined in December despite a robust increase in retail sales. Declines in restaurant, auto, and tourism sales accelerated, while activity in the health services sector also fell following moderate gains during the previous survey period. Retail trade was the only bright spot, with strong sales growth during December and sales above year-ago levels. Auto and restaurant sales were modestly below year-ago levels, while tourism activity remained sharply lower. Respondents from all consumer sectors expected modest gains in the next few months. While the majority of contacts indicated that the most recent surge of COVID cases negatively affected their firm's business, a quarter of respondents indicated that it had had no effect.\nManufacturing and Other Business Activity\nManufacturing activity expanded modestly since the last survey, but remained modestly below year-ago levels. Production and new orders rose moderately for durable goods, while activity for non-durables fell slightly for the first time since late spring. Contacts in both sectors expected production and new orders to rise in coming months. Capital expenditures were just below year-ago levels. Looking ahead, firms' primary motivations for capital outlays in the upcoming year were to make investments in labor saving technology and equipment to enhance production capacity.\nOutside of manufacturing, sales in transportation and wholesale trade fell, leaving sales modestly below year-ago levels. Sales in professional and high-tech services rose slightly, but remained moderately below year-ago levels. Capital expenditures edged down in transportation and professional and high-tech services but increased modestly for wholesale trade. Contacts from these three sectors anticipated both sales and capital expenditures to rise over the next few months.\nReal Estate and Construction\nResidential real estate activity slowed moderately in December, while commercial real estate conditions continued to worsen modestly. Residential sales fell moderately as inventories of homes fell further and prices continued to rise. Despite this, home sales remained above year-ago levels and contacts anticipated moderate increases in sales and prices the coming months. Construction supply sales fell for the first time since February and were expected to continue to fall modestly moving forward. Commercial real estate contacts noted modest declines in absorption rates, sales, prices, and rents along with an increase in vacancy rates. Developers reported that credit was increasingly difficult to access. Commercial construction, however, edged up and additional increases were expected in the next few months. Additionally, contacts expected vacancy rates to edge down and prices to stabilize.\nBanking\nBanking contacts reported a slight increase in total loan demand in recent weeks. Growth was concentrated in two categories, with a modest increase in the demand for residential real estate loans and a slight increase in the demand for commercial real estate loans. Loan demand in all other lending categories slowed, with a slight decline in consumer loan demand, a modest decline in commercial and industrial loan demand, and a moderate decline in agricultural loan demand. Credit standards tightened slightly for residential real estate and commercial and industrial loans, and tightened modestly for commercial real estate loans. Overall loan quality improved slightly compared to a year ago, although bankers expected loan quality to decline modestly over the next six months in several categories including commercial real estate, hospitality and small business. Deposit levels increased robustly in recent weeks. Anecdotal evidence suggested the economy outperformed expectations this year, but there remained a general uncertainty around future performance. One banker commented, \"surprised how well our year turned out. Economy seems very fragile yet continues to perform surprisingly well\".\nEnergy\nDistrict energy activity expanded since the previous survey period but continued to lag year-ago levels. Revenues, profits, and drilling activity rose for most firms but remained below year-ago levels. However, employment levels continued to decline. The number of active oil and natural gas rigs increased broadly across District states. While commodity prices increased since the last survey period, regional firms also reported needing a higher average price for a substantial increase in drilling to occur for oil and natural gas. Most contacts expected higher regulatory costs for their firm in the upcoming year, and a significant share of firms indicated plans to reduce emissions or reuse water. Expectations for future drilling and business activity turned positive for the first time since the first quarter of 2020, but firms anticipated additional job cuts moving forward due to continued consolidation and efficiency gains.\nAgriculture\nConditions in the Tenth District agricultural economy and prospects for farm income improved modestly since the previous reporting period alongside further increases in crop prices. District contacts reported that direct government payments had provided robust support for farm incomes, and expected the sharp increase in crop prices during recent months to further improve profits. Since the previous period, crop prices increased moderately and were well above a year ago. In addition to higher prices, strong crop yields in some parts of the District boosted revenues further, particularly in Missouri. Profit opportunities for livestock producers in the District were more limited. Cattle prices were generally stable, but remained well below a year ago. Hog prices declined slightly in the period, but were slightly higher than a year ago.\nFor more information about District economic conditions visit: www.KansasCityFed.org/Research/RegionalEconomy\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Chicago | 2021-01-14T00:00:00 | /beige-book-reports/2021/2021-01-ch | "January 14, 2021\nSummary of Economic Activity\nEconomic activity in the Seventh District increased modestly in late November and December but remained below its pre-pandemic level. Contacts expected further growth in the coming months, but most did not expect to see full recovery until at least the first half of 2022. Manufacturing increased moderately; business spending and construction and real estate increased modestly; and employment and consumer spending increased slightly. Wages rose modestly and prices were up slightly. Financial conditions were little changed. Agricultural income for 2020 was better than expected at the beginning of the year and at the onset of the pandemic.\nEmployment and Wages\nEmployment increased slightly over the reporting period, but contacts expected a moderate increase over the next 12 months. Contacts continued to report elevated employee absenteeism due to Covid-19 cases or exposures and childcare challenges for their workers, with some manufacturers saying they were forced to slow production following the Thanksgiving holiday due to staffing challenges. Many contacts noted difficulty in hiring workers, especially at the entry level. One aluminum producer said they were struggling to meet demand because they couldn't hire enough workers, even after raising wages. Overall, wages rose modestly across skill levels, with an increased number of reports of pay hikes for higher skilled workers. Benefits costs also rose modestly, with several contacts reporting higher healthcare costs. Some contacts said they had paid out larger-than-normal year-end bonuses, but others said they had been forced to cancel them.\nPrices\nPrices increased only slightly in late November and December, but contacts expected a more moderate increase in prices over the next 12 months. Consumer prices remained flat while producer prices increased some. Input costs increased modestly, driven by rising raw materials, energy, and shipping prices. Numerous manufacturing contacts noted large price increases for metals and metal products, particularly steel and aluminum. Energy prices increased some, as lower crude inventories supported higher prices for petroleum products.\nConsumer Spending\nConsumer spending increased slightly over the reporting period. Nonauto retail sales increased modestly as holiday sales came in at the low end of forecasts. E-commerce sales remained strong, but growth plateaued, in part because of shipping challenges. Brick-and-mortar traffic fell overall during the holiday shopping season. Demand remained robust in the home improvement, appliances, and furniture categories leading some items to be out of stock. Apparel sales increased only slightly. Light vehicle sales decreased slightly, and remained below pre-pandemic levels, with new vehicle sales softening more than sales of used vehicles. One contact said that vehicle demand from low and moderate income consumers had retreated as fiscal stimulus effects wore off. Leisure and hospitality spending weakened further as new and existing restrictions on restaurants and entertainment venues limited sales.\nBusiness Spending\nBusiness spending increased modestly in late November and December. Retail inventories were somewhat low overall. Dealers said that vehicle inventories remained well below pre-pandemic levels and weren't expected to rebound until well into 2021. Manufacturing inventories were generally at comfortable levels, but a growing number of contacts reported supply chain problems, especially related to raw materials, cardboard boxes, electrical components, and specialty parts. One contact said that they had stocked higher levels of raw materials to reduce the risk of running out. Capital expenditures increased modestly, as a number of contacts said they were resuming small-scale investment in equipment after pausing at the start of the pandemic. Contacts expected a moderate increase in capital spending over the next twelve months. Demand for transportation services increased moderately, and contacts noted that capacity constraints had led to sizeable price increases. There was a small increase in commercial and industrial energy consumption.\nConstruction and Real Estate\nConstruction and real estate activity increased modestly on balance over the reporting period. Residential construction activity increased moderately, with a number of contacts reporting increased single-family building. A contact in Des Moines said home construction was at its highest level in more than a decade and that the market for land was quite competitive. Contacts again reported project delays because of increased lead times for building materials and appliances, labor shortages, and delays in government permits and inspections. Residential real estate activity increased modestly. Home prices rose moderately, while rents rose slightly. Nonresidential construction was unchanged on balance. Construction of industrial space remained a bright spot, with a contact saying completed projects in 2020 in the Indianapolis area broke 2019's record. Commercial real estate activity fell slightly. Prices and rents fell marginally for commercial real estate, while sublease space increased slightly. Demand for industrial space remained robust, but interest in office and retail space decreased further.\nManufacturing\nManufacturing production increased moderately in late November and December, with reports of activity in some sectors approaching pre-pandemic levels. Some firms with strong demand continued producing on days during the holiday weeks when they normally would have been shut down. Auto output was stable and near its pre-pandemic level. Production of steel and aluminum increased, with growing demand from the construction, auto, and appliance industries. Manufacturer sales of specialty metals increased moderately and some contacts reported that capacity constraints had pushed up delivery lead times. Demand for heavy machinery rose slightly, driven in part by growth in the agriculture sector. Demand for heavy trucks increased strongly. There was steady demand for building materials.\nBanking and Finance\nFinancial conditions were little changed on balance over the reporting period. Participants in the equity and bond markets reported a small improvement in conditions, though volatility remained elevated. Business loan demand decreased modestly overall, with one contact highlighting commercial real estate as a source of decline. Business loan quality deteriorated slightly, with declines concentrated in the retail, entertainment, and commercial real estate sectors. Business loan standards tightened modestly. Consumer lending was little changed on balance. Contacts continued to note steady, strong demand for residential mortgages. Most contacts said that loan quality and standards were little changed, though one contact reported a slight increase in delinquencies as customers came off deferrals.\nAgriculture\nAgricultural income for 2020 was better than contacts expected at the beginning of the year and at the onset of the pandemic. Contacts viewed government payments as an important reason many farms had profits. Corn and soybean prices continued to move higher over the reporting period, spurred by strong export demand. A larger than usual number of acres were planted with winter wheat, encouraged by higher prices for wheat and good fall weather. Dairy prices were volatile over the reporting period but ended close to where they started. Cattle prices were generally up, but hog prices moved down. Farmland values increased some. Ethanol producers continued to struggle, but some were helped by growing demand for byproducts such as carbon dioxide for dry ice.\nFor more information about District economic conditions visit: chicagofed.org/cfsbc\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Minneapolis | 2021-01-14T00:00:00 | /beige-book-reports/2021/2021-01-mi | "January 14, 2021\nSummary of Economic Activity\nEconomic activity in the Ninth District increased modestly since mid-November. Employment grew modestly, with increased hiring demand, but restrained labor supply. Wage pressures were moderate overall, and price pressures were generally modest. Sources reported growth in consumer spending, residential construction and real estate, manufacturing, and agriculture. Energy activity held steady at low levels, while tourism and commercial construction and real estate activity declined.\nEmployment and Wages\nEmployment grew modestly since the last report, with hiring demand seeing continued growth, but labor supply not responding in kind. Staffing contacts in Minnesota and North Dakota said December job orders were surprisingly strong, possibly to expand workforces to cope with virus-related quarantines and other interruptions. A November survey of hiring expectations among Ninth District firms found that a modestly higher share was planning to increase employment in 2021 compared with those planning to decrease staff levels. Many contacts noted evidence of healthy hiring demand. Districtwide, job postings have mostly recovered on a year-over-year basis, except in Minnesota, where postings have plateaued about 10 percent below year-ago levels. There were pockets of pessimism, however. A mid-December survey of Minnesota hospitality and tourism firms found that more than half were cutting or furloughing staff, in part due to operating restrictions put in place by the state a month earlier. Preliminary December data on workers compensation policies in Minnesota also showed a slight drop-off, suggesting that employers might be pulling back on future hiring plans. Initial and continuing unemployment insurance claims rose in recent weeks, due at least in part to normal seasonal slowing in some sectors like construction. As of mid-December, the number of workers receiving jobless benefits in District states was two-and-a-half times the level seen one year earlier.\nLabor supply constraints remained significant. A handful of workforce development sources acknowledged a growing number of available jobs. But one contact noted that many available jobs lacked health care benefits and \"just don't pay enough\" to take given higher health risks and other obstacles, like day care availability, transportation difficulties, or the possibility of being recalled from furlough. The prospect of further enhanced unemployment benefits was also keeping some workers on the sidelines. A contact in Minneapolis-St. Paul said she was seeing lower labor force participation among younger workers who were \"extremely worried about parent and grandparent vulnerability\" to COVID-19. Multiple contacts also noted technology equity issues, manifested in broadband availability and the lack of computer skills necessary for effective job search. \"Just about every business in today's world is run by technology. If you lack those skills, you will not succeed\" in the job search, said one contact. Many job assistance offices remained closed to walk-ins, and newly enhanced online services compounded search problems for those without computer skills.\nWage pressures were moderate overall. A staffing contact overseeing multiple offices in Minnesota said that average wage offers in mid-December were 8 percent higher than a year ago, with most of that growth materializing in the second half of the year. Other contacts reported a rise in signing bonuses, but also a decline in hazard pay. A notable share of hospitality and tourism firms reported little or no wage increases given the difficulties in that sector. \"I really can't even think of a wage increase except the mandatory (minimum wage increase) on January first,\" said the female owner of a Minneapolis-St. Paul restaurant. \"I need to survive first.\"\nPrices\nPrice pressures were generally modest, but shipping costs were up. Survey respondents from the hospitality and tourism industry generally reported flat or mildly increased wholesale prices over the past year, including for food and drink. Retail prices saw even less pressure. Most participants in a poll at a large transportation conference in early December expected freight pricing (excluding fuel surcharges) to increase faster than usual through early 2021. An industry source reported that residential rents as of December declined 2.1 percent in Minneapolis-St. Paul month over month, and 11 percent since March, the ninth fastest decline among the nation's 50 largest cities since the start of the pandemic.\nConsumer Spending\nConsumer spending rose modestly from the previous report. Many Minnesota retailers saw lighter foot traffic during the holidays, but some reported that it nonetheless exceeded their scaled-back expectations. Online sales were widely and significantly higher, but contacts suggested that total sales for many would fall modestly short of last year, particularly for small retailers. North Dakota retailers had cautious holiday expectations because of the downturn in the oil sector. A South Dakota contact said retailers saw \"a real mixed bag.\" Rural consumers there have been more willing to shop in person, so foot traffic in smaller communities \"seems to be steady.\"\nVehicle sales saw a modest dip in November, but a dealership in the western part of the District said sales in early December were solid, \"although we would like more inventory, especially trucks.\" Vehicle sales taxes in Minnesota in December were higher than last year. Restaurants and bars continued to see decreased revenue across the District. A majority of hospitality and tourism firms in Minnesota reported negative revenue trends in December and continued pessimism for early 2021. Results were even more dour for minority-owned firms. A minority-owned hotel in central Minnesota said the facility's pool and breakfast buffet were both closed, and area bars and restaurants were barred from inside dining and drinking due to state-imposed restrictions. \"Why would anyone want to stay?\"\nConstruction and Real Estate\nCommercial construction fell moderately since the last report. Two industry databases showed construction starts and total active projects in the District continuing to slow into December. A recent Minnesota survey reported a sour industry outlook, with 42 percent predicting a sectoral downturn in 2021, compared with 10 percent last year. Residential construction continued to outperform the rest of the sector. November single-family permitting rose 8 percent over last year in Minneapolis-St. Paul and also rose in Bozeman, Mont., Bismarck, N.D., and Sioux Falls, S.D.\nCommercial real estate fell modestly since the last report. Softening levels of new commercial construction has helped keep a lid on vacancy rates in many real estate categories. However, the overall 2021 outlook was subdued, particularly in urban areas. Late payments among multifamily renters continued to creep up, according to surveys, which has put particular strain on more affordable properties with already thin margins. Sources believed federal stimulus proposals would temporarily relieve some financial stress for tenants and landlords, but there was continued concern over pandemic-related forbearance policies and their effects on housing markets. In contrast, residential real estate was strong. November home sales were robust across most the District, including many rural areas, and banking contacts reported record-level mortgage activity.\nManufacturing\nDistrict manufacturing activity increased briskly since the previous report. An index of regional manufacturing activity indicated brisk expansion in North Dakota and South Dakota in December compared with the previous month, while activity in Minnesota grew more moderately. Transportation industry contacts generally reported increased freight orders in the fourth quarter of 2020 relative to the third, with much of the growth coming from manufacturing customers.\nAgriculture, Energy, and Natural Resources\nAgricultural conditions improved modestly on strong harvests and recent increases in some commodity prices. However, contacts in the industry cautioned that much of the recent growth in farm incomes has been due to increased government aid rather than improved market conditions. District oil and gas activity remained steady at low levels.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Cleveland | 2020-12-02T00:00:00 | /beige-book-reports/2020/2020-12-cl | "December 2, 2020\nSummary of Economic Activity\nEconomic activity increased moderately and at a similar pace to the previous reporting period. Activity increased at a brisk pace for professional services, freight haulers, and firms whose sales benefitted from low interest rates (such as homebuilders and durable goods producers). Firms in industries that were most impacted by the pandemic (such as hospitality, aerospace, and energy) saw little improvement in demand. Staff levels increased slightly as customer demand improved. However, most firms were still below pre-pandemic staff levels. Although labor availability had improved recently, many firms report ongoing difficulty finding workers. Idiosyncratic disruptions to production as well as shipping delays pushed up transportation rates and costs for certain construction and manufacturing inputs. Selling prices rose moderately as a result. Looking ahead, contacts expected modest improvement in customer demand, although expectations have been tempered since the previous reporting period because of the uncertainty of the coronavirus's path. Consequently, outlooks for hiring in the year ahead were also restrained.\nEmployment and Wages\nDistrict labor markets continue to heal steadily. Staff levels increased slightly in response to the broader improvement in business activity. Most firms that had temporarily laid off workers have rehired most of those workers. That said, staff levels remain below pre-pandemic levels for about two-thirds of our contacts. Also, despite high levels of unemployment, firms experienced mixed results in recruiting workers. Firms generally had no trouble finding workers for office-type jobs, but recruitment was still a challenge for many manufacturing, construction, retail, and transportation firms. Firms in these sectors indicated that, although labor availability has improved with the passage of time since supplemental unemployment benefits lapsed in July, their staffing challenges have persisted.\nOverall, wage pressures were modest because of the slack in the labor market. The freight and logistics sector was an exception. Many of these firms reported pay increases of 10 percent or more for drivers and hourly workers to attract workers and to stem high employee turnover.\nRegarding the outlook, hiring plans for the year ahead were generally modest. About a third of contacts expected they will still be below pre-pandemic staff levels 12 months from now. Uncertainty about the path of the virus and associated public health measures topped the reasons firms are reticent to add staff. Moreover, a sizable share of firms indicated they expected sales growth to be too low to justify stronger hiring.\nPrices\nNonlabor costs rose moderately, on balance. However, cost increases were more prominent for builders, manufacturers, and retailers. Many firms in these sectors experienced delays in receiving inputs because either the producer or the shipper was short-staffed. This situation not only increased input costs and the cost of shipping these materials, but it also increased lead times. Steel and lumber were widely cited as examples of commodities for which prices are well above pre-pandemic levels.\nSelling prices rose moderately, although increases were stronger for durable goods and freight than they were for professional services and nondurable goods. Very strong demand and tight capacity in the industry motivated almost all of our freight haulers to boost their rates for new contracts, and most received little pushback from customers. A number of manufacturers and builders were able to pass cost increases on to their customers if they were not held to a long-term contract. Auto dealers commented that low inventories of vehicles continue to push up prices for new and used cars. By contrast, a number of restaurants and hotels cut their prices to attract customers. Professional services firms broadly held their prices, as they have done for several reporting periods.\nConsumer Spending\nReports suggest that consumer spending grew moderately, albeit at a slower pace than in the last reporting period. Sales of goods were generally stronger than for services. Auto dealers commented that sales remained strong, thanks largely to low interest rates, and while some reported improved inventory levels, a number of contacts indicated that sales were still being limited by low inventories. Sales for general merchandisers and apparel retailers were slightly better recently, and they were expecting a favorable holiday shopping season. However, hoteliers and restauranteurs noted that the recent rise in COVID-19 cases weakened dine-in sales and business travel further from its previous low level, and customers were cancelling planned weddings and holiday events. Contacts expected business activity to remain broadly unchanged in the next few months, although increases in COVID-19 infections and diminished assistance to households from federal programs were significant downside risks to the outlook for spending.\nManufacturing\nManufacturing orders increased modestly, although at a slower rate than in the previous period. Firms also reported slightly better capacity utilization, and plans for capital investment were stable. By end-market, the wide variation in activity that was seen in recent periods persisted. Firms that make consumer durables (such as autos) and goods related to homebuilding continue to experience strong demand. Also, the growth of online retailing boosted orders for producers of packaging and logistics equipment. Conversely, aerospace demand remained flat at low levels because of depressed air travel. Similarly, orders for oil and gas equipment remained weak because of low levels of oil and gas drilling. Looking forward, contacts expected demand to improve modestly.\nReal Estate and Construction\nDemand for homes remained strong, and contacts attributed this primarily to low mortgage rates. Although a seasonal slowdown is normally experienced around this time of the year, homebuilders and real estate agents noted that sales have yet to slow. Looking to the next two months, contacts were concerned that demand may soften as COVID-19 cases increase. One homebuilder indicated that traffic on the firm's website had declined, suggesting that new home sales may soon begin to soften.\nNonresidential construction and real estate activity remained relatively stable since our last report. Increases in COVID-19 infections and uncertainty about the elections led many firms to hold off on their investments. One general contractor stated that there have been fewer projects available for bidding and those that are available have been smaller in dollar value. He also noted that many projects have seen a significantly larger pool of bidders than usual.\nFinancial Services\nBanking activity remained stable during the reporting period. Contacts noted that low interest rates continued to support demand for consumer loans, especially for mortgages and auto loans. However, demand for business loans was reportedly flat. Core deposits grew for most contacts, and lenders indicated that delinquency rates for commercial and consumer loans were still low because of forbearance agreements and CARES Act-related assistance. One banker noted that customers for whom forbearance agreements had ended were staying current with their payments. Looking ahead, bankers were optimistic that conditions will improve as the likelihood of an effective COVID-19 vaccine increases.\nProfessional and Business Services\nDemand for professional and business services strengthened further from its previous high level. IT firms, in particular, experienced robust demand for digitization projects and support for online retailing operations. One marketing firm noted an uptick in advertising activities. Contacts expressed optimism for the coming months and expected demand to remain strong.\nFreight\nDemand for freight services strongly increased, and firms expect the momentum to continue into the next several months. Logistics firms indicated that strong online retail sales growth was keeping fulfillment centers busy. Cargo volumes picked up as manufacturers and retailers built up their inventories. Also, import volumes were reported to have increased ahead of the holiday shopping season. Many firms in the industry indicated that high staff turnover and difficulty finding workers made it difficult for them to keep up with demand.\nFor more information about District economic conditions visit: www.clevelandfed.org/region\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Chicago | 2020-12-02T00:00:00 | /beige-book-reports/2020/2020-12-ch | "December 2, 2020\nSummary of Economic Activity\nEconomic activity in the Seventh District increased moderately in October and early November, though activity remained below its pre-pandemic level. Contacts expected further growth in the coming months, but nearly all expected full recovery would not occur until at least the second half of 2021. Employment, consumer spending, and manufacturing increased moderately; business spending increased modestly; and construction and real estate was flat. Wages rose slightly, as did prices. Financial conditions improved modestly. Strong harvests, government support, and higher prices boosted expectations for farm income.\nEmployment and Wages\nEmployment increased moderately overall during the reporting period. Several contacts made little or no change to their staffing levels and there were some reports of increased headcounts in response to sales growth. Numerous contacts reported increased absenteeism because of Covid-19 cases or exposures among their workers, but these firms were generally able to maintain their output levels. Many contacts noted difficulty in finding workers, especially at the entry level. Several contacts reported using overtime to make up for elevated absenteeism and unfilled positions. Wages across skill levels and benefits costs moved up slightly.\nPrices\nPrices increased slightly in October and early November, and contacts expected a moderate increase in prices over the next 12 months. Consumer prices ticked up, led by higher food and vehicle prices. Producer prices increased slightly. Input costs were up modestly, driven by rising raw materials and shipping prices. Several contacts said that a shift forward in holiday season deliveries had pushed up shipping rates. Energy prices moved down further, as oil and gas inventories remained elevated and demand was slow.\nConsumer Spending\nConsumer spending grew moderately over the reporting period. Nonauto retail sales increased modestly. Demand remained robust in the appliance, electronics, home accessories, home improvement, power sports, and recreational goods categories. Apparel rebounded somewhat, and sales at party supply stores were strong. Growth in e-commerce eased but continued to register sharp gains from a year earlier. Contacts expected holiday-related spending to increase slightly compared with last year. Light vehicle sales decreased modestly. Auto service department activity slowed, and contacts attributed the pullback to fewer people traveling to school and work. Leisure and hospitality spending increased but remained weak, as new and existing restrictions on business travel and conventions held back gains. Contacts said that spending for elective health care procedures fell. Social service organizations reported strong demand for mental health services and financial assistance.\nBusiness Spending\nBusiness spending increased modestly in October and early November. Retail inventories were generally comfortable, though stocks of certain vehicle models remained well below normal levels. Most manufacturers also reported comfortable inventory levels, but a number continued to experience minor supply chain problems, especially related to raw materials. Capital expenditures were little changed overall, though a number of contacts said they had resumed making investments after pausing since the start of the pandemic. Several firms cited increased efficiencies as their justification for current expenditures. Contacts expected a moderate increase in capital spending over the next twelve months. Freight and shipping demand increased moderately, and contacts noted that capacity constraints had led to sizeable price increases. Commercial and industrial energy consumption increased slightly.\nConstruction and Real Estate\nConstruction and real estate activity was unchanged on balance over the reporting period. Residential construction increased moderately. Contacts noted that a lack of available lots and high materials costs continued to restrain growth. Residential real estate activity remained vibrant, particularly in the single-family market. Home prices rose slightly, while rents rose marginally. Nonresidential construction decreased some. Commercial real estate activity fell modestly, as did prices and rents. Contacts reported an increase in requests for shorter leases. Sublease space increased modestly as some tenants, particularly in the office sector, reduced their footprint in response to increased teleworking.\nManufacturing\nManufacturing production increased moderately in October and early November but remained below where it was before the pandemic began. Auto output continued to rebound and was near its pre-pandemic level. Steel production increased moderately, with reports of greater demand from the construction, auto, and appliance industries. Sales of specialty metals were mixed. Demand for heavy machinery rose slightly, driven by the automotive and construction sectors. Demand for heavy trucks increased strongly, helped by higher carrier profits. Manufacturers of building materials reported a small increase in shipments, supported by growth in residential construction.\nBanking and Finance\nFinancial conditions improved modestly over the reporting period. Participants in the equity and bond markets reported a small improvement in conditions, though volatility remained elevated in light of the pandemic and election. Business loan demand increased modestly, with contacts highlighting increases in small business banking. Contacts also reported an increase in requests for equipment financing. Business loan quality deteriorated slightly, with declines concentrated in the hospitality, retail, and commercial real estate sectors. Business loan standards tightened modestly. In consumer markets, loan demand increased somewhat, led by growth in residential mortgages. Contacts reported that delinquencies had slightly increased as accounts exited deferral programs but remained at low levels. Loan quality decreased slightly, while loan standards tightened modestly. Contacts continued to report high levels of deposits for both businesses and households.\nAgriculture\nFarm income beat expectations for the growing season, as prices for key agricultural commodities moved higher and government support continued. Corn, soybean, and wheat prices were up again, reflecting tighter stocks and increased exports. With the harvest nearly over, most of the District saw above-trend corn and soybean yields. Most specialty crops had solid yields as well. Favorable weather conditions allowed farmers to complete field work that had been skipped in prior years because of poor weather. Dairy prices were mixed, but up on net. Hog and cattle producers also benefited from higher overall prices, but expressed concern about rising feed costs.\nFor more information about District economic conditions visit: chicagofed.org/cfsbc\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
San Francisco | 2020-12-02T00:00:00 | /beige-book-reports/2020/2020-12-sf | "Beige Book Report: San Francisco\nDecember 2, 2020\nSummary of Economic Activity\nEconomic activity in the Twelfth District expanded modestly on balance during the reporting period of October through mid-November. Employment levels increased slightly on net, though the pace of job recovery slowed down in certain regions. Wages increased marginally, whereas price inflation showed little to no change on balance. Sales of retail goods rose appreciably, while conditions in the consumer and business services sectors remained unchanged overall. Manufacturing activity expanded moderately, with capacity utilization rates increasing a bit. Conditions in the agriculture sector also improved slightly. Residential real estate activity increased further, while commercial market conditions changed little on net. Lending activity increased at a mild pace.\nEmployment and Wages\nEmployment levels increased slightly on net. A large logistics and distribution firm with a national presence reported continued strength in hiring activity, as did construction and steel manufacturing firms. However, employers in the financial and energy sectors reported little to no change in their employment levels. In addition, employment in the hotel, restaurant, and entertainment industries remained well below pre-pandemic levels. In California and the Pacific Northwest, the job recovery pace slowed during the reporting period. A few contacts in California and Washington noted an unusual uptick in voluntary employee attrition, which they attributed to various reasons including changes in childcare needs, decisions to move out of state, or fear of contracting COVID-19. Several employers expressed difficulty attracting qualified workers, especially in industries that require employees to be on-site, such as payment processing companies, hotels, and food services. Some contacts in financial services mentioned implementing employee assistance programs and flexible work schedules to allow employees to coordinate with their managers ways to accommodate them to meet their children's schooling needs.\nWages increased marginally, although conditions varied widely by industry. Wages continued to increase in construction and financial services. Several contacts in California mentioned that the forthcoming change in the minimum wage taking effect in the new year would result in wage increases for most hourly workers. A wood product manufacturer in the Pacific Northwest reported plans to distribute year-end bonuses to reward employees for their efforts during the pandemic. Retail and other consumer-facing businesses reported little to no change in employee compensation. Employers in financial services and information technology mentioned reconsidering their wage structures as employees work remotely in areas with varying degrees of cost of living.\nPrices\nPrice inflation showed little to no change on balance. Contacts in wholesale retail, energy, and food services reported stable prices. Prices of building and construction materials including wood products, wallboard, cement, and paint continued to be highly elevated. Increased demand from the automotive industry as well as from foreign markets put upward pressure on prices of recycled metals and steel products. In contrast, a few hoteliers noted recently further downward pressure on rates due to increased discounting by competitors. Prices for crops such as nuts, grapes, and stone fruits were lowered mainly due to shipping constraints and export tariffs.\nRetail Trade and Services\nRetail sales rose appreciably over the reporting period. Many retailers moved up their holiday marketing by several weeks, and some have already benefited from an earlier start for holiday shopping. Online sales continued to be strong, and demand for home improvement goods, vehicles, delivery services and food products increased further. A contact in Southern California noted a recent spike in demand for bicycles. However, given the recent rise in COVID-19 cases and stricter containment measures across the District, brick-and-mortar stores expressed high uncertainty, with many being cautious about stocking up for the holidays. Most retailers expected the big shift to e-commerce to continue this holiday season, while overall sales volume is expected to be flat or slightly lower compared with last year. Several grocers reported intermittent supply issues and low inventories of certain products.\nConditions in the consumer and business services sectors remained unchanged overall. Activity remained strong in information technology, health care, and legal services. Logistics and transportation services reported continued strength in home deliveries and increasing holiday shipments. A contact in Southern California noted that demand for lodging in areas within easy driving distance of major metropolitan areas increased in the fall, especially among younger people. However, weakening activity in leisure and travel industries began in mid-October, and restaurants and hotels continued to operate at fractional capacities. Furthermore, contacts across the District expressed concern over renewed containment measures, including shutting down or reducing capacities for indoor dining, gyms, movie theaters, and beauty services. One contact in Hawaii suggested that lower levels of tourism may be at least partially attributable to testing and quarantine protocols.\nManufacturing\nManufacturing expanded moderately, with capacity utilization rates improving. Demand for manufactured wood products and building materials remained strong, as residential construction continued its rebound. A wood products manufacturer in the Pacific Northwest reported most sawmills were operating at near capacity, though still somewhat constrained by COVID-19, with related staff shortages and challenges in acquiring raw materials. Sales of recycled metals and fabricated steel products increased further, underpinned by strong demand from the automotive industry. Although energy usage by manufacturers has mostly rebounded from its lows, it has slowed down somewhat, which one contact attributed to a slowing recovery of the manufacturing sector as winter approaches. Durable goods orders increased robustly as businesses resumed investment, though several contacts reported continued disruptions to supply chains.\nAgriculture and Resource-Related Industries\nActivity in the agriculture sector increased slightly. The harvest for most agricultural crops, including grains and potatoes, has been completed in the Pacific Northwest and California, and ample water supply has contributed to high yields. International demand for wheat, raisins, and nuts has increased recently due to droughts in other parts of the world as well as a slight depreciation of the dollar. Despite the increase in exports, inventories remained elevated, especially for raisins, nuts, and almonds. Domestic demand for logs and timber continued to be strong, and demand from Asia increased. Several contacts expressed concern over the short to medium-term impact that wildfires could have on crops as well as on wood supply.\nReal Estate and Construction\nResidential construction activity continued to grow strongly, supported by low interest rates and the current telework environment. Contacts throughout the District reported increased demand for new and existing homes, especially in suburban areas and vacation home destinations, which kept inventories low and raised home prices further. Activity in the multifamily property sector was mixed, with lower rents and higher vacancies in metropolitan areas, while the opposite occurred in suburban areas. Several contacts noted increases in construction costs and longer project timelines due to labor shortages and supply chain disruptions. A contact in the Pacific Northwest noted that many people who were impacted by the wildfires plan to rebuild their homes, which could further spur demand for construction labor and materials.\nActivity in the commercial real estate market was little changed on net. Although commercial construction projects that began prior to the pandemic continued, new development projects were put on hold. Demand for commercial office and retail space continued to be weak throughout the District. By contrast, demand for new industrial and warehouse spaces increased in the Pacific West. A contact in Washington noted plans for a large new warehouse facility in their region.\nFinancial Institutions\nOverall lending activity increased at a mild pace. Most of the demand continued to be for residential and commercial real estate loans, particularly refinancing. Demand for auto loans continued to grow, albeit at a slower pace as compared with the summer. Demand for commercial and industrial loans edged down slightly, and utilization of commercial lines of credit remained low. In contrast, consumer lending activity has picked up a bit. Deposits continued to grow at double-digit rates, and deposit rates declined further. Banks noted strong asset quality, with low delinquency rates and ample liquidity. Several contacts across the District expressed concern over potential loan losses in the coming months should payment deferrals and mortgage forbearances no longer be extended. A contact in Southern California noted that capital markets and investment activities have rebounded in recent months, especially in the sustainability and clean technology areas.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Philadelphia | 2020-12-02T00:00:00 | /beige-book-reports/2020/2020-12-ph | "December 2, 2020\nSummary of Economic Activity\nOn balance, Third District business activity held steady for most of the current Beige Book period and remained below levels observed prior to the onset of the COVID-19 pandemic in most sectors. Net employment continued to grow modestly, wages continued to grow slightly, and price increases remained modest. However, numerous contacts noted that the sharp rise in COVID-19 cases had disrupted economic activity, and a downward trend emerged as November began. The cases heightened concerns that the winter months would prove difficult, if not impossible, to survive for some firms. Bankruptcies have already begun within the retail, restaurant, and hospitality sectors. Contacts are concerned that when unemployment benefits and moratoriums on evictions and foreclosures expire, an avalanche of bankruptcies will emerge among other small and medium-sized businesses, as well as households. Positive expectations for growth over the next six months have narrowed among firms.\nEmployment and Wages\nEmployment continued to increase modestly overall. The share of manufacturers reporting employment increases held steady at one-third, while the share reporting declines fell. Among nonmanufacturing firms, the share reporting increases has risen since the prior period, while the share reporting decreases held steady. On balance, average hours worked rose across all firms.\nActivity at staffing firms remained below pre-pandemic levels, with most firms noting more openings than candidates. Firms have more success at placements for those clients willing to pay competitive wages. Even in outlying areas of the District, this often means that firms seeking workers for low-skilled jobs must compete with billboard advertisements by warehouses for positions that start at $15 an hour and higher. Rising COVID-19 cases and sporadic school closings continue to deter workers, especially women, from reentering the labor market.\nWages continued to grow slightly. In mid-November, the percentage of nonmanufacturing firms reporting higher wage and benefit costs per employee remained somewhat higher than the percentage reporting lower costs. However, two-thirds of the firms reported no change.\nPrices\nPrices continued to rise modestly overall. Nearly 40 percent of the manufacturers reported that prices rose for factor inputs (and none reported a decline), but only about 25 percent received higher prices for their own products. In turn, about 25 percent of the nonmanufacturers reported that prices rose for their inputs, but only about 10 percent received higher prices from consumers for their own goods and services (and 6 percent reported declines). Generally, well over half of all firms noted no change in prices.\nVarious contacts noted that supply disruptions, shortages, and price spikes were easing. However, as COVID-19 cases surged, more businesses were coping with sporadic shutdowns and labor shortages, and many feared worse conditions in the winter months ahead.\nLooking ahead one year, manufacturers now anticipate receiving prices for their own goods and services that are modestly higher than they expected one quarter earlier. However, nonmanufacturing firms have raised their expectations significantly. Overall, firms also reported slightly higher expectations for annual consumer inflation.\nManufacturing\nOn average, manufacturing activity continued to grow slightly over the prior period; however, the trend softened in early November. The diffusion indexes for shipments and for new orders from our mid-month surveys in October and November remained positive\u2014suggesting some growth. However, the indexes rose from September to October, then fell in November.\nManufacturing firms responding to a question drawn from our COVID-19 survey reported that sales and new orders were about 8 percent below what had been anticipated pre-pandemic\u2014the same as was reported at the end of September.\nOne contact with a diverse and global footprint noted that U.S. manufacturing softened at the beginning of November, as had manufacturing in Europe after COVID-19 cases began rising. In contrast, cases are few in China, and activity is holding steady. Although China's economy would be expected to slow as global demand wanes, the contact noted that some production has shifted back to Chinese facilities\u2014free of virus-induced disruptions.\nConsumer Spending\nNonauto retail sales appeared to edge lower beginning in late October. Contacts cited rising COVID-19 cases and falling temperatures as contributing factors. Rising caseloads worried consumers and disrupted purveyors with staff shortages and sporadic closures. Sales held steady for some firms but still disappointed, since holiday shopping (and eating out) would typically have begun to boost brick-and-mortar sales.\nAuto dealers continued to report strong consumer demand for new and used autos; however, the growth rate in new car sales remained modest on average. Dealers noted that inventory problems had mostly cleared and that margins were greater, as labor expense was lower and terms with manufacturers were more favorable.\nContacts noted that leisure travel held up later into the fall, but business travel and group travel picked up less than usual. Shore destinations reported better-than-normal activity well into October. However, overall tourism remained at almost half of prior-year levels and appeared to decline slightly at the end of October. A hotel contact expects a tough winter for the industry and has already observed more \"jingle mail\"\u2014when the operator sends the keys to the lender.\nNonfinancial Services\nOn balance, nonmanufacturing activity has fallen slightly since the prior period. In responding to a question from our COVID-19 survey at the end of September, nonmanufacturers had reported that sales and new orders were about 16 percent below what had been anticipated pre-pandemic. In our mid-month surveys for October and November, firms reported demand was nearer to 19 percent below pre-pandemic expectations.\nThe diffusion indexes for new orders and sales from our mid-month surveys also suggested slight declines. Both indexes have fallen into negative territory since mid-September, indicating that declines were somewhat more widespread among firms and that the overall direction of change was no longer positive.\nFinancial Services\nThe volume of bank lending fell modestly during the period (not seasonally adjusted); in the same period in 2019, by contrast, loan volumes grew modestly. Residential mortgages grew modestly but were offset by modest declines in home equity lines, auto loans, and other consumer loans. Commercial real estate lending was flat, and commercial and industrial loans fell sharply again as Paycheck Protection Program loans continued to roll off the books. Credit card volumes fell moderately; last year, they grew modestly over the same period.\nBanking contacts, as well as accountants and attorneys, continued to note little change in delinquencies or other credit problems, except in the retail, restaurant, and hospitality sectors. However, concerns remained that significant problems will arise as moratoriums on evictions and foreclosures expire and unemployment benefits end.\nReal Estate and Construction\nHomebuilders reported moderate sales growth in which demand continues to outpace the availability of land and labor. Raising prices has helped builders to slow demand and cover rising costs. Existing home sales have also grown moderately\u2014relative to very low levels from the prior year. Inventory levels remain extremely low; however, the recent high demand for homes may be depressing inventory levels because new listings are snapped up so quickly.\nPhiladelphia's commercial construction activity held steady at about 13 percent below the level of activity anticipated before the pandemic. The existing pipeline of construction should keep activity steady through the first half of 2021. Commercial office leasing activity has fallen moderately in the suburbs and in central business districts. Demand remained strong for warehousing construction and leasing.\nFor more information about District economic conditions visit: www.philadelphiafed.org/research-and-data/regionaleconomy\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Dallas | 2020-12-02T00:00:00 | /beige-book-reports/2020/2020-12-da | "December 2, 2020\nSummary of Economic Activity\nThe Eleventh District economy expanded at a modest pace, but activity in most industries remained below normal levels. Recovery in the manufacturing, retail, and services sectors slowed. The housing market continued to outperform expectations, but office leasing remained weak. Overall loan volume fell, though residential real estate lending continued to be robust. Energy activity remained depressed but showed some signs of improvement. Employment rose modestly, and several firms said weak demand and uncertainty about the course of the pandemic and/or related regulations were a drag on hiring. Input costs rose moderately, while selling prices were flat to up slightly. Outlooks were generally positive but uncertain, with political uncertainty and the trajectory of the pandemic weighing heavily on growth expectations for 2021.\nEmployment and Wages\nEmployment rose modestly, with continued reports of hiring in certain sectors such as single-family home construction and manufacturing. Most firms looking to hire said they've been able to do so without difficulty, though some staffing firms cited challenges due to unemployment insurance benefits. Voluntary separations and/or job losses continued in the air transportation and energy sectors. Several firms said continued weak demand and uncertainty about the course of the coronavirus pandemic as well as related regulations and government policies were a drag on hiring, with a few noting it would take more than two years to reach their pre-pandemic employment level.\nWage growth remained subdued, with most firms noting that they were not raising salaries or wages to attract new hires or retain existing employees. Some contacts cited cutting pay in order to be able to keep employees on payrolls or recall furloughed workers. A few energy sector companies said they weren't cutting compensation but encouraging retirement among older, more costly workers. An airline reported plans to cut non-contract employees' salaries in absence of additional government support.\nPrices\nInput costs continued to increase at a moderate pace, in part due to supply-chain issues. The exception was in oilfield services where costs declined due to weak demand. Selling prices were flat to up slightly, with more marked increases reported in the construction and retail sectors. Contacts noted that pass-through of costs onto customers remained limited.\nManufacturing\nManufacturing activity continued to recover, though at a slower pace than in the previous reporting period. Output rose with growth led by primary metals, fabricated metals, construction-related, and food product manufacturing. Several manufacturers, particularly those tied to the energy and the leisure and hospitality sectors, said demand remained below normal. Petroleum refiners noted a slight increase in utilization rates, and chemical production rose, but margins remained depressed due to weak demand and high inventories. Overall, outlooks among manufacturers remained positive, though uncertainty persists.\nRetail Sales\nGrowth in retail sales slowed during the reporting period. Some firms experiencing continued sluggish demand attributed it to weakness in the oil and gas sector and in tourist activity. Auto sales remained weak partly due to low inventories. Hardware store sales have been boosted by rising home renovation activity. Wholesalers of nondurable goods noted solid demand. Outlooks were somewhat optimistic, although political uncertainty arising from the election and increasing COVID-19 cases remain sources of concern.\nNonfinancial Services\nRecovery in the nonfinancial services sector slowed following a surge in activity during the previous reporting period. However, activity in the information and professional and business services industries saw continued solid growth. Staffing firms noted a pickup in demand, particularly for healthcare, IT, online retail, and call center services; however, activity remained below year-ago levels. Air cargo volumes rose. Airlines saw modest growth in bookings. Leisure travel to outdoor vacation destinations continued to dominate bookings, while corporate travel remained nearly nonexistent. Outlooks among airline contacts remained weak and further reduction in capacity was expected. Activity in the leisure and hospitality sector remained sluggish, and a contact noted that a sizable share of hotel owners in Corpus Christi would only be able to survive another six months without government assistance. Nonprofit organizations continued to face challenges due to lack of funding.\nIn general, outlooks were marginally positive, with the resurgence of COVID-19 cases and political uncertainty continuing to weigh on sentiment.\nConstruction and Real Estate\nActivity in the housing market remained robust. Home sales continued to outperform expectations, particularly in suburban locations, and inventories remained exceptionally tight. Builders said they were raising home prices both to cover higher construction costs and to slow down sales given the heavy backlogs. New home development was active, and contacts noted that builders and developers were chasing land and lots. Outlooks were positive, with some concern about the impact on future sales of rising COVID cases, tight lot supply, and a weak labor market.\nApartment demand held steady. Elevated supply continued to put downward pressure on apartment rents. Office leasing remained weak and sublease space rose as many firms continued to evaluate their space needs given that a sizeable share of their employees continued to work from home. Retail market conditions stayed fragile, while industrial demand remained strong driven by third party logistics and e-commerce activity. Investment sales have picked up for multifamily and industrial properties.\nFinancial Services\nOverall loan volume dipped during the reporting period, with solid gains in residential real estate lending offset by declines in consumer and in commercial and industrial (C&I) loans. Loan pricing was competitive, and a few contacts voiced concerns about margin compression. Credit standards tightened, particularly for C&I and commercial real estate loans. Nonperforming loans rose over the past six weeks, and over half of the respondents expect an increase in delinquencies six months from now. Perceptions of general business activity and outlooks for loan demand stayed positive, though there were lingering concerns about political uncertainty, low net interest margins, and deteriorating asset quality.\nEnergy\nThe Eleventh District rig count rose over the reporting period. Well completions rose sharply as firms moved forward with bringing uncompleted wells into production. However, most contacts expect drilling and completion activity to level off soon and hold nearly flat through mid-2021. Contacts said that the recovery of oil consumption remained their primary near-term concern, although political uncertainty surrounding potential changes in the regulatory environment was particularly worrisome for smaller exploration and production and fracking-services firms.\nAgriculture\nDrought conditions intensified, particularly in the western part of the district. Contacts remained concerned about the La Ni\u00f1a weather pattern and a dry winter diminishing 2021 crop prospects. The harvest was wrapping up for 2020 row crops, and prices pushed above breakeven levels for most producers. The livestock sector was facing headwinds of lower cattle prices and higher feed costs. Contacts were more optimistic about the agricultural sector in general with stronger prices, solid export demand, and a more hopeful economic outlook.\nFor more information about District economic conditions visit: www.dallasfed.org/research/texas\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
New York | 2020-12-02T00:00:00 | /beige-book-reports/2020/2020-12-ny | "Beige Book Report: New York\nDecember 2, 2020\nSummary of Economic Activity\nEconomic activity in the Second District economy was flat in the latest reporting period. The labor market has remained weak, with employment in most industry sectors essentially unchanged. Input prices continued to rise moderately, while selling prices were little changed. Consumer spending has been little changed at subdued levels, while tourism has remained depressed. Housing markets have continued to strengthen, except in New York City, while markets for office and retail space have continued to soften. Finally, banks reported little change in loan demand, tighter credit standards, and an upturn in delinquency rates. Overall, business contacts have become less optimistic about the near-term outlook, with many contacts mentioning the recent pandemic wave, increased restrictions, and political uncertainty as major challenges.\nEmployment and Wages\nThe labor market has remained weak, with employment levels little changed in recent weeks. A major New York City employment agency reported that hiring has remained moribund and anticipated a rough patch through the winter but expressed hope for a pickup later in 2021. An upstate agency, on the other hand, indicated scattered signs of a pickup in hiring, especially for lower-wage workers, and noted particular difficulty in recruiting customer-service representatives. Despite the weak labor market, a number of business contacts have struggled to hire and retain skilled workers.\nBusinesses in many service industries\u2014leisure & hospitality, education & health, wholesale trade, and information\u2014reported flat to declining employment. However, manufacturers and retailers, on balance, reported modest increases in staff. Business contacts in most sectors said they plan to leave staffing levels at or near current levels in the months ahead, with the notable exception of construction, where considerably more businesses plan to reduce than expand employment.\nWages have picked up modestly, according to business contacts across a wide spectrum of industries. Moreover, an upstate New York employment agency noted a particular upward trend in wages at the lower end of the pay scale. Looking ahead, businesses generally expect wages to accelerate somewhat\u2014particularly in the trade & transportation and education & health sectors.\nPrices\nBusiness contacts have reported somewhat more upward pressure on input prices in recent weeks. Businesses in manufacturing, distribution, education & health, and leisure & hospitality have generally noted more widespread escalation than those in other sectors. Construction contacts, on the other hand, reported somewhat less pronounced cost pressures than previously. Some business contacts have noted a pronounced acceleration in health coverage costs for 2021.\nRegarding selling prices, retailers, distributors, and manufacturers reported some increases, but businesses in other sectors indicated that selling prices remained steady. Looking ahead, there has been a further modest increase in the proportion of businesses planning to raise their selling prices in the next few months\u2014most notably in the retail and manufacturing sectors.\nConsumer Spending\nConsumer spending has been mostly flat since the last report. Retailers reported that sales have been steady to somewhat lower in recent weeks, with business remaining well below pre-pandemic levels. Stores in upstate New York continued to outperform those in other areas.\nNew vehicle sales were flat to down slightly, according to dealers in upstate New York, with the weakness attributed to a combination of low inventories, reduced dealer incentives, and some pullback in demand. Sales of used vehicles have been steady, also hampered by lean inventories. Consumer confidence among residents of the Middle Atlantic region (NY, NJ, PA) retreated in October and remains moderately below pre-pandemic levels.\nManufacturing and Distribution\nManufacturing growth has slowed to a subdued pace in the latest reporting period. In contrast, wholesale trade firms continued to report moderate growth, and businesses engaged in transportation & warehousing reported some pickup in activity.\nLooking ahead, manufacturers have remained fairly optimistic about the outlook, while wholesalers' optimism has waned, and transportation & warehousing contacts have continued to be broadly pessimistic.\nServices\nService industry contacts generally reported that business activity has weakened noticeably in the latest reporting period. Contacts in the professional & business services and leisure & hospitality sectors reported widespread declines in activity, while those in the information and education & health sectors indicated more moderate declines. Looking ahead, professional & business service firms expressed mild optimism about prospects for the months ahead, whereas leisure & hospitality firms expressed increased concern that conditions would deteriorate.\nTourism, which had picked up somewhat in the previous reporting period, has more recently shown signs of weakening. A number of contacts attribute this to the recent wave of the pandemic across the nation and much of the world, as well as the onset of cold weather, which limits outdoor activities. An authority on New York City's tourism sector noted that most recent visitations have been short haul trips. Hotel occupancy rates have been noticeably higher on weekends than weekdays but are still well below 50 percent, and room rates are down sharply. Many city hotels are picking up some of the slack with alternative uses, such as providing shelter for the homeless. Advance bookings for the holiday season suggest only a modest uptick. While tourism is expected to rebound noticeably in 2021, it is projected to remain 25-30 percent below pre-pandemic levels, as the international and business segments are expected to lag.\nReal Estate and Construction\nHousing markets have continued to strengthen across much of the District. In both upstate New York and the areas around New York City, sales activity has been brisk, home prices have risen strongly, and the inventory of unsold homes has declined further. In New York City, conditions have been more mixed. Rental markets have weakened further: with increased landlord concessions, effective rents are reported to be down 15 percent from a year ago in both Manhattan and nearby Queens and down 5 percent in Brooklyn, as vacancy rates have climbed. The co-op and condo sales market has been more stable, with prices declining moderately in Manhattan but holding mostly steady in Brooklyn.\nCommercial real estate markets have weakened further. Office availability and vacancy rates have continued to rise across the District, while asking rents declined in New York City but were steady to higher across the rest of the District. Retail vacancies have continued to increase across the District. Asking rents for retail space have fallen sharply in New York City but have been flat to down modestly in other areas.\nNew construction activity has remained sluggish and well below year-earlier levels for both residential and commercial structures. Contacts in the construction industry reported weakening activity and have grown increasingly pessimistic about the near-term outlook. One contact noted clogged supply chains as a major problem and attributed this partly to reduced availability of credit.\nBanking and Finance\nContacts in the finance sector generally continued to report steady to declining business activity but have grown less pessimistic about the near-term outlook. Small to medium-sized banks in the District reported little change in overall loan demand, with increased demand for residential mortgages but decreased demand for commercial and industrial (C&I) loans. Refinancing activity increased. Bankers reported tightened credit standards across all categories. Spreads narrowed on all loan categories except C&I, where spreads were unchanged. Finally, bankers reported higher delinquency rates across all loan segments except commercial mortgages where delinquency rates held steady. Bankers reported no change in the degree of leniency on delinquent accounts across all categories.\nFor more information about District economic conditions visit: www.newyorkfed.org/regional-economy\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Boston | 2020-12-02T00:00:00 | /beige-book-reports/2020/2020-12-bo | "December 2, 2020\nSummary of Economic Activity\nEconomic activity continued to expand in the First District in October and early November. Most manufacturers cited increases in revenues in recent weeks compared with a year earlier. Tourism and hospitality remained in the doldrums, while brick and mortar retailers saw gains from earlier in the year. Staffing firms' revenues were down from a year ago, but they too cited quarter-over-quarter improvements. Real estate markets for industrial and lab space continued strong even as the office and retail real estate markets remained weak. Residential real estate markets across the region continued to experience increases in both sales and prices. Reports on the labor market were mixed. Most responding firms cited cautiously optimistic outlooks, with continued uncertainty.\nEmployment and Wages\nLabor market conditions varied by sector. Many hotel workers across the region remained furloughed, particularly staff that worked larger functions. Most manufacturing respondents said they were hiring; some reported difficulty finding workers but others did not. A supplier to commercial aviation announced major layoffs over the summer and has not had any reason to revise those plans either up or down since then. Staffing companies, while noting increased business, reported that the supply of labor continued to be a challenge. They cited a number of reasons for a shortage of workers: limited or lack of access to daycare and school, worries about contracting COVID-19, mandatory 14-day quarantines, and potential further shutdowns. Staffing firms' bill and pay rates have gone up considerably since the pandemic hit, but some companies said the rates had begun reversing toward their pre-pandemic levels.\nPrices\nContacts cited limited concerns about prices. Average nightly hotel prices in Boston dropped 45 percent compared to 2019 reflecting extremely low occupancy. Manufacturers said pricing pressures were generally muted. Nonetheless, a chemical maker said prices of some bulk chemicals had spiked due to demand for PPE and the recovery in China. Several manufacturers registered cost concerns regarding the availability of transportation both locally and around the world.\nRetail and Tourism\nRetail contacts noted improvements in brick and mortar store sales compared to the first half of 2020, though tourism and hospitality respondents continued to report major disruptions related to COVID-19. After limited in-person shopping in the second quarter, one retailer's same-store sales were off just 5 percent\u2014exceeding expectations\u2014across August, September, and October compared to the same period in 2019, with home d\u00e9cor and furnishings doing best. Another retail contact reported sales improved more than anticipated from the spring, but were down by mid-single digits from a year ago.\nRestaurants across Massachusetts benefited from a dry summer and start of fall, but as temperatures declined, outdoor dining and average sales dropped. At the same time, COVID-19 cases increased and new restrictions were imposed, both of which contacts suspected raised concerns with indoor dining. Many restaurants that used tented spaces to increase social-distanced table capacity this fall reported that heating constraints will shut down those spaces as winter approaches. Restaurants in Boston continued to fare the worst in the state, on average, and some will close for the winter, as operating at reduced capacity would lead to greater losses.\nTravel industry contacts reported that hotel stays were still significantly impacted by the pandemic; hotel occupancy in Boston was under 30 percent as compared with a 2019 average over 80 percent. Conventions scheduled in Boston through July 2021 have been postponed.\nManufacturing and Related Services\nAll but one of 11 contacted manufacturers reported increased sales versus a year earlier. The lone exception has large exposure to commercial aviation and autos, with commercial aviation down 40 percent to 50 percent and autos down 10 percent to 15 percent. By contrast, some contacts reported strong gains, including a manufacturer of testing equipment who said sales were up 35 percent and a semiconductor equipment supplier with a 45 percent increase. A manufacturer of ventilators cited $400 million in orders as compared to $20 million in a normal year. A supplier of products to veterinarians said that demand was up partly because the number of pet owners has increased during the pandemic.\nCapital expenditures were generally up but several contacts reported delays in delivery of capital goods. No one reported any issues with financing. Most contacts had not made major capital investments in response to high demand because they viewed it as temporary.\nManufacturers generally reported positive outlooks, albeit with some caution because of uncertainty about both the path of the pandemic and the timing of vaccines.\nStaffing Services\nNew England staffing firms reported positive growth in Q3 regardless of their industry exposure. Quarter-over-quarter growth rates ranged from 10 percent to 15 percent for firms that shared numbers. By early Q4, a few companies enjoyed levels of business activity similar to their pre-COVID ones. All contacts remarked that business volume was still down compared to a year ago, citing numbers from -8 percent to -40 percent. All reported that business has steadily regained momentum since July, with the demand for labor strong. One contact had shifted to placing essential workers due to higher demand. In general, staffing firms were more optimistic now than they were in August. They expect modest slowdowns next quarter but quick recovery in the following quarters of 2021.\nCommercial Real Estate\nConditions in First District leasing markets have not changed appreciably since the last report. Industrial and lab space continued to do well, while retail and office space continued to suffer. Much industrial activity was related to e-commerce and last-mile fulfillment. Construction activity in the industrial market was somewhat restrained by increased construction costs. In the life-science sector, one contact reported that around 5 million square feet of lab space is underway to be delivered by the end of 2025 in greater Boston, with about 40 percent of it pre-leased.\nWith very little leasing activity in the office sector, tenants nearing the end of their leases were renewing only for the short term. Some respondents reported an increase in available office sublease space, indicating more office-market problems to come. Retail properties continued struggling, with grocery and big-box stores the only successes. Contacts estimated daytime office occupancy rates at around 20 percent\u2014bad news for the shops and restaurants that relied on office workers' business. Regarding the outlook, contacts expressed cautious optimism, with positive vaccine news and the election behind them. Many expected Q1 2021 to be tough, with the pandemic picking up again and uncertainty about future stimulus measures, but they were hopeful about the second half of 2021.\nResidential Real Estate\nThe First District saw high sales numbers in September or October, as pent-up demand from the delayed spring market and eagerness to take advantage of historically low mortgage rates overpowered the usual fall slowdown. (Connecticut data were unavailable. Boston and Maine reported changes from October 2019 to October 2020; all other areas reported changes through September 2020.)\nThe number of closed sales increased in all reporting areas from a year ago, with double-digit increases for all markets except Boston condos. Notwithstanding these unusually high sales numbers, severe inventory shortages continued; the inventory of homes for sale dropped by double-digit percentages from a year ago in all reporting markets except Boston condos. The lack of inventory and high buyer demand continued to put upward pressure on prices and, once again, the median sale price rose in all markets, with double-digit increases for single family homes. Contacts expected this \"buying frenzy\" to continue through the winter months. The Massachusetts contact again mentioned movement from urban areas to suburban and rural areas, and the Maine contact noted a substantial influx of out-of-state buyers.\nFor more information about District economic conditions visit: www.bostonfed.org/regional-economy\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
St Louis | 2020-12-02T00:00:00 | /beige-book-reports/2020/2020-12-sl | "Beige Book Report: St Louis\nDecember 2, 2020\nSummary of Economic Activity\nReports from District contacts suggest economic activity has continued to increase slightly since the previous report; however, conditions deteriorated toward the end of the reporting period. The pace of activity continues to remain highly variable across sectors. Employment has increased slightly, while wages have increased modestly. Consumer prices increased slightly; however, nonlabor input costs have experienced stronger increases. The overall outlook for business conditions over the next 12 months has improved but remains slightly pessimistic.\nEmployment and Wages\nEmployment has increased slightly since the previous report. The strongest growth was reported in manufacturing, transportation, and healthcare. Expanding firms continued to note labor supply shortfalls, ascribing it to workers' childcare and health concerns. One firm sought new employees in neighborhoods without adequate transportation by expanding a bus system to and from its warehouses. However, half of contacts reported remaining below pre-pandemic employment levels. Staffing contacts noted that many firms remained hesitant to hire or re-hire workers in the face of policy uncertainty and COVID-19 resurgences. Some firms\u2014particularly small firms and those in the leisure and hospitality industry\u2014exhibited more mixed employment trends.\nWages have grown modestly. Two-thirds of contacts reported raising wages for new and existing employees due to labor shortages, especially for low-wage and high-contact positions; one staffing firm instituted a minimum wage at which it would hire industrial workers for clients, believing it impossible to fill vacancies otherwise. Small-firm wage growth remained more mixed, with many reportedly unable to compete with larger firms' raises.\nPrices\nInput prices have increased strongly. However, contacts reported only a slight growth in prices charged to consumers, indicating that very little of the increased input cost is being passed on to consumers. Raw materials prices have increased moderately overall; agriculture contacts noted that prices are at a yearly high, which contacts attributed to low yields nationally paired with healthy demand for staple crops such as corn and wheat both domestically and from China. Coal and lumber prices have declined since the previous report. A lumber yard contact noted that with inventories back to normal levels, lumber prices have declined 40% after spiking in recent months, putting them back at average levels compared with prices in previous years. A real estate contact noted that the price of plumbing materials has increased. Another contact noted increases in containerboard prices due to higher demand from online shopping coupled with lower supply from COVID-19 and natural-disaster-related production delays.\nConsumer Spending\nReports from general retailers, auto dealers, and hospitality contacts indicated that consumer spending activity has been mixed since our previous report. Over the course of October, seasonally adjusted credit and debit card spending generally declined across the District. As of early November, general retailers and restaurants reported mixed business activity. Auto dealers reported that current-quarter sales have met or exceeded expectations. Dealers cited low interest rates and gas prices helping to bolster sales. Tourism and hospitality contacts reported that current-quarter sales fell short of expectations and continued to be much lower than they were during the same period last year. Hospitality contacts expect business activity to decline in the coming months.\nManufacturing\nManufacturing activity has strongly increased since our previous report. Survey-based indices suggest that manufacturing activity moderately increased in Arkansas and strongly increased in Missouri. In both states, firms reported a strong uptick in new orders and production. Auto manufacturers in south central Kentucky and southern Indiana reported high levels of production. Firms reported that supply chain issues that were previously constricting production have mostly been resolved. One contact noted that containerboard paper manufacturers are seeing increased demand, but some mills are experiencing slowed back production due to minimal crew schedules in response to COVID-19 precautions.\nNonfinancial Services\nActivity in the nonfinancial services sector has been mixed since our previous report. Airport passenger traffic appears to be declining further relative to last year as business travel remains minimal and rising numbers of COVID cases lead to holiday travel cancellations. A parcel services contact indicated that business has improved, and the firm is already experiencing holiday-level activity. Several trucking contacts were optimistic about the industry going into 2021, as fewer competitors remain in business. Feedback from other logistics contacts was mixed regarding both sales in the previous quarter and the outlook for the next quarter, with one citing a lack of demand. A healthcare contact reported lower-than-expected sales last quarter, given increased apprehension about seeking health services.\nReal Estate and Construction\nResidential real estate activity has increased modestly since our previous report. Home sales remain robust for this time of the year and inventory levels remain low. A St. Louis-based contact noted that lower interest rates are a major factor in the increased demand for homes and thus why selling prices are rising.\nResidential construction activity has remained unchanged since the previous report. Contacts noted that high demand for residential real estate is driving new residential construction, as there continues to be low residential inventory. Contacts also noted that construction is limited by lack of building materials, and a contact in St. Louis reported that the spike in COVID-19 cases is forcing them to regularly quarantine workers due to outside exposure.\nCommercial real estate activity has been mixed since our previous report. Demand is down for both retail and office space, with contacts reporting a loss of retail tenants. Contacts in Memphis expect a loss of tenants as leases come to an end. However, demand for industrial space remains high, particularly for warehouse and manufacturing space, with demand expected to remain high or increase in the next quarter.\nCommercial construction activity has been mixed. Contacts observed that most speculative activity in the office and retail space has ceased. However, construction for industrial space remained strong due to high market demand, with multiple active projects across the region. Contacts reported that large distribution companies are buying up new speculative inventory in order to quickly expand capacity.\nBanking and Finance\nBanking conditions in the District have experienced little change since the previous report. Overall loan demand remained low due to the pause in business activity following the recent surge in COVID-19 cases in the District. Residential real estate loans increased slightly, led by elevated refinancing activity to lock-in favorable rates. Banking contacts continued to report high levels of deposits despite lower rates paid on interest-bearing accounts. Delinquency rates remained generally low; however, some contacts observed a slight uptick in deferred payments among hospitality and commercial real estate clients. Competition for new loans and lower interest rates continued to narrow net interest margins.\nAgriculture and Natural Resources\nDistrict agriculture conditions have remained unchanged since our previous reporting period. Production forecasts for corn, cotton, and soybeans have decreased, while cotton production forecasts have increased. Production levels for corn, rice, and soybeans are expected to be significantly higher than in 2019, while cotton production is expected to see a moderate decline. District contacts expressed optimism, citing higher-than-expected yields due to excellent weather conditions and a strong rebound in prices.\nNatural resource extraction conditions declined modestly from September to October, with seasonally adjusted coal production declining around 3%. Production is still struggling overall, declining 24% from a year ago. Contacts reported reducing employee hours and offering early retirement options as a result of the industry struggles.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
National Summary | 2020-12-02T00:00:00 | /beige-book-reports/2020/2020-12-su | "Beige Book: National Summary\nDecember 2, 2020\nThis report was prepared at the Federal Reserve Bank of Philadelphia based on information collected on or before November 20, 2020. This document summarizes comments received from contacts outside the Federal Reserve System and is not a commentary on the views of Federal Reserve officials.\nOverall Economic Activity\nMost Federal Reserve Districts have characterized economic expansion as modest or moderate since the prior Beige Book period. However, four Districts described little or no growth, and five narratives noted that activity remained below pre-pandemic levels for at least some sectors. Moreover, Philadelphia and three of the four Midwestern Districts observed that activity began to slow in early November as COVID-19 cases surged. Reports tended to indicate higher-than-average growth of manufacturing, distribution and logistics, homebuilding, and existing home sales, although not without disruptions. Banking contacts in numerous Districts reported some deterioration of loan portfolios, particularly for commercial lending into the retail and leisure and hospitality sectors. An increase in delinquencies in 2021 is more widely anticipated. Most Districts reported that firms' outlooks remained positive; however, optimism has waned--many contacts cited concerns over the recent pandemic wave, mandated restrictions (recent and prospective), and the looming expiration dates for unemployment benefits and for moratoriums on evictions and foreclosures.\nEmployment and Wages\nNearly all Districts reported that employment rose, but for most, the pace was slow, at best, and the recovery remained incomplete. Firms that were hiring continued to report difficulties in attracting and retaining workers. Many contacts noted that the sharp rise in COVID-19 cases had precipitated more school and plant closings and renewed fears of infection, which have further aggravated labor supply problems, including absenteeism and attrition. Providing for childcare and virtual schooling needs was widely cited as a significant and growing issue for the workforce, especially for women\u2014prompting some firms to extend greater accommodations for flexible work schedules. In several Districts, firms feared that employment levels would fall over the winter before recovering further. Despite hiring difficulties, firms in most Districts reported that wages grew at a slight or modest pace overall. However, many noted greater pressure to raise rates for low-skilled workers, especially in outlying areas. Staffing firms described greater placement success with competitive rates, and one firm instituted a minimum wage rate for its industrial clients.\nPrices\nIn most Districts, firms reported modest to moderate increases of input prices, while the selling prices of final goods rose at a slight to modest pace. Contacts noted that COVID-19 cases have caused ongoing disruptions and delays among short-staffed producers and shippers\u2014raising transportation costs, which are then passed through to buyers.\nHighlights by Federal Reserve District\nBoston\nManufacturers reported increased revenues from a year ago, including some strong gains. Retailers and staffing firms continued recovering toward pre-pandemic levels, while the hospitality and tourism sectors remained hard-hit. Uncertainty about the course of the pandemic, vaccines, and possible relief measures added caution to positive outlooks.\nNew York\nThe regional economy has been flat, and the labor market has remained weak. Manufacturing growth slowed, consumer spending and tourism were little changed, and a number of service industries saw declines in activity. Commercial real estate softened further, but most residential sales markets continued to show strength. Wages and other business input costs picked up modestly, while selling prices were little changed.\nPhiladelphia\nBusiness activity held steady during the current Beige Book period and remained below levels attained prior to the onset of COVID-19. However, sharply rising COVID-19 cases triggered a downward trend in early November and heightened concerns over anticipated layoffs, foreclosures, evictions, and bankruptcies. Meanwhile, modest job growth, slight wage growth, and modest inflation continued.\nCleveland\nEconomic activity increased moderately, and staff levels increased slightly. Firms connected to IT, housing, and consumer durables fared better than those connected to travel, energy, and hospitality. Supply chain constraints boosted transportation costs and prices for certain construction and manufacturing inputs. Contacts expected a modest improvement in activity, but hiring plans were restrained because of the pandemic's uncertain path.\nRichmond\nThe regional economy grew moderately in recent weeks. Employment rose and demand for some professional business occupations was strong. Wage and price growth were modest. The housing market remained robust, and commercial real estate leasing improved somewhat. Port and trucking volumes reached robust levels and manufacturing activity picked up.\nAtlanta\nDistrict economic activity modestly expanded. Labor markets continued to improve. Contacts noted some nonlabor costs rose. Retail activity and auto sales were mixed. Activity in tourism and hospitality picked up slightly. Residential real estate demand was strong and home prices rose. Commercial real estate conditions remained challenged. Manufacturing activity increased. Conditions at financial institutions stabilized.\nChicago\nEconomic activity increased moderately but remained below its pre-pandemic level. Employment, consumer spending, and manufacturing increased moderately; business spending increased modestly; and construction and real estate was flat. Wages rose slightly, as did prices. Financial conditions improved modestly. Strong harvests, government support, and higher prices boosted expectations for farm income.\nSt. Louis\nReports from District contacts suggest economic activity has continued to increase slightly since our previous report; however, conditions deteriorated toward the end of the reporting period. The overall outlook for business conditions over the next 12 months has improved but remains slightly pessimistic.\nMinneapolis\nDistrict economic activity grew moderately. Employment rose modestly, but obstacles such as child care availability and virtual schooling for households with children impacted labor participation, particularly among women. Consumer spending grew slightly, with softening demand in some segments due to rising COVID-19 infections. Manufacturers generally saw brisk growth. Agricultural conditions improved slightly.\nKansas City\nEconomic activity continued to expand slightly. After rising in October, consumer spending fell slightly in November but was expected to bounce back in the coming months. Contacts in the manufacturing, residential real estate, wholesale trade, transportation, and professional and high-tech services sectors all reported increased levels of activity. In addition, the energy sector held steady, and the agriculture sector improved moderately.\nDallas\nEconomic activity expanded modestly. Growth moderated in the manufacturing, retail, and services sectors. The housing market continued to outperform expectations, but office leasing remained weak. Energy activity remained depressed though it showed further signs of improvement. Outlooks were positive, though highly uncertain due to looming concerns surrounding political uncertainty and the unknown course of the pandemic.\nSan Francisco\nEconomic activity in the District expanded modestly. Employment levels increased slightly, while price inflation showed little change. Sales of retail goods rose appreciably, but conditions in the services sector were unchanged. Manufacturing expanded moderately, and the agriculture sector improved slightly. Residential real estate activity continued to grow, while commercial markets changed little. Lending activity increased mildly.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Kansas City | 2020-12-02T00:00:00 | /beige-book-reports/2020/2020-12-kc | "Beige Book Report: Kansas City\nDecember 2, 2020\nSummary of Economic Activity\nThe Tenth District economy continued to expand slightly in October and November, although activity remained below pre-pandemic levels in several sectors. After rising in October, consumer spending fell slightly in November due to a pullback in retail, restaurant, auto and tourism sales. However, contacts expected sales in all consumer segments to rebound in the months ahead. Manufacturing production and new orders expanded modestly, and capital expenditures were expected to rise at both non-durable and durable goods plants. Transportation and wholesale trade sales picked up moderately, and sales rose modestly in the professional and high-tech sector. Home sales and prices increased and were well above year-ago levels even as inventories fell further. Commercial real estate conditions worsened modestly, and additional declines were expected in the months ahead. Energy activity held steady, and the farm economy improved moderately as agricultural commodity prices increased. Employment rose slightly, but remained modestly below year-ago levels. Wages continued to rise, and modest gains were anticipated in the next few months. Input prices rose at a faster pace than selling prices, and most industries expected additional price gains moving forward.\nEmployment and Wages\nDistrict employment increased slightly during the survey period, but remained modestly below year-ago levels. Growth was driven by increases in health services and retail employment, but was held back by moderate declines in the restaurant and tourism sectors. Manufacturing contacts noted a slight increase in employment, and contacts expected additional gains in the coming months. Employment expectations within the services sector were mixed, with the biggest gains expected in retail and wholesale trade and the biggest losses expected in auto and professional and high-tech services.\nA majority of contacts in the services sector reported labor shortages, indicating a need for truck drivers and retail, restaurant, and technology staff. Wages rose modestly in October, followed by smaller gains in November, leaving wages modestly above year-ago levels. Modest wage increases were expected moving forward. Over the next year, most firms expected employment to increase or remain unchanged, although a lesser number still expected declines. Contacts cited expected sales growth and the need to expand the current skillset of employees as the primary reasons for hiring.\nPrices\nInput prices rose moderately, outpacing modest gains in selling prices in both the services and manufacturing sectors. Contacts in the retail and restaurant sectors indicated that growth in selling prices was expected to accelerate in the coming months. Prices for raw materials and finished products in the manufacturing sector followed a similar pattern, but although selling prices were expected to grow more quickly moving forward, raw materials prices were still expected to rise at a faster pace. Transportation input prices rose moderately in October but edged down in November, while selling prices rose modestly. Transportation contacts expected moderate gains in the coming months. Construction supply contacts indicated that selling prices grew moderately, but expected them to fall in the winter months.\nConsumer Spending\nConsumer spending increased slightly in October, but decreased slightly in November. Moderate gains in retail and health services drove the rise in October. However, a slight decline in retail sales combined with modest decreases in restaurant and auto sales and moderate declines in tourism led to an overall decline in November sales activity, despite an increased pace of sales in health services. Despite the drop in retail sales in November, activity remained moderately above year-ago levels. However, tourism and restaurant sales remained well below year-ago levels. In November, respondents from all sectors expected positive growth in the months ahead, with tourism and restaurant sectors expecting modest gains for the first time since spring. The majority of firms indicated that developments related to COVID have pushed their firm to either expand, implement for the first time, or create a plan to implement an online business segment.\nManufacturing and Other Business Activity\nManufacturing activity expanded modestly since the previous survey, but still remained modestly below year-ago levels. Production and new orders increased modestly for both durable and non-durable goods, but durable goods activity remained moderately below year-ago levels. By contrast, nondurables contacts indicated that production was slightly above year-ago levels for the first time since February. Expectations were positive as contacts in the durables and non-durables sectors expected modest and moderate gains, respectively. Capital expenditures were expected to increase modestly in both sectors. Many contacts indicated that the uncertainty surrounding the pandemic and related business restrictions/ policies was restraining hiring plans.\nOutside of manufacturing, sales in transportation and wholesale trade increased moderately, and sales and capital expenditures in professional and high-tech services rose modestly. For the latter, this marked an improvement from declines in late summer. Contacts in transportation and wholesale trade expected moderate gains, while those in professional and high-tech services anticipated modest declines.\nReal Estate and Construction\nResidential real estate activity increased moderately, while commercial real estate conditions continued to worsen at a modest pace. Despite additional declines in home inventories, sales increased modestly, leading to moderate gains in home prices. Home sales and prices were strongly above year-ago levels, and this trend was expected to continue in the coming months. Construction supply sales continued to rise modestly, but were expected to decline heading into the winter months. Commercial real estate conditions worsened, as vacancy rates rose, developers had difficulty accessing credit, and there were slight decreases in absorption rates, sales, prices, and construction. Commercial rents edged down in October but were unchanged in November, the first month without a decline since February. Contacts indicated that rents were expected to hold steady moving forward, although overall commercial real estate conditions were expected to worsen modestly.\nBanking\nIn recent weeks, bankers reported a slight increase in overall loan demand. Gains were driven by moderate increases in residential real estate loan demand and slight increases in commercial real estate loan demand. Consumer installment loan demand held steady, agricultural loan demand decreased slightly, and commercial and industrial loan demand fell modestly. Credit standards tightened slightly for residential real estate, commercial real estate, and commercial and industrial loans. Loan portfolio quality decreased slightly in comparison to a year ago, but bankers expected significant decreases in loan quality over the next six months. Despite this, deposit levels remained strong. Overall, bankers were somewhat concerned with the continued stress on the economy due to the pandemic, although specific sectors, including residential real estate, remained strong.\nEnergy\nDistrict energy activity was relatively unchanged from the previous survey period, with revenues and drilling activity mixed across individual firms. Debt increases and bankruptcies continued for several regional firms, while other contacts reported positive net income and capital expenditure plans. Firms expected additional mergers and acquisitions moving forward. Many contacts reported additional efficiency gains and continued investment in innovations to lower operating costs. The number of active oil and gas rigs in the District increased slightly in October and November, due to gains in New Mexico and Oklahoma. However, the number of active rigs remained below year-ago levels. Oil prices held relatively steady, and natural gas prices rose. However, prices for oil and gas remained below the average price District firms reported needing for drilling to be profitable.\nAgriculture\nThe Tenth District farm economy improved moderately since the previous period alongside additional increases in agricultural commodity prices. Since early October, strengthening demand and downward revisions to production estimates led to sharp increases in corn and soybean prices and moderate increases in most other agricultural prices. Stronger profit opportunities than earlier in the year, in addition to substantial government payments to producers, supported farm sector finances. Although farm income generally remained low in aggregate, contacts reported lower rates of problem loans compared to a year ago. District contacts continued to express concerns, however, about the potential for renewed pressure in the months ahead, depending on the path of agricultural commodity prices, government support programs, and drought in some parts of the region.\nFor more information about District economic conditions visit: www.KansasCityFed.org/Research/RegionalEconomy\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Minneapolis | 2020-12-02T00:00:00 | /beige-book-reports/2020/2020-12-mi | "December 2, 2020\nSummary of Economic Activity\nThe Ninth District economy grew modestly overall since the last report, but some signs of softening appeared recently as COVID-19 infections surged. Employment rose modestly since the last report, but conditions were volatile. Wage pressures were moderate and appeared to be increasing for some, while price pressures were modest. Consumer spending, manufacturing, energy, and residential construction and real estate grew since the previous report. Commercial construction and real estate activity fell. Agricultural conditions improved slightly.\nEmployment and Wages\nEmployment rose modestly since the last report, but conditions were volatile and likely to remain so in the face of rising COVID-19 infections. A survey of District construction firms in late October found that firms were hiring overall, particularly in skilled trades. However, hiring sentiment for the coming months was somewhat softer. A handful of ad hoc surveys of Minnesota firms in November showed similar findings. Job postings have seen modest-but-steady growth through mid-November across most District states. A western South Dakota contact said many firms were \"desperate for help,\" a situation worsened by visa programs that were no longer a reliable labor source. However, there was widespread concern over new, pandemic-related restrictions on business activity and employment. Some indicators also showed small business employment falling steadily in October through mid-November. Initial unemployment insurance claims increased in the last half of October, due in part to normal seasonality, but were nonetheless several times their level last year. The number of workers receiving unemployment benefits steadily declined through October, but remained high overall, especially among minority workers. Though unemployment has been dropping steadily, state government contacts noted that falling labor force participation was responsible for much of the recent drop.\nLabor constraints became more pronounced, particularly in sectors, such as health care, experiencing worker shortages due to COVID-19-related quarantines. Firms also reported difficulty filling open positions, frequently citing enhanced unemployment benefits as a work disincentive. However, workforce contacts noted that the expiration of more generous benefits has not led to a big increase in job seekers. Other obstacles\u2014child care availability, virtual school for households with children, and virus fears\u2014also impacted labor participation, particularly among women. A Minnesota contact noted that workforce systems were \"failing to reach\" those most negatively affected, particularly African American and noncollege-educated workers.\nWage pressures were moderate and appeared to be increasing for some. More District businesses reported raising average wages than cutting them. Certain sectors like construction were seeing greater wage pressures, and sources also noted bonuses and temporary wage hikes for frontline retail workers, higher entry-level wages, and reinstatement of pre-pandemic wage levels that had been cut. Pressures were not uniform, however. A large Minnesota nonprofit said that frontline staff received wage increases related to virus exposure, while other staff have been laid off or had wages frozen.\nPrices\nPrice pressures since the previous report were modest overall. A majority of firms responding to recent Minneapolis Fed surveys reported little or no change to nonlabor input costs and final prices compared with pre-pandemic levels. By contrast, more than half of respondents from the construction industry reported input price increases of greater than 5 percent. Respondents also expected a similar rate of price increases over the coming year, consistent with rapid growth in construction materials prices. Home heating costs were expected to rise more in District states than nationwide this winter, largely due to regional differences in the prices of natural gas and greater demand due to work from home. Retail fuel prices in District states as of mid-November fell slightly from the previous reporting period. Prices received by farmers in September increased from a year earlier for soybeans, wheat, dry beans, cattle, hogs, eggs, and turkeys, while prices for corn, hay, potatoes, chickens, and milk decreased.\nConsumer Spending\nConsumer spending grew slightly overall. Car and truck sales rose modestly in October compared with a year earlier, and contacts noted strong demand for recreational and powersport vehicles. However, spending was checked by softening demand at retail, restaurant, accommodation, and other firms more directly affected by rising COVID-19 infections. Numerous ad hoc polls showed that (self-reported) consumer spending remained below pre-pandemic levels, and future spending would be influenced by infection trends. Strong outdoor activity has lingered; visits to most of the District's major national parks rose in October compared with last year, and Mackinac Bridge traffic to Michigan's Upper Peninsula also rose over the same period. However, leisure travel through District airports as of mid-November had leveled off after modest-but-steady growth through September.\nConstruction and Real Estate\nCommercial construction fell moderately since the last report. Industry data showed a slowing of new and active projects in the District. A survey of construction firms in late October found that 40 percent saw revenues decline compared with earlier in the pandemic, and a slightly smaller share saw revenues increase. Firms were also more pessimistic about revenues in the coming months due to a shrinking pipeline of new projects. A minority-owned contractor in the western part of the District said the company had a fraction of its typical workload due to COVID-19-related cutbacks in spending on government projects. \"There is very little work out there...and prices are being driven down drastically as contractors are all bidding for the same projects.\" However, prospects in Minnesota improved with the state's recent passage of a record-high $1.8 billion bonding bill. Residential construction continued to outperform other industry segments, in both recent project activity and planned future work, according to the recent survey. Most of the District's metros saw growth in single-family permitted units in October compared with a year earlier.\nCommercial real estate fell modestly since the last report. Vacancy rates have risen across most categories, particularly in retail and office space. Industrial vacancy rose slightly in Minneapolis-St. Paul but was still considered healthy. While federal and state eviction moratoriums were keeping people housed, rent collections at lower-priced units in Minnesota were reportedly falling faster than at higher-priced units. Rising nonpayments were also squeezing smaller landlords, who have fewer options for mortgage forbearance than larger landlords. Residential real estate saw robust growth, with closed home sales in October seeing double-digit growth across the District. A Minneapolis-St. Paul contact said demand was \"relentless.\" Low inventories of homes have also resulted in strong increases in median sale prices.\nManufacturing\nDistrict manufacturing activity increased briskly since the previous report. A regional manufacturing index indicated strong growth in October in Minnesota and South Dakota compared with a month earlier, with positive but more moderate growth in North Dakota. A producer of cleaning equipment was expanding operations as it sought to in-source more if its supply chain. A manufacturer of home furnishings reported difficulty keeping up with strong demand due to pandemic-related safety measures.\nAgriculture, Energy, and Natural Resources\nAgricultural conditions improved slightly due to solid harvests, recent increases in prices for some commodities, and federal relief aid. Respondents to the Minneapolis Fed's third-quarter (October) survey of agricultural credit conditions mostly reported unchanged farm income compared with a year earlier, while the outlook for the fourth quarter was for increasing farm incomes. District oil and gas activity increased slightly from low levels; the number of active drilling rigs was little changed since the last report, while oil production increased from its lows earlier in the year but remained below pre-pandemic output. District iron ore mines were operating at normal levels except for one idled facility that was scheduled to reopen in December. Contacts in nonferrous mining described activity as steady.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Atlanta | 2020-12-02T00:00:00 | /beige-book-reports/2020/2020-12-at | "December 2, 2020\nSummary of Economic Activity\nOn balance, economic activity in the Sixth District expanded modestly from October through mid-November. Labor markets continued to recover as some firms added to headcounts where demand was strong. Some contacts noted rising nonlabor costs, especially related to construction and shipping. Retailers reported mixed activity. Auto dealers reported solid retail vehicle sales, offset by softness in fleet sales. Tourism and hospitality noted slow improvements in activity. Residential real estate remained strong, but challenges in commercial real estate markets continued. Manufacturing activity accelerated as new orders and production levels rose. Banking conditions stabilized, but net interest margins remained compressed.\nEmployment and Wages\nOn balance, contacts continued to report modest improvements in labor market conditions. Increases in headcounts were strongly tied to improvements in demand. Some firms noted the ability to maintain or increase productivity levels with fewer employees, while others reported onboarding new employees to provide relief to overworked staff. Seasonal hiring was notable among retailers, distributors, and delivery firms. Driver shortages intensified as capacity constraints due to social distancing measures at driver training locations slowed the number of new certified drivers. Business contacts indicated that companies in higher cost-of-living geographies were recruiting accounting, IT, and other professional staff to work remotely full-time, and are able to pay salaries that were higher than local market rates, but often lower than the salary paid in their geography. Those hiring for higher skilled positions noted an ability to find quality applicants. Overall, the supply of available lower-skilled workers remained limited. Childcare challenges continued to be noted and there were some reports of accelerations in retirements.\nThere were fewer reports of wage and salary reductions since the previous report, and some firms began to restore pay cuts or plan to do so in 2021. Increases in wages were largely targeted to specific occupations and lower-skilled positions.\nPrices\nOver the reporting period, contacts continued to note some rising input costs, particularly for lumber and aluminum. Shipping costs rose as solid demand put increased pressure on capacity; however, fuel costs remained low. Firms continued to report little to no pricing power, but some anticipate having the ability to pass through increased costs in 2021. The Atlanta Fed's Business Inflation Expectations survey showed year-over-year unit costs decreased significantly to 1.3 percent in November, down from 1.6 percent in October. Year-ahead expectations increased to 1.9 percent from 1.6 percent since the last reporting period.\nConsumer Spending and Tourism\nRetailers reported mixed activity over the reporting period, though demand generally outperformed forecasts. Some retailers noted cutting store hours and reducing costs to preserve margins. The outlook for the holiday season remained uncertain. Although overall District auto sales declined from September to October, retail auto sales remained solid while fleet sales fell significantly as compared with year-earlier levels.\nTravel and tourism contacts reported that the industry was slowly recapturing demand, as some contacts reported a pickup in leisure travel. Business travel continued to struggle. Based on the current trajectory, a full recovery is not expected until 2023.\nConstruction and Real Estate\nAlthough they moderated slightly from peak levels experienced over the summer, District home sales remained strong, with low interest rates continuing to be the primary driver of demand. Existing home inventory remained tight and new home construction continued to lag demand. Construction costs, especially lumber and labor, remained elevated. Consequently, home prices continued to rise, putting pressure on affordability. Rural areas in Alabama, Mississippi, and Louisiana, urban markets in south and central Florida, and the southern portion of the Atlanta metro area were geographies that stood out in terms of the share of mortgages that remained in some stage of delinquency.\nBusiness contacts reported that the commercial real estate sector continued to encounter bifurcated conditions associated with the effects of the pandemic. Hospitality, which was especially hard hit earlier this year, saw modestly improving conditions come to an end, as occupancies declined from the prior reporting period. Retail remained challenged; however, contacts reported limited improvement in rent collections. Low levels of tourism and travel have had a notable impact on activity across the hospitality and retail sectors. Recent asset valuations in public markets confirmed that values are deteriorating, which, along with tighter underwriting standards, may create impediments to new lending.\nManufacturing\nMost manufacturing firms reported an increase in overall activity over the reporting period as new orders and production levels continued to climb. Production managers indicated that supplier delivery times were getting longer, and finished inventory levels remained slightly elevated. Expectations for future production levels declined, with over one-third of contacts expecting higher levels of production over the next six months compared to one-half during the previous reporting period.\nTransportation\nDistrict transportation contacts indicated that demand was largely consistent with the previous report. Total year-over-year rail traffic rose as robust intermodal freight volumes offset declines in agriculture products, petroleum and petroleum products, and aggregates and coal. Trucking companies noted solid demand; however, driver shortages continued to constrain capacity for some. At District ports, container traffic increased, while roll-on, roll-off cargo, breakbulk and bulk freight volumes remained below year-earlier levels. Several contacts reported strong warehouse expansion activity across the region.\nBanking and Finance\nBanking conditions stabilized, taking pressure off of earnings. Net interest margin compression continued but significant additions to provisions for loan losses were not required. Banks appeared to struggle to find suitable lending opportunities while deposit levels remained elevated. Outside of residential real estate and commercial loans, loan balances across multiple portfolios were stagnant or edged downward. Instead of increasing loans, banks held higher balances in cash accounts or securities portfolios.\nEnergy\nHurricane Zeta made landfall within the District during the reporting period, causing temporary disruptions to oil and gas production in the Gulf of Mexico. Amid continued soft demand for crude oil, industry contacts reported consolidation among refiners and expect more in the coming months. Petrochemical manufacturers noted that reduction in crude oil refining has lowered the availability of residual products used for fuel, which ultimately has affected production supply chains, capabilities, and costs. While some energy contacts noted that petrochemical and chemical processing expansion projects were gradually restarting, others reported that many projects that were delayed will be on hold into 2021. Within the utilities sector, residential power demand was up compared with this time last year; however, commercial and industrial segments, although recovering, were down overall. Contacts described that recovery of commercial energy usage slowed in recent weeks since demand is sensitive to COVID-19 movements. Still, capital investment within the utilities sector remains solid, including increasing investment in renewable energy sources in the industry's ongoing pursuit of increased decarbonization.\nAgriculture\nAgricultural conditions were mixed. While drought-free conditions prevailed in most of the District, some producers reported crop damage caused by recent hurricanes. Contacts noted increases in some agriculture commodity prices attributed to changes in supply and demand, the USDA Food Box program, and improved trade with China. Some contacts also noted that increased federal assistance helped improve balance sheets. Cotton harvesting progressed, though below the five-year average pace, while soybean and peanut harvesting were near their five-year averages. The USDA reported year-over-year prices paid to farmers in September were up for rice, soybeans, cattle, and eggs, but down for corn, cotton, broilers, and milk. On a month-over-month basis, prices increased for corn, cotton, soybeans, cattle, and eggs, but decreased for rice, broilers and milk.\nFor more information about District economic conditions visit: www.frbatlanta.org/economy-matters/regional-economics\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Richmond | 2020-12-02T00:00:00 | /beige-book-reports/2020/2020-12-ri | "December 2, 2020\nSummary of Economic Activity\nThe Fifth District economy expanded at a moderate rate in recent weeks. Although some sectors reported strong growth, most businesses reported demand or sales at levels below their pre-pandemic or year-ago levels. Manufacturers experienced robust growth in shipments and new orders, and in some cases, demand exceeded capacity as producers were constrained by labor and supply chain factors. Ports and trucking companies saw strong growth in volumes, driven by high demand for furniture, consumer goods, and autos. Retailers reported little change in overall sales and low customer foot traffic, however there was strong growth in certain categories. Travel and tourism declined modestly as leisure travel softened. Restauranteurs voiced concerns about colder weather impacting outdoor dining in the coming months. Residential home sales picked up markedly and prices rose for both new and existing homes. Commercial real estate grew modestly. Office and retail vacancies remained elevated but rent payments held up. Despite moderate growth in mortgage demand, total loan volumes declined slightly, according to Fifth District financial institutions. On balance, the demand for nonfinancial services rose slightly in recent weeks. Employment continued to rise, but some firms looked to invest in technology or automation rather than hiring more workers. Overall, price growth was little changed as prices received by firms grew modestly.\nEmployment and Wages\nEmployment in the Fifth District rose moderately since the previous report. Despite recent increases, the overall level of employment remained below the pre-pandemic level. Some professional and financial services firms reported a recent uptick in hiring, particularly for accountants, lawyers, and IT professionals. An infrastructure design and consulting firm was hiring engineers due to strong demand for their services. Similarly, an advanced manufacturing firm reported strong growth in hiring for engineers, technicians, and administrative staff. Several businesses, however, were hesitant to hire and some looked to invest in technology or automation rather than increasing employment. Other firms reported difficulty finding workers to fill open positions. Wage growth remained modest, overall.\nPrices\nPrice growth was little changed, on balance, in recent weeks. According to our most recent surveys, manufacturers and service sector firms reported modest growth in prices received, averaging well below two percent. Growth in prices paid for inputs remained moderate and generally outpaced growth in prices received. Firms in both goods producing and service providing sectors continued to state that additional cleaning measures and purchases of personal protection equipment contributed to the growth in input costs compared to last year.\nManufacturing\nManufacturers reported strong increases in shipments and new orders since our last report. Producers of furniture, textiles, home goods, food, and shipping materials reported robust demand, often exceeding capacity. However, many manufacturers reported that production was constrained by unavailability of labor and supply chain disruptions resulting from tariffs, shutdowns, and shortages. Some manufacturers expressed concerns about recent increases in new COVID cases, leading to uncertainty about the extent that they would be able to operate in the near future.\nPorts and Transportation\nFifth District ports saw robust growth in shipping volumes in recent weeks. Contacts reported volumes were up over the year and neared record levels. Import levels continued to exceed export levels, but both registered strong growth and high volumes. Furniture, consumer goods, and auto imports were particularly strong, but machinery and beverage imports were weak. On the export side, machinery, meat, and grocery products were strong. Lumber and grain exports improved slightly but remained soft compared to year-ago levels.\nTrucking companies reported high volumes and strong growth since our last report. High rates and fairly stable costs led to strong profits. Volumes of home improvement goods and packaging materials were particularly high. Demand often exceeded supply, leading some companies to turn away business. Trucking companies continued capital investments but faced capacity constraints from lack of available drivers. Contacts noted that drivers from smaller companies that closed during the pandemic often left the industry or did not qualify to drive for larger companies with higher safety standards.\nRetail, Travel, and Tourism\nFifth District retailers reported little change in recent weeks, and business remained below year-ago levels. Home goods and food retailers continued to see strong demand. Local retailers that also sell online reported solid online sales while in-store shopper traffic remained low. Auto sales were fairly stable, and dealers held out for higher prices because of low supply. Retailers worked to restock inventories to prepare for holiday sales, but some contacts reported that delays and shortages were limiting their ability to do so.\nTravel and tourism in the Fifth District saw a modest decline since our last report and was well below year-ago and pre-pandemic levels. Hotel occupancy was low, as leisure travel softened and business travel remained very low. Restaurateurs expressed concerns about the feasibility of outdoor dining heading into the colder weather, as both restrictions and low demand limited indoor dining. Attractions, museums, and performing arts also saw weak demand. Many businesses felt that demand would not return until a vaccine becomes widely available, and many businesses faced renewed constraints on activity with the recent surge in virus cases. However, some mountain resorts reported solid to strong demand.\nReal Estate and Construction\nHome sales in the Fifth District continued to be strong since our last report. Sales were robust across price ranges and locations; demand for moderately priced suburban homes was particularly strong. Prices were strong and rising for both new and existing homes, which contacts attributed to low inventories, high demand, and low mortgage rates. Average days on the market decreased, as did the number of listings. Construction costs were high as lumber prices remained significantly elevated. Realtors reported that buyers were increasingly looking for houses with more land, multiple home offices, pools, and personal gyms.\nCommercial real estate leasing grew modestly in recent weeks. Vacancy rates remained elevated for office and retail, but rent payments generally have held up. Office tenants asked for short-term renewals as they reevaluated space needs and increasingly looked to locate in smaller buildings, often in the suburbs, instead of renting space in urban high-rises. Some retail vacancies opened up as tenants went out of business, but realtors reported new interest in those spaces. Industrial space remained in high demand, driven largely by ecommerce. Multifamily vacancy rates varied by location and were notably high in the District of Columbia. Rents were soft in retail and multifamily but high for industrial space. High construction costs encouraged repurposing of old buildings by companies instead of building new sites.\nBanking and Finance\nOverall, respondents reported that loan activity declined slightly for this period, despite moderate mortgage loan growth. On balance, contacts indicated conventional commercial lending remained unchanged with several banks indicating tightening credit standards, especially for hospitality, retail, and office loans. Deposit growth was moderate even with interest rates paid on deposits remaining low. Credit quality remained good, but a few respondents said they were carefully watching how some mid and lower tiered loans will perform in 2021. In addition, there was some concern regarding increased competition as banks search for loan volume to help offset lower yields.\nNonfinancial Services\nOn balance, demand for nonfinancial services picked up slightly in recent weeks. Some firms reported moderate growth, particularly those engaged in construction related services, information technology, legal, and financial services. Several other firms, however, reported flat to declining demand due to limited business-to-business spending. A marketing company, for example, said that businesses seemed to be conserving resources and marketing budgets were one of the first places that companies look to cut. Health service providers continued to report strong demand.\nFor more information about District economic conditions visit: www.richmondfed.org/research/data_analysis\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
National Summary | 2020-10-21T00:00:00 | /beige-book-reports/2020/2020-10-su | "Beige Book: National Summary\nOctober 21, 2020\nThis report was prepared at the Federal Reserve Bank of St. Louis based on information collected on or before October 9, 2020. This document summarizes comments received from contacts outside the Federal Reserve System and is not a commentary on the views of Federal Reserve officials.\nOverall Economic Activity\nEconomic activity continued to increase across all Districts, with the pace of growth characterized as slight to modest in most Districts. Changes in activity varied greatly by sector. Manufacturing activity generally increased at a moderate pace. Residential housing markets continued to experience steady demand for new and existing homes, with activity constrained by low inventories. Banking contacts also cited increased demand for mortgages as the key driver of overall loan demand. Conversely, commercial real estate conditions continued to deteriorate in many Districts, with the exception being warehouse and industrial space where construction and leasing activity remained steady. Consumer spending growth remained positive, but some Districts reported a leveling off of retail sales and a slight uptick in tourism activity. Demand for autos remained steady, but low inventories have constrained sales to varying degrees. Reports on agriculture conditions were mixed, as some Districts are experiencing drought conditions. Districts characterized the outlooks of contacts as generally optimistic or positive, but with a considerable degree of uncertainty. Restaurateurs in many Districts expressed concern that cooler weather would slow sales, as they have relied on outdoor dining. Banking contacts in many Districts expressed concern that delinquency rates may rise in coming months, citing various reasons; however, delinquency rates have remained stable.\nEmployment and Wages\nEmployment increased in almost all Districts, though growth remained slow. Employment gains were reported most consistently for manufacturing firms, although firms continued to report new furloughs and layoffs. Most Districts continued reporting tight labor markets, attributing it to workers' health and childcare concerns, with many firms consequently offering increased schedule flexibility; a few Districts, however, noted some firms were finding it easier to hire workers. Wages increased slightly in most Districts, often tied to firms' difficulty finding workers, especially for low-wage or high-demand jobs. Some firms reported returning wages (and raises) to normal levels, but many reported more stable wages.\nPrices\nPrices rose modestly across Districts since the previous report. Input costs generally increased faster than consumer prices; however, some sectors\u2014notably construction, manufacturing, retail, and wholesale\u2014passed along the higher costs to consumers. Overall, consumer prices across Districts rose modestly, with the notable exceptions of food, automobiles, and appliances, which increased significantly. Retail gasoline prices declined. Input costs increased at varying degrees, mostly led by increases in materials costs, particularly steel and lumber. Multiple Districts reported continued additional costs for firms due to COVID-19, including personal protective equipment, sanitation equipment, testing equipment, and technology needed for remote work. Changes in row crop prices were mixed, while Districts reported declines in prices for animal proteins.\nHighlights by Federal Reserve District\nBoston\nEconomic activity continued to improve during the end of August through September. Revenues of responding firms were generally ahead of the year-earlier period, albeit not strongly. Housing markets saw strong demand and limited supply, leading to home price increases. Outlooks were mostly positive, but contacts expressed considerable uncertainty.\nNew York\nThe regional economy has grown slightly in recent weeks, with activity still well below pre-pandemic levels. Manufacturing, housing markets, and tourism have all picked up somewhat, while consumer spending has leveled off. Employment and wages have held steady. Selling prices have been little changed, on balance, though more firms plan to raise their prices in the months ahead.\nPhiladelphia\nBusiness activity grew slightly during the current Beige Book period but remained well below levels attained prior to the onset of COVID-19. Employment sustained a modest rebound, while wages rose slightly and firms struggled to attract workers. Prices also rose modestly amid price spikes. With the pandemic ongoing and the stimulus ended, uncertainty remained extremely high in anticipation of layoffs, foreclosures, and bankruptcies.\nCleveland\nThe Fourth District economy expanded at a moderate pace, and more firms increased staffing to keep up with rebounding demand. However, labor shortages persisted, with many workers sitting out of the labor force. While firms expect conditions to improve further in coming months, elevated uncertainty resulted in many firms' opting to hold cash and forgo capital expenditures.\nRichmond\nThe Fifth District economy expanded modestly in recent weeks, but economic activity was below pre-pandemic levels. Employment rose, as demand for part-time and temporary workers increased, but wages and prices held fairly steady. Shipments and manufacturing activity increased, and the housing market was strong, but commercial real estate and lending were soft, and the hospitality market remained weak.\nAtlanta\nEconomic activity improved somewhat. Labor market conditions improved modestly, and nonlabor costs were generally stable. Retail activity was soft. Activity in tourism and hospitality remained muted. Residential real estate demand increased, and home prices rose. Commercial real estate conditions stabilized. Manufacturing activity improved. Conditions at financial institutions stabilized.\nChicago\nActivity increased robustly, but growth slowed and activity remained below pre-pandemic levels. Employment and consumer spending increased robustly; manufacturing increased moderately; construction and real estate increased modestly; and business spending increased slightly. Wages increased slightly and prices rose modestly. Financial conditions were little changed. Rising prices lifted farm income.\nSt. Louis\nReports from contacts suggest economic activity has increased slightly but remains highly variable across sectors. Auto dealers continued to report strong sales despite inventory shortages. Restaurants reported some improvement but expect activity to decline due to cooler weather. Most District crop yields and production are up significantly over the prior year, with only cotton production lower.\nMinneapolis\nNinth District economic activity grew slightly. Employment was flat overall, but volatile, with many firms either adding or cutting workforce. Labor availability tightened, and wages gained some traction. Growth continued in manufacturing and residential construction and real estate. But most other sectors were either flat or down; agriculture conditions improved thanks to a good crop outlook, but remained weak due to low prices.\nKansas City\nEconomic activity continued to increase in September, albeit at a slower pace than during the summer months. Consumer spending declined modestly, with drops in retail, auto, restaurant, and tourism sales. However, activity rose in the manufacturing, residential real estate, wholesale trade, and transportation sectors. In addition, the energy sector stabilized somewhat and the agriculture sector improved slightly.\nDallas\nGrowth in the Eleventh District economy picked up pace, particularly in services and manufacturing, though activity remained well below normal levels. The housing market continued to perform well. Energy activity remained depressed but started to show some signs of improvement. Outlooks were largely positive but highly uncertain, particularly with regard to the presidential election and the unknown trajectory of the COVID-19 pandemic.\nSan Francisco\nEconomic activity in the Twelfth District expanded moderately. Employment levels increased modestly, while price inflation rose marginally. Sales of retail goods rose noticeably, while conditions in the consumer and business services sectors improved somewhat. Manufacturing expanded moderately, and conditions in the agriculture sector improved modestly. Residential real estate activity increased further, while the commercial market was broadly unchanged. Lending picked up at a fair pace.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Dallas | 2020-10-21T00:00:00 | /beige-book-reports/2020/2020-10-da | "October 21, 2020\nSummary of Economic Activity\nEconomic growth resumed in the Eleventh District after a spike in COVID-19 infections over the summer disrupted the budding recovery. Growth in the services and manufacturing sectors picked up pace in September, and retail sales increased. However, revenues remained well below normal levels in most industries. The housing market continued to perform well. In the banking sector, real estate lending picked up further but was offset by declines in consumer and commercial and industrial loan volumes, and most contacts expect an increase in nonperforming loans over the next six months. Energy activity remained depressed but started to show some signs of improvement. Employment in the district edged higher, with increasing reports of hiring. Input costs rose modestly while selling prices were flat to up slightly. Outlooks were largely positive but highly uncertain, particularly with regard to the presidential election and the unknown trajectory of the COVID-19 pandemic.\nEmployment and Wages\nEmployment edged higher, with increasing reports of hiring in certain sectors, including manufacturing. A Dallas Fed survey of well over 200 Texas service sector executives showed that 12 percent of services firms increased employment levels on net in September, which exceeded the share noting net layoffs for the first time since February. Hiring was particularly strong in financial and business services, while recent job growth in health care abated. Airlines continued facilitating voluntary separations and some have now begun furloughing or laying off workers. Job losses continued in the energy sector, though at a more modest pace. Energy contacts noted that though the worst is likely past, more layoffs are coming, especially among exploration and production companies.\nWage growth remained subdued in September. In the energy sector, wages remained frozen and some firms still have pay-cuts in place.\nPrices\nInput costs rose at a moderate pace, except in transportation and oilfield services where costs were down somewhat. Selling prices were flat to up slightly, with more pronounced increases in the retail and wholesale sectors.\nManufacturing\nRecovery in the manufacturing sector picked up steam in September, with production accelerating and outlooks continuing to improve. Month-over-month production increases were seen in both durables and nondurables manufacturing. Nonetheless, about 60 percent of manufacturers said business is still below normal levels, by about 30 percent on average. Petroleum refiners saw a decrease in production and utilization rates due in part to tropical storms curtailing operations. Margins among refiners and chemical manufacturers remained depressed. Overall, sentiment among manufacturers regarding broader business conditions remained positive, though uncertainty persists, particularly surrounding the election.\nRetail Sales\nRetail sales surged in September, according to contacts. Even still, more than half said revenues were still below normal levels. Growth over the reporting period was led by nondurable goods and building materials sales. Auto sales remained weak, with multiple contacts citing supply chain delays. Among retailers overall, outlooks and expectations of future activity remained positive.\nNonfinancial Services\nGrowth in nonfinancial services activity picked up notably in September after the recovery faltered in July and August in the wake of sharply rising COVID-19 cases. The recent pickup was led by professional and business services, which saw a marked acceleration in revenue growth over the reporting period. Leisure and hospitality also saw some recovery in revenues, but contacts noted that with uncertainty surrounding the spread of COVID-19 there has been little change in visitor activity. While above-average growth was seen in nonfinancial services overall over the past six weeks, the sector has not yet recovered from the COVID-19 downturn. As of September, still more than 60 percent of contacts said revenues were below normal. Airlines noted that demand improved over the reporting period but was still down sharply year over year, and that corporate travel continued to be nearly nonexistent.\nLooking ahead, outlooks continued to improve, and half of contacts expect increased revenue six months from now, exceeding the less than twenty percent that expect a decrease.\nConstruction and Real Estate\nActivity in the housing market remained solid. Home sales continued to outperform expectations, though the pace was not as robust as in the previous reporting period. Builders said they are raising prices to cover higher construction costs and slow down sales as backlogs remained high. Some contacts noted pouring slabs and holding off on framing houses due to crew shortages and high lumber prices. There were also widespread reports of supply chain issues, particularly for appliances and windows. New home development was active, and inventories continued to be exceptionally tight. Outlooks were generally optimistic, with some concern about the impact of the upcoming elections and a weak labor market on future sales activity.\nApartment demand rebounded in the third quarter, but rents were flat to down compared with year-ago levels and concessions were high, particularly in areas where there's a lot of new apartment units. Office leasing activity weakened further, and available sublease space increased notably in the third quarter. Retail market conditions stayed fragile, while industrial demand continued to be strong.\nFinancial Services\nOverall loan volume held fairly steady over the reporting period, with gains in real estate lending offset by declines in consumer and commercial and industrial volumes. In a Dallas Fed survey of 78 financial institutions, just over a quarter reported an increase in nonperforming loans over the past six weeks while more than 60 percent expect an increase in nonperforming loans six months from now. Contacts believe commercial real estate loans carry the greatest downside risk in terms of credit performance.\nIn preparation for an increase in past due loans, the majority of contacts were monitoring loan performance more closely and setting aside additional reserves for loan losses. Also, about 70 percent of bankers expect lower profitability over the next six months. Cost cutting measures focus on lowering interest rates on deposits and reducing employment and/or worker compensation. Despite challenges, perceptions of general business activity improved notably, and loan demand outlooks turned positive.\nEnergy\nThe Eleventh District rig count remained near historical lows but increased over the reporting period for the first time since the beginning of the year. Most contacts are confident that oilfield activity has stabilized and begun a long slow slog toward recovery. Well completions rose as producers began bringing uncompleted wells into production. Contacts mentioned that the recovery of oil consumption is their primary near-term concern, although uncertainty in both domestic and global affairs, particularly surrounding the U.S. election, are also worries. Most executives don't expect the U.S. oil rig count to increase substantially until the price of oil is at least $51 per barrel.\nAgriculture\nSoil moisture conditions deteriorated further across the western part of the district, where drought conditions continued to intensify. Row crop harvesting progressed and yields were quite strong, notably higher than last year for several crops. Grain prices generally improved over the past six weeks and will have reached profitable levels if production is at least average. Drought hampered pasture conditions in parts of the district, which coupled with increased feed costs strained livestock producers. Contacts expressed concern over the La Ni\u00f1a weather pattern that has developed and is likely to persist through the winter, which will bring drier weather and could hinder crop and pasture conditions.\nFor more information about District economic conditions visit: www.dallasfed.org/research/texas\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
New York | 2020-10-21T00:00:00 | /beige-book-reports/2020/2020-10-ny | "Beige Book Report: New York\nOctober 21, 2020\nSummary of Economic Activity\nEconomic activity in the Second District economy grew slightly in the latest reporting period, as the pace of re-opening has been gradual and the virus spread has remained subdued across most of the District. Employment has been steady overall, with some industries adding jobs but others reducing headcounts. Input prices continued to rise moderately, while selling prices were little changed. Consumer spending has flattened out, while tourism has picked up somewhat but remains depressed. Housing markets have been mixed but, on balance, somewhat stronger, while markets for office and retail space have softened further. Commercial construction activity has remained depressed, though residential construction has shown scattered signs of picking up. Finally, banks reported increased demand for commercial and home mortgages, tighter credit standards, and a downward shift in delinquency rates for commercial and residential mortgages. Overall, business contacts have become somewhat less optimistic about the near-term outlook.\nEmployment and Wages\nThe labor market has been steady, on balance, in recent weeks. Manufacturers, wholesalers, and leisure & hospitality firms have reported some net hiring, whereas contacts in the information, transportation, and construction sectors have reported modest staff reductions. A major upstate New York employment agency noted a pickup in hiring, particularly for manufacturing and customer support jobs. A New York City agency specializing in office jobs noted scattered hiring in the financial sector but characterized the job market overall as sluggish, with many job-seekers laid off from retail and hospitality. This contact also noted that many companies are still largely operating remotely and are reluctant to on-board new staff to work from home.\nBusiness contacts in most sectors said they plan to increase staffing levels in the months ahead, with the most widespread gains anticipated among manufacturers. In contrast, more transportation & warehousing firms plan to reduce than expand employment.\nWages have edged up overall, except in the information sector, where contacts mostly reported flat to declining wages. Looking ahead, businesses generally expect wages to accelerate modestly\u2014particularly in the trade & transportation sector.\nPrices\nBusiness contacts reported that input costs continued to rise moderately. In particular, contacts involved in construction noted sharply increasing prices for lumber and other construction materials. A number of contacts noted that, aside from the prices of inputs, they have incurred additional costs in adapting to new safety concerns and complying with regulations. Retailers and wholesalers reported some increases in selling prices, but businesses in other sectors indicated that selling prices were little changed. Looking ahead, somewhat more contacts than in recent months indicated plans to raise their selling prices\u2014most notably, in the retail sector.\nConsumer Spending\nConsumer spending showed signs of leveling off since the last report. Retailers reported that sales grew at a subdued pace in recent weeks, as restrictions continued to be gradually eased, though business remained well below pre-pandemic levels. Stores in upstate New York tended to outperform those in other areas.\nNew vehicle sales softened further in the latest reporting period, with sales down from brisk summer levels, according to dealers in upstate New York. This continued pullback is largely attributed to low inventories, though one contact noted that inventory levels picked up starting in late September. Sales of used vehicles have held up better due to less pronounced inventory problems. Separately, consumer confidence among New York State residents rose notably in September, reaching its highest level since the beginning of the pandemic.\nManufacturing and Distribution\nManufacturing activity has picked up in the latest reporting period, growing at a moderate pace. Wholesale trade firms noted a brisk rebound in activity, which had been flat or declining since the onset of the pandemic. In contrast, contacts in the transportation & warehousing sectors continued to report weakening business activity, with some noting difficulties in replenishing inventories.\nLooking ahead, manufacturers and wholesalers remained largely optimistic, while transportation & warehousing contacts have grown increasingly pessimistic.\nServices\nService industry contacts generally reported that business activity has been steady to slightly lower, after weakening during the late summer. Contacts in the professional & business services and education & health sectors reported steady activity, while those in leisure & hospitality and information reported slight declines. Service firms generally indicated they do not expect activity to change significantly in the months ahead\nTourism has shown scattered signs of a pickup. The more rural tourist destinations across the region have reportedly fared reasonably well. New York City's tourism sector, in contrast, has been depressed, though there have been signs of modest improvement. Hotels have seen some pickup in occupancy, but a sizable proportion remain closed, and those that are open are still at somewhat below half capacity\u2014with about half of that reflecting arrangements with the city to house the homeless. While business travel has remained moribund, a pickup in weekend occupancies signals some return of leisure visitors\u2014a trend that was also evident in strong attendance at the 9-11 memorial site and a modest increase in visits to local museums. New York City restaurants, which benefited from a broad expansion in outdoor dining during the summer, have more recently been allowed to restart indoor dining with limited capacity\u2014a change that occurred earlier on in the rest of the District. As the onset of cold weather inevitably reduces outdoor dining, many are concerned that demand for indoor dining will be limited by safety concerns. Movie theaters have reopened in New Jersey and Connecticut but remain closed in New York.\nReal Estate and Construction\nHousing markets have improved somewhat across much of the District. New York City's sales and rental markets have continued to weaken, while markets elsewhere\u2014particularly for single-family homes\u2014have been increasingly robust. New York City's rental vacancy rate has surged to a multi-decade high, and rents have fallen by roughly 10 percent from pre-pandemic levels, as landlord concessions have become more common. Demand for smaller units has fallen particularly sharply. Rents and rental vacancy rates across the rest of the District have generally been stable.\nThe residential sales market has been mixed. Sales of Manhattan condos and co-ops have been sluggish and running nearly 50 percent lower than a year earlier, while the listing inventory has risen sharply; still, prices have been reasonably steady thus far. Across the rest of the District\u2014even in other parts of New York City and the metro area\u2014inventories have fallen to low levels and prices have climbed. Sales volume has risen but continues to be constrained by limited supply. In some areas, bidding wars were reported to be increasingly common.\nCommercial real estate markets have weakened further. Office availability and vacancy rates have risen sharply in New York City and moderately across the rest of the District. Similarly, office rents have declined noticeably in New York City, running about 8 percent lower than a year ago. Across the rest of the District, office rents were steady to down modestly. Retail vacancies have continued to increase, and asking rents have declined further.\nNew construction activity has remained sluggish and well below year-earlier levels. Single-family construction has increased somewhat in recent months, while multifamily construction has remained sluggish, and commercial construction has been particularly depressed. Contacts in real estate and construction expressed increasing concern about the near term outlook.\nBanking and Finance\nSmall to medium-sized banks in the District reported increased demand for residential and commercial mortgages but little change in demand for other categories of loans. Refinancing activity increased. Bankers reported some tightening in credit standards on commercial mortgages but stable credit standards across all other categories. Delinquency rates declined for residential and commercial mortgages but remained stable for consumer and commercial & industrial loans. Finally, bankers reported increasingly lenient policies for delinquent accounts across all categories.\nFor more information about District economic conditions visit: www.newyorkfed.org/regional\u2010economy\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Kansas City | 2020-10-21T00:00:00 | /beige-book-reports/2020/2020-10-kc | "Beige Book Report: Kansas City\nOctober 21, 2020\nSummary of Economic Activity\nTenth District economic activity expanded slightly in September despite a pullback in consumer spending for the first time since early summer. Retail, restaurant, auto and tourism sales declined since the previous survey, and expectations for consumer spending were mixed. Retail and auto contacts anticipated moderate gains, while restaurant and tourism contacts anticipated declines heading into the winter months. Manufacturing production and new orders increased modestly at both non-durable and durable goods plants. Transportation and wholesale trade sales also rose modestly, but sales in the professional and high-tech sectors fell. Residential real estate activity continued to increase at a moderate pace, but commercial real estate conditions weakened. Energy activity stabilized somewhat, but revenues, employment and capital expenditures continued to decline in the sector. The agriculture sector improved slightly in September, although drought conditions intensified in parts of the District. Most industries continued to add jobs, but overall employment levels were modestly below year-ago levels. Wages and prices rose modestly, and similar gains were expected in the coming months.\nEmployment and Wages\nDistrict employment increased slightly since the last survey period but remained modestly below year-ago levels. Contacts in the wholesale trade, health services, and real estate sectors reported the largest employment gains, while tourism, transportation and manufacturing contacts reported slight increases. Restaurant contacts noted a slight decrease in employment following a modest gain during the previous survey period. Employment levels remained below year-ago levels in most industries, but contacts in every sector except tourism expected to add jobs in the months ahead.\nA slight majority of contacts in the services sector reported labor shortages, including openings for truck drivers, retail workers, and skilled technicians. Wages rose modestly and were expected to continue to do so in the coming months. The majority of restaurant, wholesale, transportation and auto sales respondents expected wage growth over the coming year to be similar to that of last year. However, the majority of tourism and health services contacts expected slower wage growth than a year ago.\nPrices\nInput and selling prices rose modestly in the services and manufacturing sectors in September and continued modest increases were expected in the next few months. Prices in the retail industry rose moderately and were well above year-ago levels. Transportation contacts noted a slight increase in input and selling prices, although prices remained moderately below year-ago levels. Selling prices increased moderately for construction supplies, but were expected to remain flat in the upcoming months. Restaurant prices edged up during this survey period and remained moderately above year-ago levels. Prices of raw materials and finished products rose modestly in the manufacturing sector and additional increases were anticipated in the coming months.\nConsumer Spending\nConsumer spending fell modestly since the last survey period which was the first decline since early summer. Restaurant and auto sales experienced the largest declines, both following moderate increases during the previous survey period. Tourism and retail sales fell slightly, after experiencing consistent gains throughout the summer. Tourism, restaurant, and auto sales were moderately below year-ago levels, however retail sales remained modestly above. In the next six months, many restaurant and auto contacts indicated that they will need to increase marketing or sales and the majority of respondents in the retail and restaurant sectors noted that they will need to hire new employees. Retail and auto contacts expected moderate increases in sales over the next few months, while restaurant and tourism respondents expected continued declines.\nManufacturing and Other Business Activity\nManufacturing activity expanded modestly in September, but remained moderately below year-ago levels. Both the non-durable and durable goods sectors experienced modest gains in production and new orders, marking a slight slowdown in the pace of growth for non-durable goods. Contacts anticipated further increases in production and new orders in the coming months. Capital expenditures were consistent with levels from a year ago in the non-durable sector, while down slightly from a year ago in the durable sector. The majority of manufacturing contacts expected to hire new employees in the next six months.\nOutside of manufacturing, sales in transportation and wholesale services increased modestly during the survey period, a weakened pace of growth for both sectors relative to this summer. Sales in professional and high-tech services declined since the last survey and were modestly below year-ago levels. Contacts in transportation and professional and high-tech services expected modest increases in sales and slight declines in capital expenditure in the coming months, while wholesale respondents expected moderate increases in both measures.\nReal Estate and Construction\nResidential real estate activity grew moderately since the last survey, but commercial real estate conditions continued to decline. Home prices rose moderately as inventories fell further. Home sales held steady, and remained moderately above a year ago. In addition, contacts expected moderate growth in both sales and prices in the upcoming months. Construction supply sales continued to rise modestly, keeping them moderately above year-ago levels. Since the previous survey period, commercial real estate conditions continued to worsen with a modest increase in vacancy rates, a slight increase in developer's difficulty in accessing credit, and slight declines in absorption rates, sales, and rents. Commercial construction, however, increased slightly for the first time following consistent declines since early spring. Overall, expectations improved in the commercial real estate sector compared to the previous survey, but contacts still expected conditions to worsen in the next few months.\nBanking\nBankers reported modest growth in overall loan demand, with strong increases in residential real estate loan demand and slight increases in consumer installment loan demand. Other lending categories continued to slow, with slight declines in commercial real estate loan demand and modest declines in commercial, industrial, and agricultural loan demand. Since the last survey, credit standards tightened modestly for commercial real estate lending and tightened slightly for commercial, industrial, and consumer lending. Deposit levels increased moderately over the past few weeks. Bankers reported moderate declines in loan quality compared to a year ago and expected strong declines in quality over the next six months.\nEnergy\nDistrict energy activity stabilized somewhat since the previous survey period, but revenues, employment, and capital expenditures continued to decline. The number of active oil and gas rigs in the District was mostly unchanged from August, and drilling and business activity remained significantly lower than a year ago. Prices for oil and gas remained below the average price District firms reported needing for drilling to be profitable. Expected oil prices for the near term were higher than price expectations from earlier in 2020, but longer-term projections were steady. Over a quarter of firms surveyed expected global oil demand to return to pre-COVID levels by Q2 2021, but the majority of contacts didn't expect oil demand to rebound fully until 2022 or 2023. Moving forward, most firms expected more defaults and bankruptcies in the energy sector, and over half of firms anticipated a large increase in mergers and acquisitions through 2021.\nAgriculture\nEconomic conditions in the Tenth District agricultural sector improved slightly from the previous period despite intensifying drought conditions in some parts of the District. Alongside government payments that were expected to help offset revenue losses, prices for most of the region's major agricultural commodities increased slightly in late September. However, apart from soybean and hog prices, agricultural prices generally remained low. Drought conditions intensified, particularly in western District states. Through September, the share of corn and soybean acres in poor condition was higher than a year ago and above the national average in all states except Missouri. Extreme drought in portions of Colorado, Wyoming, New Mexico, Oklahoma and Nebraska could further lower crop revenues and reduce income prospects for cow-calf producers impacted by the severe conditions.\nFor more information about District economic conditions visit: www.KansasCityFed.org/Research/RegionalEconomy\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Philadelphia | 2020-10-21T00:00:00 | /beige-book-reports/2020/2020-10-ph | "October 21, 2020\nSummary of Economic Activity\nThird District business activity incrementally improved during the current Beige Book period but remained well below levels observed prior to the onset of the COVID-19 pandemic. The number of COVID-19 cases had been manageable but began rising late in the period. Net employment continued to grow modestly, but the rate of permanent layoffs has persisted as well. On balance, wages continued to grow slightly, and many contacts continued to report difficulties attracting workers. Prices rose modestly \u2013 driven primarily by price spikes amid disruptions to production and distribution. Modestly positive expectations for growth over the next six months have broadened among firms. However, extreme uncertainty is uniformly expressed, with contacts citing rising COVID-19 cases, colder weather, rising layoffs, the failure to renew stimulus measures, a divisive political climate, and the consequences after moratoriums on evictions and foreclosures expire.\nEmployment and Wages\nEmployment increased modestly overall as firms continued hiring; however, recalls ebbed for previously furloughed workers, while new furloughs and permanent layoffs persisted. Among firms responding to our COVID-19 survey, 35 percent reported that they had hired new workers in September \u2013 up from 31 percent in August and 25 percent in July. Likewise, our mid-September surveys indicated somewhat stronger hiring among all types of firms than in the prior month.\nRecalls of furloughed workers have slowed \u2013 to 5 percent in September from 13 percent in July. Meanwhile, the share of firms issuing permanent layoffs edged up to 7 percent in September from 6 percent in July, while the share issuing new furloughs edged down to 5 percent from 6 percent.\nStaffing firms reported that activity continued to increase but tended to remain below pre-pandemic levels by 10\u201315 percent. Staffing contacts continued to note more orders than they can fill with available labor. In our COVID-19 survey, fewer firms noted impediments to hiring in late September than in late August. Lack of childcare and expanded unemployment benefits were cited by just over one-fourth of the firms, while fear of infection was cited by just under one-fourth. One manufacturer noted that it has provided onsite childcare for over 25 years \u2013 largely removing that barrier. Some firms continue to note offering wage and benefit packages sufficient to retain their workforce with little turnover.\nWages continued to grow slightly. In mid-September, the percentage of nonmanufacturing firms reporting higher wage and benefit costs per employee remained somewhat higher than the percentage reporting lower costs. However, nearly two-thirds of the firms reported no change.\nPrices\nPrices appeared to rise modestly, as about 25 percent of all contacts reported higher prices for their own goods and services and for their inputs to production. However, over 60 percent of all firms noted no change in prices.\nMost contacts were not worried about rising inflation. Instead, contacts continued to describe scarcity, delays, and spotty price hikes because of intermittent demand shifts, production disruptions, and logistics problems. Contacts noted that California wildfires have caused food prices to spike; builders continued to note numerous prices hikes (and delays) for lumber, appliances, and other critical inputs.\nManufacturing\nOn balance, manufacturing activity has grown slightly since the prior period but may have leveled off during September. At the end of July, manufacturing firms responding to our COVID-19 survey reported that sales and new orders were about 14 percent below what had been anticipated pre-pandemic. At the end of August and September, firms reported demand was about 8 percent below pre-pandemic expectations.\nDiffusion indexes for shipments and for new orders from our mid-month surveys also suggested growth. Both indexes had risen since mid-August, indicating that growth was more widespread among firms and that the overall direction of change was positive.\nConsumer Spending\nOn balance, nonauto retail sales improved incrementally over the period but remained below contacts' pre-pandemic expectations by 5\u201310 percent, depending on the retail segment (restaurants were on the low end or lower). Restaurants continue to survive with a mix of sit-down dining, takeout/delivery, catering, and groceries. Contacts anticipate weaker sales in the coming winter months.\nStrong demand persisted for auto sales \u2013 new and used; however, inventory constraints limited new car sales to modest growth. Still, new car sales were less than 5 percent below the prior year, which marked a significant improvement. Dealers did note that they are seeing more credit-challenged customers, resistance from bank lenders, delinquencies, and repossessions.\nTourism changed little compared with the prior period as a whole but did grow softer with the move from summer to fall. In the first half of August, activity had improved to about 39 percent below prior-year levels but was averaging 47 percent below in late September. Contacts described mixed results for the summer: Rental homes were doing well, while some hotels struggled, and some restaurants were busy, while others never reopened. Attractions, business travel, and urban destinations remain depressed.\nNonfinancial Services\nOn balance, nonmanufacturing activity has grown slightly since the prior period, but mostly leveled off during September. At the end of July, nonmanufacturers in our COVID-19 survey had reported that sales and new orders were about 21 percent below what had been anticipated pre-pandemic. At the end of August and September, firms reported demand was 16.7 percent and 16.2 percent below pre-pandemic expectations, respectively.\nDiffusion indexes for new orders and sales from our mid-month surveys also suggested slight growth. Both indexes had edged down since mid-August but remained positive, indicating that growth was slightly less widespread among firms but that the overall direction of change remained positive.\nFinancial Services\nThe volume of bank lending grew modestly during the period (not seasonally adjusted); in the same period in 2019, by contrast, loan volumes grew robustly. Residential mortgages and other consumer loans grew moderately during the period, and auto loans and commercial real estate lending grew modestly. However, these gains were offset by moderate declines in home equity lines and steep declines in commercial and industrial loans. Credit card volumes rose slightly; last year, they were essentially flat over the same period.\nBanking contacts, as well as accountants and attorneys, noted little change in delinquencies or other credit problems. However, most remained concerned that significant problems would arise without renewed government stimulus and as moratoriums on evictions and foreclosures expire.\nReal Estate and Construction\nHomebuilders reported robust sales relative to a year earlier, while existing home sales grew modestly, as extremely low inventories continued to constrain sales. Builders and brokers alike noted that strong demand persisted because of low interest rates, a pandemic-driven desire for more space, and the emergence of more first-time buyers. Surging demand has enabled builders to raise prices to cover rising labor and commodity costs. For brokers, surging demand has spurred multiple offers and higher house prices for the limited available homes. Banking contacts are becoming wary of appraisals, and some appraisers are beginning to balk at the higher prices.\nActivity in Philadelphia's commercial real estate construction sector essentially held steady at about 10\u201315 percent below the level of activity anticipated before the pandemic. Production remains constrained by crew-size reductions for worker safety. Commercial office leasing activity continued to edge lower. With many workers remote and potential layoffs ahead, firms continued to delay leasing decisions; some are terminating leases. Demand remained strong for warehousing and positive for life science activities, but weak for retail space.\nFor more information about District economic conditions visit: www.philadelphiafed.org/research-and-data/regional-economy\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Cleveland | 2020-10-21T00:00:00 | /beige-book-reports/2020/2020-10-cl | "October 21, 2020\nSummary of Economic Activity\nFourth District economic activity increased at moderate pace since the last Beige Book report. The share of business contacts reporting an increase in customer demand was unchanged over the period; however, far fewer firms noted a decrease in demand. The general improvement was evident across broad industry breakouts, but there was considerable variation within them. For example, spending on interest rate-sensitive goods (such as homes and light vehicles) was particularly robust, while spending in high-contact services segments (such as accommodation and food services) remained weak. The modest increase in customer demand was accompanied by an uptick in staffing levels. However, contacts suggested that hiring was difficult because of limited labor availability, which also exerted more upward pressure on wages. Supply chain constraints and higher costs of freight and some materials pushed up input prices, and a greater share of contacts were able to increase selling prices. While most firms expect demand to increase further in coming months, capital spending remained soft as firms continue to hold on to cash amid persistent uncertainty surrounding the pandemic.\nEmployment and Wages\nStaffing levels increased slightly since the last report, although employment remained well below pre-pandemic levels. More firms across a wide array of industries reportedly wanted to hire (or rehire) additional workers to meet improving demand. However, many indicated that they had a hard time adding workers. Contacts said that three primary factors contributed to their inability to hire: health concerns, difficulty arranging dependent care, and generous unemployment insurance benefits. Contacts were specifically asked if labor availability increased after the generous supplemental unemployment insurance payments lapsed, and most said that it had not. There were a few exceptions noted by manufacturers, transportation firms, and restaurants. Nevertheless, the increase in labor availability was insufficient to meet these employers' needs. Staffing services firms continued to report unusually large numbers of unfilled orders because of these shortages. Moreover, they and other business contacts suggested that some wage rates were rising as a consequence, particularly in lower-wage positions.\nPrices\nOn balance, selling prices rose moderately during the latest Beige Book period. However, pricing power varied by sector. In consumer-facing segments, auto dealers, furniture retailers, and apparel stores were among those reporting that customers were paying higher prices. Freight haulers said that strong demand, especially for last-mile delivery, was pushing up both spot and contract rates. By contrast, firms in professional and business services indicated that prices to customers were flat to down, with one noting that customers were \"fragile\" and had little appetite for higher prices.\nNonlabor input costs also rose for many firms. Construction and manufacturing firms reported rising freight rates and materials prices, along with supply chain interruptions, that contributed to higher input costs. Many of those firms were able to push such cost increases though to their customers. Contacts in a variety of sectors suggested that adapting their operations to account for COVID-19 also added to their costs.\nConsumer Spending\nReports from retailers suggest that consumer spending increased modestly during the last two months. Auto dealers said that sales remained strong in August and September, and many suggested that sales would have been even stronger if not for unusually low inventories. General merchandisers and apparel retailers said that sales flattened out in recent months even though customers seemed more willing to shop in brick-and-mortar stores. Hoteliers noted some improvement in occupancy rates relative to those of a few months ago, although they remained low. Looking ahead, contacts noted cautious optimism that consumer spending will continue to recover but expressed some concern about this given uncertainty regarding the path of the virus and the future of fiscal stimulus.\nManufacturing\nManufacturing orders increased moderately. Several contacts attributed stronger orders to customers' replenishing inventories that were depleted earlier in the year. Others said that increased auto production as well as growing foreign demand, especially from China, contributed to their partial recovery. However, several contacts emphasized that activity remained below pre-pandemic levels. Looking forward, almost two-thirds of manufacturing contacts believed demand will increase over the next quarter, although uncertainty about the path of the virus and the upcoming presidential election persisted.\nReal Estate and Construction\nResidential construction and real estate activity remained strong since our last report. Many contacts said that favorable interest rates and low inventories have persuaded many consumers to go forward with home purchases. One real estate agent noted that sales did not decline after Labor Day as they usually do, and contacts noted that while they anticipate that demand will soften in the coming months, they think demand will be stronger than is typical for fall. One builder reported that some potential homebuyers were pushed out of the market by higher home prices, a situation which resulted from low inventories and higher materials costs, particularly for lumber.\nDemand for nonresidential construction was mixed. While public work remained weak, there was a slight uptick in private-sector projects. One general contractor reported that previously delayed projects began to move forward and that bidding activity had increased. For the most part, commercial realtors remained downbeat, citing a lack of interest in commercial space and financial hardship among small businesses and restaurants. By contrast, demand for industrial space remains strong. Looking forward, firms expected nonresidential construction and leasing activity to experience a typical seasonal deceleration as the winter months approach, but persistent uncertainty may further slow construction decisions.\nFinancial Services\nOverall, banking activity increased after going through a soft patch during the last reporting period. Contacts noted that demand for mortgages and auto loans remained strong as low interest rates persisted, but demand for business loans was flat on balance. Lenders said that delinquency rates for commercial and consumer loans were still relatively low because of forbearance agreements and various fiscal relief measures. However, a number of contacts reported slight increases in delinquencies of commercial loans as the economy remained weak and some deferral programs ended. Looking ahead, bankers expected loan demand to remain unchanged throughout the current quarter but noted that uncertainty regarding the path of the virus clouded their outlook. Moreover, while bankers expressed surprise that they had not yet seen bigger increases in metrics reflecting financial duress, many expected them to rise in 2021.\nProfessional and Business Services\nCustomer demand for professional and business services remained strong, and no contacts reported a decrease in business activity. One contact indicated that his firm's demand was picking up along with the broader economy, but his firm was also benefitting from some pent-up demand that built during the slower months earlier in the pandemic. The transition to remote work and online transactions has accelerated the need for new software solutions and increased cybersecurity measures. In spite of the recent strength in demand for professional and business services, a couple of contacts expressed concern that firms may begin to delay purchases as a result of continued heightened uncertainty.\nFreight\nDemand for freight services increased over the reporting period, driven by an increase in e-commerce and ongoing (and broadening) resumption in economic activity. Eighty percent of contacts reported demand had increased in the last two months, and 70 percent expected demand to continue to increase during the fourth quarter, particularly because more consumers will be holiday shopping from home. Many firms have been unable to adequately respond to increased demand because hiring drivers is difficult, and freight prices have increased as a result.\nFor more information about District economic conditions visit: clevelandfed.org/region\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Richmond | 2020-10-21T00:00:00 | /beige-book-reports/2020/2020-10-ri | "October 21, 2020\nSummary of Economic Activity\nEconomic activity in the Fifth District increased modestly since our last report but remained soft compared to pre-COVID and year-ago levels. Manufacturers saw a moderate increase in new orders and shipments, overall, but supply chain disruptions limited output and increased cost of production. Ports experienced a moderate rise in volumes, particularly of imports, as shipments neared year-ago levels. Trucking companies had strong growth in volumes, particularly of retail goods and noted tight capacity in the market. Retail sales showed modest growth as demand for home goods was strong, but customer traffic at brick-and-mortar stores remained soft. The travel and tourism industry saw modest improvement, but remained weak, as hotel occupancy rates were low. Residential home sales showed robust growth across price ranges, as inventories of both new construction and resales remained low. Commercial real estate leasing saw some declines, as retail was particularly weak. Bankers reported a moderate increase in loans, as demand for home mortgages remained strong, but commercial lending softened somewhat. Overall, demand for nonfinancial services increased slightly, as most firms reported flat to improving sales. Employment rose in recent weeks but remained below year-ago levels, and some businesses struggled to find workers. Price growth was fairly stable but varied across industries, as some firms noted increased costs of raw materials.\nEmployment and Wages\nTotal employment continued to rise in recent weeks, but the level of employment remained well below pre-pandemic and year-ago levels. A staffing and recruiting company said that demand for temporary and part-time workers remained somewhat elevated but demand for direct placement was very low. An employer of hourly workers remarked that it was very hard to find workers, particularly for positions paying less than $20 an hour. Many businesses said that they were offering flexible scheduling and remote work opportunities to workers with children schooling at home. Wages were little changed, overall, but there were some reports of recent wage gains in industries with significant order backlogs.\nPrices\nPrice growth remained modest, overall, since our previous report. According to our most recent surveys, manufacturers reported a slight slowdown in growth of prices received while service sector firms reported a modest acceleration. Businesses in both sectors reported a small increase in prices paid. Some manufacturing and construction firms noted supply shortages and rising prices for certain raw materials. Several businesses reported longer lead times and higher prices for personal protection equipment.\nManufacturing\nManufacturers in the Fifth District reported a moderate increase in shipments and new orders in recent weeks. Food, furniture, and appliances were strong, with demand often exceeding capacity. Manufacturers who had shifted to making hospital gowns, sneeze guards, or other COVID-related equipment saw strong demand. However, manufacturers for retail stores struggled. Supply chain disruptions and tariffs put continued pressure on costs of inputs while unavailability of workers constrained production. Many contacts were cautious about investment because of uncertainty from the virus and the election year, but one West Virginia contact planned to expand factory space to increase capacity.\nPorts and Transportation\nFifth District ports observed a moderate increase in shipping volumes since our last report. Many contacts reported volumes exceeded expectations from the spring. Import levels remained above export levels and grew faster than exports. Both import and export automotive shipments were strong, as were consumer goods, with one contact noting high volumes of toy shipments. Imports from east Asia grew, but heavy equipment was soft. Port contacts noted higher shipping rates, as some blank sailings limited capacity. An airport saw strong cargo shipments of both imports and exports, while capacity on passenger flights was limited.\nTrucking companies reported strong growth in recent weeks. Capacity was tight as some companies had experienced closures. This shifted activity to the spot market, which saw rates reach record highs. Retail shipments for certain goods were high as some retailers looked to replenish inventories. Competition for drivers from companies developing their own delivery services led to some attrition and wage pressure. Contacts reported some capital expenditures but remained cautious, citing high uncertainty in the market.\nRetail, Travel, and Tourism\nRetail sales saw modest growth in recent weeks but remained soft compared to last year. Demand was somewhat mixed across products. Sales of home improvement goods and furniture remained strong. Clothing stores continued to struggle with low traffic and revenues in general, but they noted fairly strong sales of high-end clothing. Several retailers reported that inventories were out of season as excess remained from the spring. Contacts also noted a shift in customer traffic from large malls to individual destination stores. Some business expressed concerns about cash flow after Paycheck Protection Program loans run out.\nTravel and tourism in the Fifth District increased modestly since our last report but were below year-ago levels. Hotel occupancy rose slightly in some areas, but hotels still struggled with low prices and occupancy rates that cannot sustain business in the long run. Demand for short term rentals was solid, particularly in areas with outdoor attractions, away from cities. Restaurants struggled, and some closed permanently. Restauranteurs expressed concerns about the effect of coming cold weather on demand for outdoor dining while indoor space remains limited or undesirable. Outdoor attractions saw strong demand but noted that capacity restrictions limited business.\nReal Estate and Construction\nFifth District home sales growth remained robust in recent weeks. Demand for homes was strong across locations and price ranges. Inventories were low for both new construction and resales, and new construction remained strong. Prices rose, and days on the market fell. Realtors reported increasing numbers of offers made on homes. Customer traffic remained somewhat sluggish, but customers were eager to buy. Low mortgage rates incentivized buyers, but rapidly growing prices led to unpredictable appraisals. Realtors noted that buyers increasingly want homes with more land, home offices, pools, and rooms suitable for homeschooling multiple children.\nCommercial real estate leasing declined slightly since our last report. Vacancy rates for both retail and office were up, while rental rates fell. Retail was particularly weak, as some stores and restaurants closed permanently or were unable to pay rent. Office leasing was soft. Many office tenants asked for short term lease renewals while determining the space they will need in the future, and some looked to sublet office space. Built-to-suit office construction was soft, and contacts did not see speculative office building. Multifamily leasing struggled in some urban areas, as many tenants moved to the suburbs, but was fairly stable in less densely populated areas. Demand for industrial space exceeded supply, leading to high rent and increasing construction.\nBanking and Finance\nOverall, respondents reported that loan activity picked up moderately for this period, mainly driven by continued strong demand for mortgage loans. On balance, they indicated conventional commercial lending declined slightly, especially in the hospitality and retail sectors. A few financial institutions stated that downward rate pressure had squeezed their net interest margins. Deposit growth was moderate despite low rates on interest-bearing accounts. Credit quality remained good, but a few respondents noted being more cautious in terms of their underwriting due to the pandemic. In addition, there is some concern that delinquencies may increase as a result of pending layoffs or furloughs.\nNonfinancial Services\nOverall, demand for nonfinancial services increased slightly since our previous report. A majority of professional and business services firms reported flat to slightly improving sales and revenue. A few firms noted, however, that a slowdown in retail and office construction led to a decline in demand for their services. Health care service providers reported little change in demand, but one clinic saw an increase in demand for virtual visits and was increasing capital spending on technology as a result.\nFor more information about District economic conditions visit: www.richmondfed.org/research/data_analysis\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Atlanta | 2020-10-21T00:00:00 | /beige-book-reports/2020/2020-10-at | "October 21, 2020\nSummary of Economic Activity\nEconomic conditions in the Sixth District improved slightly over the reporting period but remained below pre-COVID-19 levels. Labor market activity improved modestly as employers continued to add to payrolls. Nonlabor costs remained generally muted, but costs related to construction and COVID-19 safety measures continued to rise. Retail sales grew but largely remained below year-earlier levels. Softness in tourism and hospitality persisted as COVID-19 restrictions continued to limit activity in many parts of the District. Residential real estate demand and home prices increased while inventory levels remained tight. Commercial real estate activity stabilized. Manufacturing activity increased and new orders and production levels rose. Banking conditions stabilized, and loan loss reserves continued to grow.\nEmployment and Wages\nContacts reported modest improvements in labor market conditions since the last report. On balance, District employers continued to add to payrolls over the reporting period. Firms continued to slowly recall workers as demand returned. However, several contacts reported that some prior staff cutbacks had become permanent, while others noted using attrition to shrink headcount. Many contacts indicated that the pool of available workers was ample and speculated that the expiration of the enhanced unemployment insurance benefit had begun to improve the supply of workers for lower-skilled positions. Employers remained concerned about workers' abilities to balance workloads with the demands of childcare and the return to school, in person or virtual.\nReports on wages and compensation varied among contacts. Some businesses rescinded salary cuts, while others maintained pay cuts and salary freezes. Wage increases remained concentrated at the low end of the pay scale.\nPrices\nOver the reporting period, contacts noted some rising input costs, particularly for lumber and steel. Expenses associated with personal protective equipment, testing, and sanitation practices to protect employees and customers from COVID-19 remained significant, and increased technology expenses for extended work-from-home postures were also reported. Insurance costs were also cited as increasing. Pricing power remained muted, with little ability to pass through these costs. The Atlanta Fed's Business Inflation Expectations survey showed year-over-year unit costs decreased significantly, from 1.5 percent in August to 1.3 percent on average in September. Year-ahead expectations remained largely unchanged at 1.6 percent.\nConsumer Spending and Tourism\nReports from retail contacts were little changed from the previous report. Sales relative to this time last year remained soft but were better than expected with continued strength in home-related products. Contacts in Florida and Louisiana anticipate an uptick in demand as those states implemented final phases of reopening. Contacts shared concerns for the upcoming holiday season sales period, citing political uncertainty and the potential for another spike in COVID-19 cases as potentially hampering sales growth.\nTravel and tourism contacts reported that although demand through the summer season was softer than a year ago, tourism activity through early October was recovering slowly. COVID-19 restrictions continued to negatively impact the industry in most District states as hospitality contacts reported that group travel and conference bookings continued to be postponed or cancelled through the second quarter of 2021.\nConstruction and Real Estate\nDemand for housing continued to recover, and new home construction continued to fall short of demand. Inventory levels of existing homes dropped to historic lows and shortages are expected to remain a long-term market headwind. Limited supply and rising construction costs have led to increased upward pressure on prices. However, historically low interest rates continued to help offset rising prices. Contacts shared concerns over potential higher mortgage defaults as surges in delinquencies in markets such as Orlando and Miami were noted.\nCommercial real estate (CRE) contacts reported continued stabilization amidst improving employment conditions and customer traffic. Hospitality, which was especially hard hit at the onset of the pandemic, was generally stagnant. Retail remained challenged; however, contacts reported marginal improvement as rent collections increased at poor performing shopping centers. The rate of unit leasing remained muted compared with pre-pandemic rates. Owners of lower-price multifamily properties reported an increase in late rent payments and some softening in occupancies. While improving, low levels of tourism and travel were having a notable impact on activity across the hospitality and retail sectors. Due to slower transaction and leasing volumes, asset valuation remained difficult.\nManufacturing\nManufacturing contacts reported an increase in overall business activity since the previous report. Firms indicated that new orders and production levels rose, and supply delivery times increased. Finished inventory levels were also reported to have increased, after declining over the last three reporting periods. Expectations for future production levels rose, with half of contacts surveyed expecting higher levels of production over the next six months.\nTransportation\nTransportation activity across the District improved over the reporting period. Trucking firms reported that shipments of consumer staples and building materials remained above pre-COVID-19 levels. Port contacts reported significant growth in container traffic, driven by increases in e-commerce, and ocean carriers were operating at full capacity and reinstating vessels that were suspended as a result of the pandemic. Railroads reported that overall traffic improved, intermodal shipments of consumer goods strengthened, and industrial freight volumes stabilized but were down from year-earlier levels. Inland waterway contacts noted that demand for barge services was below pre-pandemic levels, owing primarily to fewer shipments of domestically-produced refined products.\nBanking and Finance\nConditions at financial institutions stabilized over the reporting period. Earnings remained pressured by compressed net interest rate margins and higher provisions for loan losses. Persistently elevated deposit levels kept liquidity strong. Loan growth was flat as underwriting conditions remained tight for many loan products outside of portfolios such as residential real estate. Requests for additional forbearance on loan payments declined.\nEnergy\nHurricanes Laura and Sally made landfall within the District during the reporting period, causing supply disruptions as production, refining, and chemical processing activity stalled, according to energy contacts. Power generation, transmission, and distribution infrastructure in southwest Louisiana was severely damaged by Hurricane Laura, leaving hundreds of industrial sites without power for a sustained period. Crude oil refiners continued to experience weak demand amidst a global inventory glut. Refining contacts noted that utilization rates remained near historically low levels and are expected to remain low heading into the fall or until fuel prices rise enough to justify increasing output. Still, some energy contacts reported that large industrial petrochemical refining and chemical processing plant expansion projects that were delayed earlier in the year were gradually picking up again. Utilities contacts noted ongoing investment and integration of renewable energy resources.\nAgriculture\nAgricultural conditions remained weak. While drought-free conditions prevailed in most parts of the District, some producers reported crop and infrastructure damage caused by Hurricanes Laura and Sally. The USDA reported that District farmland values were up on a year-over-year basis except in Florida where cropland value was unchanged. Cotton, peanut, and rice harvesting progressed, though below the pace of their five-year averages, while soybean harvesting was near its five-year average. The USDA reported that in August, year-over-year prices paid to farmers were up for cotton, rice, soybeans, and milk, but down for corn, cattle, broilers, and eggs. On a month-over-month basis, prices increased for rice, soybeans, and cattle but decreased for corn, cotton, broilers, eggs, and milk.\nFor more information about District economic conditions visit: www.frbatlanta.org/economy-matters/regional-economics\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Minneapolis | 2020-10-21T00:00:00 | /beige-book-reports/2020/2020-10-mi | "October 21, 2020\nSummary of Economic Activity\nThe Ninth District economy grew slightly overall since the last report. Employment was mixed, with overall conditions remaining volatile. Wage pressures were modest, while price pressures were moderate. The District economy showed growth in manufacturing and residential construction and real estate. But consumer spending and tourism were flat overall, while activity slowed for professional services and commercial construction and real estate. Agricultural conditions improved thanks to a promising crop outlook, but remained weak overall, and energy was stable at low levels.\nEmployment and Wages\nEmployment was mixed since the last report, and overall conditions remained quite volatile. Contacts suggested that some firms were in a \"hiring chill,\" with essential vacant jobs getting filled, but holding overall staffing levels in check. Initial unemployment claims over the most recent six-week period (through mid-September) fell significantly compared with the previous reporting period, but remained quite elevated compared with year-ago levels. Continuing claims also dropped steeply over this relatively short period compared with mid-summer levels. Staffing contacts in Montana and North Dakota said job orders have grown in recent weeks, and labor availability was tightening. However, a survey of hospitality firms in Minnesota showed more firms were downsizing workforces compared with those that were increasing head count. Preliminary results of a larger, Districtwide survey in October showed similar results, and that trend was also expected to carry into the coming months. A Wisconsin contact said recruitment has become harder given pandemic constraints, and there's \"no doubt that automation has accelerated. Some lower-paying jobs probably won't be coming back.\" Job postings improved slightly in recent weeks across most District states, though South Dakota saw a modest decline, and the overall growth trend has slowed notably from the pace seen in June and early July.\nWage pressures rose modestly. A Districtwide survey in early October showed that a slightly higher share of firms have increased wages, and a lower share have decreased wages, compared with a similar July survey. Other, smaller ad hoc surveys in Minnesota, Wisconsin, and South Dakota showed generally similar results. Wage growth was slightly stronger among Minnesota hospitality firms, particularly in tourism regions seeing healthy labor demand. Firms across these various surveys also expected somewhat stronger wage growth in the future.\nPrices\nPrice pressures were moderate since the previous report, though input price pressures appeared greater than final prices. According to preliminary results of a survey of District businesses, half of respondents reported that input prices were unchanged compared with pre-pandemic levels, though nearly one-third said input prices were up by 5 percent or more. Prices for final goods or services increased at a smaller share of firms. Prices for construction materials continued to increase rapidly. A panel of manufacturers reported that input prices had been rising faster than usual in August and September. Retail fuel prices in District states decreased slightly since the previous reporting period. Prices received by farmers in August increased from a year earlier for soybeans, wheat, potatoes, dry beans, and turkeys, while prices for corn, hay, cattle, hogs, chickens, eggs, and milk decreased.\nConsumer Spending\nConsumer spending was flat since the last report. Surveys of retail and accommodation firms showed that while many were operating below pre-pandemic capacity, customer demand was still not outstripping available sales or service capacity. Growth in vehicle sales paused after a strong uptick earlier in the summer. A dealership with multiple locations in western District states saw sales decline significantly in August compared with a year earlier, and September sales were flat. Motor vehicle sales in Minnesota and Wisconsin were also lower, according to available data.\nTourism experienced healthy late-summer activity in rural, high-amenity regions, but many firms in these areas worried about off-season business. Conversely, many larger cities continued to see low hotel occupancy rates and overall tourism activity. Air traffic was flat overall. After a modest late-summer increase in screened passengers at the eight largest District airports, activity fell slightly over September and was less than 40 percent of 2019 levels.\nServices\nActivity in the professional services sector decreased slightly since the last report. Firms providing services to clients in oil and gas and air transportation reported severe contraction in demand. Trucking contacts said that demand for freight transportation decreased recently. Providers of information technology services and consulting said business was steady, while broadband providers reported that demand was up significantly.\nConstruction and Real Estate\nCommercial construction was moderately lower since the last report. In an October sample of several dozen construction firms, one-third saw a decrease in activity compared with earlier in the pandemic, and that share was expected to increase in the coming quarter. Many contractors were also experiencing project delays, particularly related to supply chain disruptions; a Montana contact said product delivery times were double or triple their normal length. Many firms continued to stay busy thanks to project backlogs built up prior to the pandemic. But firms across the District expressed concern about a shrinking pipeline of future work out for bid. Some locations appeared to be bucking the overall trend, including Fargo, N.D., and Rapid City, S.D., where August and September permitting activity was very healthy. Residential construction rose modestly. After a slow August, single-family permits rose sharply in September in Minneapolis-St. Paul. Permit activity over this period also rose in Bismarck, N.D., Rochester, Minn., and Sioux Falls, S.D.\nCommercial real estate continued to decline modestly since the last report. With many workers continuing to work from home, office space in downtown Minneapolis and St. Paul was seeing increased lease concessions, according to contacts. Lower foot traffic at office buildings also continued to put pressure on retail and other ancillary businesses, with significant closures of restaurant and other retail outlets. Multifamily vacancy rates were reportedly rising in some cities. Residential real estate continued to grow moderately overall. Closed home sales in August were widely higher, except in Minnesota, where sales were flat. Limited data for September home sales suggested continued growth, with Sioux Falls sales rising by 25 percent over last year, and Missoula, Mont., by 12 percent.\nManufacturing\nDistrict manufacturing activity increased moderately since the last report. An index of manufacturing activity indicated expansion in Minnesota and the Dakotas in September compared with a month earlier. About half of participants on a panel of South Dakota manufacturers reported that new orders had increased in August and September compared with the previous two months. A metal fabricator reported that recent demand from automation and packaging had increased, while demand from heavy construction and from oil and gas exploration was down. Manufacturing contacts continued to report pandemic-related bottlenecks in supply chains.\nAgriculture, Energy, and Natural Resources\nDistrict agricultural conditions improved going into the harvest season, however low prices depressed the outlook for farm incomes. Harvests were generally proceeding ahead of schedule in most areas of the District, and the majority of crop acres as of early-October were in good or excellent condition. Despite recent drought conditions in some parts of the District, early estimates called for strong yields of corn and soybeans and record production in some states. District oil and gas exploration held steady at low levels. The number of drilling rigs in the District as of early October was unchanged from a month earlier, though recent oil production increased slightly. All but one District iron ore mine that shut down earlier in the year has reopened.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Chicago | 2020-10-21T00:00:00 | /beige-book-reports/2020/2020-10-ch | "October 21, 2020\nSummary of Economic Activity\nEconomic activity in the Seventh District increased robustly in late August and September, but the pace of growth was slower than the prior reporting period and activity remained well below its pre-pandemic level. Contacts expected further growth in the coming months, but most did not expect a full recovery until at least the second half of 2021. Employment and consumer spending increased robustly; manufacturing increased moderately; construction and real estate increased modestly; and business spending increased slightly. Wages increased slightly and prices rose modestly. Financial conditions were little changed on balance. Rising prices and additional government support lifted expectations for farm income.\nEmployment and Wages\nEmployment increased robustly overall during the reporting period, though the pace of growth slowed. Furthermore, a number of contacts again reported little or no change to their staffing levels. Many retail contacts noted that they continued to operate with reduced hours and were holding staffing levels down accordingly. In spite of high unemployment, some contacts in manufacturing and agriculture reported that finding entry level workers was only a little easier than prior to the pandemic. Contacts continued to report providing scheduling accommodations to workers with young children. Wages increased slightly across skill levels, while benefits costs moved up modestly.\nPrices\nPrices increased modestly on balance in late August and September, and contacts expected a similar sized increase over the next 12 months. Consumer prices increased moderately, led by higher food and vehicle prices. Producer prices increased slightly. Input costs rose modestly, driven by rising prices for shipping and raw materials, particularly metals. Energy prices remained weak, as inventories of natural gas and crude oil stayed elevated and demand remained slow.\nConsumer Spending\nConsumer spending increased robustly over the reporting period, though overall spending remained well below pre-pandemic levels. Nonauto retail sales increased moderately, led by growth in the home improvement, home furnishings, and appliance categories. Hobby and sporting good sales remained strong. Apparel sales were lackluster because of low demand for traditional back-to-school wear. Growth in e-commerce eased but continued to register large gains from a year earlier. The pace of vehicle sales strengthened. Dealers indicated that inventories of new light trucks and many types of used vehicles continued to be tight, which supported rising prices and profit margins. Demand for auto repairs increased significantly. Contacts in the leisure and hospitality industry reported large increases in volumes, but activity remained well below its pre-pandemic level. Contacts noted that Labor Day air and hotel bookings were sharply off year-ago levels and that business travel continued to be weak. In a Michigan survey, the majority of restaurant operators believed they would not see sales return to pre-pandemic levels for at least 6 months.\nBusiness Spending\nBusiness spending increased slightly in late August and September. Retailers continued to struggle to maintain inventories for in-demand items such as home improvement, home furnishings, and hobby goods because of supply constraints. A contact said that appliance shortages, especially of refrigerators, hampered multi-family building projects. Most manufacturers indicated that inventories were at comfortable levels, though a number of contacts continued to report minor supply chain problems. Capital expenditures were little changed, and many contacts again said they had paused expansion plans. Demand for transportation services increased modestly, with contacts noting that capacity constraints had led to sizeable price increases. Commercial energy consumption decreased slightly, but industrial energy consumption increased slightly.\nConstruction and Real Estate\nConstruction and real estate activity increased at a modest pace over the reporting period. Residential construction grew modestly. Contacts noted that a lack of available lots, material shortages, and rising lumber and drywall prices were putting a damper on growth. Residential real estate activity remained vibrant, particularly in the single-family market. Home prices rose and inventories remained low. Nonresidential construction was flat overall and, as with residential construction, was experiencing rising costs. A Southeast Michigan contact indicated that while there was solid demand for new industrial space, there was no new office or hospitality work. Commercial real estate activity fell slightly overall, with deal making largely limited to industrial and multi-family properties. Warehouse and distribution space was in particularly high demand. Commercial real estate prices fell modestly overall. Contacts also reported falling rents for office and retail spaces.\nManufacturing\nManufacturing production increased moderately in late August and September, but remained below where it was before the pandemic began. Auto output continued to rebound and was near its pre-pandemic level. Steel production also continued to recover, but remained low. Demand for heavy machinery was higher than earlier in the year, but remained weak. Contacts noted that while demand for heavy machinery from the infrastructure segment remained solid, they were concerned about a drop-off in spending by state and local governments, many of which face potentially large budget cuts. Specialty metals manufacturers reported a modest increase in sales, with contacts highlighting growth in the construction, medical, and defense industries. Demand for heavy trucks increased moderately. Manufacturers of building materials saw a modest increase in shipments, supported by growth in residential construction. Contacts in food processing reported strong growth and plans to expand capacity.\nBanking and Finance\nFinancial conditions were little changed on balance over the reporting period. Participants in the equity and bond markets reported little change in conditions overall, though volatility remained elevated. Business loan demand decreased modestly, with contacts highlighting declines in the hospitality and commercial real estate sectors. One contact noted that commercial and industrial loan demand had started to come back because many businesses had used up their PPP funds. Business loan quality deteriorated modestly, with declines concentrated in leisure and hospitality and commercial real estate. Contacts reported that forbearances had ended for many customers and that there were few requests for extensions. Standards again tightened some. Consumer loan demand increased modestly, led by continued mortgage refinancing activity. Loan quality improved slightly while standards tightened slightly. Contacts indicated that forbearances had ended in the consumer sector as well, with limited effects on portfolio quality. Contacts continued to report high levels of deposits for both businesses and households.\nAgriculture\nRising prices for key agricultural commodities and additional government support lifted expectations for farm income for the year. Corn, soybean, and wheat prices moved higher, reflecting in part lower stocks compared with a year ago. Increases in corn and soybean exports, particularly to China, also supported prices. In addition, a dry August held back expected yields. Dairy prices were higher, supported by increased sales to food service establishments, and strong exports. Hog prices increased while cattle prices decreased. There were reports that improved income prospects had eased stress on agricultural borrowers somewhat, though concerns remained for next year, when government support was expected to drop substantially.\nFor more information about District economic conditions visit: chicagofed.org/cfsbc\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
San Francisco | 2020-10-21T00:00:00 | /beige-book-reports/2020/2020-10-sf | "Beige Book Report: San Francisco\nOctober 21, 2020\nSummary of Economic Activity\nEconomic activity in the Twelfth District expanded moderately on balance during the reporting period of mid-August through early October. Employment levels increased modestly on net, but hiring activity varied across sectors and somewhat across the District. Wages rose slightly, and price inflation increased marginally. Sales of retail goods rose noticeably, while conditions in the consumer and business services sectors improved somewhat. Manufacturing expanded moderately. Conditions in the agriculture sector improved modestly. Residential real estate activity increased further, while the commercial market remained broadly unchanged. Lending picked up at a fair pace.\nEmployment and Wages\nEmployment levels increased modestly on net. Hiring picked up overall in the Mountain West as most businesses have reopened. Employment levels in California and the Pacific Northwest increased more slowly than in other parts of the District. Hiring in these regions for lower-paid service positions especially lagged, partially due to relatively more stringent social-distancing guidelines and partly due to smaller labor supply as people fled from wildfires. Employment levels in the information technology sector were generally stable over the reporting period, although one contact reported layoffs connected to strategic discontinuation of some product lines. Hiring in lumberyards and construction firms was somewhat constrained by a shortage of skilled workers. Employers in the financial and energy sectors mostly engaged in replacement hiring only. Employment levels in restaurants, hotels, retailers, and the entertainment and tourism sectors remained low. Hiring firms reported receiving plentiful applications for open positions and ease in filling them. Instances of absenteeism decreased, but workers showed continued concern about COVID-19 exposure and grappled with childcare needs.\nWages increased slightly overall, although some employers reported keeping wages fairly unchanged over the reporting period. Labor shortages in the construction sector fueled increases in wages. Some employers in the financial sector observed higher wages over recent weeks despite still high unemployment in their communities and regions. Following other businesses in the Mountain West, a provider of animal health-care products planned to distribute merit increases. Wages in retail and agriculture in some areas in California increased due to regulatory developments concerning overtime pay. Some firms reported that wage increases are not currently under consideration but noted that plans for next year may change, partially due to renegotiations with unions.\nPrices\nPrice inflation increased marginally on balance. Increased demand and low inventories for durable goods, building materials, and processed foods resulted in markedly higher prices for consumers. Constrained supply chains also put upward pressure on costs faced by restaurants and some retailers, though some firms were able to absorb these costs. In contrast, prices decreased for many agricultural goods, including animal proteins. Many bankers reported charging lower interest rates on loans. Similarly, scheduled price increases for undergraduate tuition and some technology services were deferred this year. A few contacts also noted that prices for air travel and hotel rooms remained subdued.\nRetail Trade and Services\nRetail sales rose noticeably over the reporting period. The retail sector benefited from further easing of social- distancing restrictions and better adherence to health and safety guidelines. Contacts reported that consumers felt more comfortable shopping, and foot traffic increased. Sales in brick-and-mortar stores picked up strongly but remained below pre-pandemic levels, while online sales continued to be robust. Demand for durable goods such as home appliances, home improvement goods, and vehicles increased noticeably, and retailers noted low inventories. Grocers in Southern California and the Pacific Northwest highlighted limited supplies of many products and more customers stocking up and switching brands. A specialty retailer in Arizona noted strong sales for pet products but weak department store sales for women's fashion products.\nConditions in the consumer and business services sectors improved somewhat over the reporting period. High demand remained for logistics and transportation services, including home deliveries and shipment of health-care products. Activity remained strong in the information technology and health-care sectors as well as the mental health services subsector. Food service, travel, and hospitality providers reported incremental sales increases over recent weeks, though the pickup in activity has been comparatively faster in the Mountain West relative to other areas in the District. Generally, firms in these sectors continued to operate at a fraction of their pre-pandemic levels, and contacts expressed concern regarding prospects for the winter. Conditions in the entertainment and the health and beauty sectors continued to be precarious. One contact in the education sector reported decreased enrollment rates at both two- and four-year undergraduate institutions, which is unusual during economic downturns.\nManufacturing\nManufacturing expanded moderately. Demand for manufactured wood products and building materials soared on the back of a very active residential real estate market. Construction activity also underpinned strong sales of fabricated and recycled metals over the reporting period, although one contact attributed the rise in demand mainly to niche markets. Manufacturers of home appliances and recreational equipment reported limited increases in production, given pandemic-related capacity reductions. In the Mountain West, meat-processing plants saw increased demand for beef products but a reduction in pork sales. These plants continued to experience COVID-19-related staff shortages but remained open per local officials' orders aimed at ensuring adequate food supply.\nAgriculture and Resource-Related Industries\nConditions in the agriculture sector improved modestly. Most of the grain crops in the Mountain West and the eastern Pacific Northwest have been harvested, with high yield and quality. Yields of grapes, nuts, peaches, and tomatoes in California's Central Valley also were good. Potato output was not as high as expected, though quality remained high. Domestic sales of peaches, wine grapes, vegetables, oils, seafood, and beef rose on the tailwind of ameliorated supply chain disruptions and reduced costs. Higher output and a recent depreciation in the U.S. dollar contributed to increased international sales of grain, fruit, raisins, and nuts, principally to Asian markets. Growers throughout the District reported the potential risks of new COVID-19 cases among their workforce as well as wildfires, which could harm supply chains and production.\nReal Estate and Construction\nResidential construction activity increased further, supported by a low interest rate environment. Contacts reported increased demand for new and existing homes throughout the District, which kept inventories low and construction permitting high. Home prices continued to climb at double-digit rates, partially fed by increased demand for suburban homes in the current telework environment. Rents in metropolitan areas dipped. Contacts expressed some concern over the undersupply of affordable housing, especially after some regions suffered from wildfire-led destruction. Homebuilders in the Mountain West and Pacific Northwest reported backlogged projects, increased costs of building materials, and finalized sales well in advance of project completion.\nActivity in the commercial real estate market remained broadly unchanged. Demand for commercial and office space was either stagnant or decreased in most of the District. However, new hotels and offices continued to be built in the Mountain West. In other areas, demand for new industrial and warehouse space expanded. A contact in Alaska noted that prices for commercial real estate remained unchanged despite subdued local activity and more emigration from the area.\nFinancial Institutions\nOverall lending activity picked up at a fair pace. Contacts noted that the bulk of demand was for home mortgages and refinancing as households took advantage of low interest rates, as well as for auto loans. In contrast, utilization of commercial lines of credit was down, as was demand for unsecured personal loans. Financiers noted strong asset quality, liquidity conditions, and capital positions. Deposits continued to grow at double-digit rates. Some contacts suspected that deposit levels remained high partially due to PPP funds being kept in firms' checking accounts. Contacts highlighted some uncertainty regarding loan demand in coming months given expected decreases in activity over the winter. Some bankers in California reported that a few retail bank branches closed due in part to wildfires. One contact expressed concern over mortgage forbearances and eviction moratoriums and their implications for loan servicing and the health of the real estate market once the deferral periods are over.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
St Louis | 2020-10-21T00:00:00 | /beige-book-reports/2020/2020-10-sl | "Beige Book Report: St Louis\nOctober 21, 2020\nSummary of Economic Activity\nReports from District contacts suggest economic activity has increased slightly but the pace of activity remains highly variable across sectors. Employment and wages increased slightly. Auto dealers continued to report strong sales despite inventory shortages. Restaurants reported some improvement but expect activity to decline due to cooler weather. District banking contacts reported that outstanding loan volumes decreased slightly compared with the previous survey period but remain well above year-ago levels. Home sales in most areas remain strong for this time of the year but have slowed in recent months.\nEmployment and Wages\nLabor market conditions have improved slightly since the previous report, though the pace of job growth has slowed. Contacts across industries reported hiring or re-hiring workers since July, especially in transportation, manufacturing, and healthcare. Firms seeking to hire workers reported a tight labor market, citing workers' ongoing health concerns and family care responsibilities. One firm reported having to threaten furloughed employees' healthcare benefits to pressure enough to return to work. Another firm estimated that 10% to 15% of its workforce was absent daily. Other firms reported business closures or emphasized stability more than growth. Employment trends for small firms were especially mixed. One Memphis contact reported several small business owners were seeking additional part-time jobs to cover their expenses, and aggregate data show little improvement in small business employment since July.\nWages have grown slightly. Contacts reported increasing wages in the face of labor shortages or returning to normal salaries and wages as business normalized. Wages for small businesses remained more stable, with one survey finding no significant changes since our previous report.\nPrices\nPrices have increased moderately since the previous report. Contacts across industries reported higher input costs due to adding sanitization products and personal protective equipment as inputs. Crop prices have increased moderately, except for rice, which has seen a slight decline. However, rice prices have increased moderately year-over-year. Many raw materials are up moderately, steel prices are up significantly, while chemical prices have declined. Contacts attribute elevated lumber prices to increased demand and a slowdown in production as a result of the COVID-19 pandemic. An agriculture contact attributed the slight growth in cotton prices since the previous report to the first phase of a trade agreement between the U.S. and China. Contacts also noted that the prices of used cars remain elevated.\nConsumer Spending\nReports from District general retailers, auto dealers, and hospitality contacts indicate that consumer spending activity has been mixed since our previous report. Seasonally adjusted credit and debit card spending through the middle of September was mixed across the District. Consumers in West Tennessee have an improved outlook relative to June and expect to spend about the same this year as they did last year. General retailers reported mixed business activity. District auto dealers continued to report strong sales but have experienced inventory shortages. Tourism and hotel contacts continued to report business activity well below typical levels; most contacts reported constant business activity from late summer through early fall but expect a decline through the remainder of the year as cooler weather reduces outdoor dining. Restaurants continued to see increased sales; however, some restaurants that have maintained business through outdoor seating are planning temporary closures in the colder months.\nManufacturing\nManufacturing activity has strongly increased since our previous report. Survey-based indexes suggest that manufacturing activity in Arkansas and Missouri strongly increased. In Arkansas, firms reported a strong uptick in new orders while production remained stable. In Missouri both new orders and production showed a strong uptick. Metal manufacturing contacts in the St. Louis area reported 5% to 10% increases in production. Contacts reported that production is still below pre-COVID-19 recession levels, but conditions are steadily improving. Fluctuations in demand were cited as impediments to further increases in production for these contacts. Contacts in the furniture, military vehicle, and energy and defense products all reported that ongoing projects would considerably expand operations and employment over the next few years.\nNonfinancial Services\nActivity in the nonfinancial services sector has increased since the previous report. Airport passenger traffic is up significantly, although it remains down more than 60% relative to this time last year. Cargo traffic is down slightly since the previous report but remains up year-over-year due to e-commerce. Logistics activity is mixed, with several package delivery firms hiring workers as the pandemic and oncoming holiday season increase volume. Other logistics contacts reported lower revenue year-over-year due to the pandemic and low oil production, which have negatively impacted businesses that use their services. Hospital contacts reported revenue and patient volumes are increasing while costs per patient have increased due to higher staffing costs and PPE expenditures. Other healthcare contacts indicated that telehealth will likely become a larger part of the healthcare industry even after the pandemic.\nReal Estate and Construction\nResidential real estate activity has decreased slightly since the previous report. While home sales have recovered from their lows in the spring, total sales in most of the largest District metro areas have been down slightly since mid-August. Home prices in the largest District metro areas have increased moderately since mid-August. Contacts continued to report a shortage of housing on the market, with homes selling quickly once listed. Some contacts expressed concern about a future increase in evictions when moratoria are lifted.\nCommercial real estate activity has been mixed since the previous report. Contacts reported that demand for office space has varied, with some tenants choosing to keep their current spaces or expand, while others are choosing to move toward remote work on a more permanent basis. Contacts reported continued high demand for industrial space. A contact in Memphis noted that while a greater number of retail tenants have been able to pay rent compared with the spring, some are struggling to pay or have gone bankrupt.\nCommercial construction activity was mixed. Contacts reported little speculative activity or construction for office space, while construction for industrial space remained strong. Contacts reported delays with supply chains for materials and a lack of skilled labor.\nBanking and Finance\nBanking conditions in the District have slightly weakened since the previous report. Overall loan demand continued to decline following the end of new PPP loans. Outstanding loan volumes decreased slightly compared with the previous survey period but were well above year-ago levels. Growth in real estate and consumer loans fell modestly while commercial and industrial loan volumes slightly increased. Liquidity conditions remained strong due to high levels of deposits, despite lower rates on interest-bearing accounts. Delinquency rates remained relatively low; however, several contacts expressed continuing concerns for loans in the entertainment and leisure and hospitality sectors. Competition for loans and low interest rates is expected to narrow net interest margins and profitability.\nAgriculture and Natural Resources\nAgriculture conditions have slightly improved. Overall, contacts reported that year-to-date revenue remains steady or slightly up. The agribusiness sector has remained steadier than most, but the effects have been diverse across the industry: Restaurant demand has been collapsing, but grocery spikes have been more than filling the shortfall. Most supply chain bottlenecks were early in the spring and have smoothed out in recent months. Overall, contacts expect business activity for the remainder of 2020 will remain steady or increase slightly.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Boston | 2020-10-21T00:00:00 | /beige-book-reports/2020/2020-10-bo | "October 21, 2020\nSummary of Economic Activity\nBusiness contacts in the First District reported activity continued to improve from mid-August through September, amid ongoing pandemic disruptions. Although overall activity levels were still below average, most responding manufacturers and retailers reported increased revenues compared with a year ago. Revenues at contacted software firms were also up modestly from 2019. Commercial real estate markets continued to diverge, with industrial and lab space doing well, and retail and office in the doldrums. Residential real estate contacts cited strong demand and limited inventory, causing home and condo sales prices to rise. Outlooks were mixed, although mostly somewhat positive, with uncertainty the watchword.\nEmployment and Wages\nReports on hiring varied. One retail contact still has workers on furlough but also reported difficulty hiring warehouse workers; they have permanently increased warehouse worker pay as well as adding additional temporary pay increases from September through December to support added holiday demands. Two-thirds of manufacturing contacts said they were hiring. Several indicated labor market pressure had eased in recent weeks and they were getting more job applicants. One software firm reported its headcount up 5 percent year-over-year reflecting a recently finalized acquisition; they will finalize another acquisition in the coming weeks. That firm also continued hiring for all business functions. By contrast, another software contact noted that while scheduled retirements continued, they were not hiring replacements for any roles, so headcounts were down slightly. Software respondents said annual wage increases continued on schedule and they implemented no wage cuts or layoffs due to COVID-19.\nPrices\nContacts again said little about prices. Manufacturers reported that pricing pressure was limited. Two contacts in the paper business said the cost of inputs and their selling prices had both gone up. A drug manufacturer said they were postponing an annual price increase because of COVID. Software firms do not anticipate any changes in prices in the coming months.\nRetail and Tourism\nRetail respondents continued to report major disruptions related to COVID-19, though several retailers cited strong recoveries through the summer and into fall. One clothing seller said store foot traffic was down 30 percent compared to the same period last year, but a higher conversion rate and strong online sales led to an increase in total September sales of almost 15 percent from year-earlier. An online retailer noted sustained year-over-year growth, albeit decelerating compared to the spring. This contact expects strong e-commerce holiday sales but is concerned about delivery delays, as many couriers are already strained by the increased volume of online shopping. Automobile sales remained strong; a northern New England contact reported the strongest summer on record for sales of automobiles, RVs, and power sports equipment.\nTravel industry contacts reported that in one coastal area, hotels reported their best August on record, and for the season they were down a better-than-anticipated 12 percent; short-term rentals were up 5 percent compared to 2019. Restaurants there reported that September was close to normal, although many restaurants that usually close for the winter closed earlier than usual this year due to added restrictions and slimmer profit margins. Restaurants staying open reported difficulty sourcing winterized tents and propane heating units to continue serving outside. Airline passenger counts into Boston remained down more than 80 percent into the start of fall, an improvement from earlier this spring. International passenger counts were down 90 percent; only half the international routes are currently operating.\nManufacturing and Related Services\nFive of six firms responding this cycle reported sales growth from a year ago. The one exception was a paper producer reporting that gains in grocery and mail order offset a slowdown in orders from retailers. A drug firm reported increased sales but said they were held back by people's continued reluctance to get medical care during the pandemic. A producer of frozen fish said sales remained extremely strong and that it was contracting some production to frozen fish producers who sold mostly to restaurants and now have excess capacity. A toy producer said that limits on production of new movies hurt demand for their products.\nNo contacts reported significant revisions to capital spending plans. The toy maker said they were reassessing their need for office space because of the success of remote work arrangements. Outlooks were generally positive among manufacturing respondents. A diversified manufacturer with substantial military business said their COVID slowdown was more or less over.\nSoftware and IT Services\nSoftware firms responding this round saw slight positive growth in the last quarter; most contacts anticipated ending the year with revenues up 3 percent to 5 percent over last year. For one medical software contact, new bookings remained at 30 percent of the previous year's level; they have relied on their backlog to sustain them during this time. All contacts reported that operating expenses were down, mostly due to moving to a virtual setting for customer visits and marketing events; they anticipate that these virtual interactions may continue even once public health concerns have abated.\nContacts expressed confidence that they have adapted well to what they believe will be the state of the industry through mid-2021. While some felt that the national economy remained uncertain, they were more optimistic regarding their own firm's performance.\nCommercial Real Estate\nIndustrial and lab space markets in the First District continued to do well, while retail and office continued to struggle. The industrial market, particularly anything having to do with logistics, was operating at near capacity, and prices and rents increased as a result. Lab space continued to be in high demand, so investment in these types of buildings hasn't slowed. Retail spaces continued to struggle, notwithstanding states' advancing reopening plans. Contacts reported that shopping centers with essential businesses such as grocery and home improvement stores, were doing well in terms of rent collection, but malls and lifestyle stores were doing much worse, with rent collection as low as 20 percent in some cases. The retail vacancy rate has increased.\nOffice market activity was still only as-needed, mainly renewing expiring leases. Tenants requested short-term extensions; while they received some concessions, face-value rents remained mostly unchanged. Most contacts estimated that about 20 percent of workers are working from offices now; while this is an increase from August's 10 percent estimate, the post-Labor Day rise was not as large as anticipated.\nContacts were mostly pessimistic regarding the outlook for the rest of 2020 and the beginning of 2021, largely citing political uncertainty and confusion around future stimulus measures. Many contacts said that without further stimulus measures, landlords may not be able to continue covering for their more-affected tenants, so evictions and vacancy rates may increase. Some contacts also noted that in order for older office spaces to recover post-COVID, many infrastructure improvements will be needed.\nResidential Real Estate\nHigh prices and substantial inventory shortages characterized residential real estate markets in the First District. (Connecticut data were unavailable. Vermont reported changes from July 2019 to July 2020; all other areas reported year-over-year changes to August 2020.) The inventory of homes for sale dropped by double-digit percentages from a year ago in all reporting markets except Boston condos. In Massachusetts and New Hampshire, the inventory of single family homes decreased by over 55 percent. The median sale price rose in all markets, with double-digit increases for single family homes. Changes in closed sales varied by market, largely reflecting available inventory. Contacts said they did not expect the usual fall and winter slowdown this year. Pent-up demand from the delayed spring market as well as the desire to take advantage of historically low interest rates have fueled the current buying frenzy. While there has been some increase in seller activity, it is failing to match demand. Both the Boston and Massachusetts contacts continued to observe movement from urban areas to suburban and rural locations, with work-from-home arrangements becoming longer term.\nFor more information about District economic conditions visit: www.bostonfed.org/regional\u2010economy\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Dallas | 2020-09-02T00:00:00 | /beige-book-reports/2020/2020-09-da | "September 2, 2020\nSummary of Economic Activity\nIncreasing COVID-19 infections in the Eleventh District have disrupted the budding economic recovery in some sectors and is the biggest risk to the near-term outlook. While manufacturing activity continued to expand and loan volumes increased in the financial sector, service sector activity declined overall in July but resumed its nascent recovery in August. Retail sales fell steeply in July but stabilized somewhat in August. Energy activity remained depressed. Activity in the housing market was a bright spot, with home sales rising sharply. Employment remained fairly stable, according to contacts. Input costs rose modestly while selling prices were flat to down. Outlooks were increasingly uncertain, with numerous contacts expressing concern over surging COVID-19 cases and the resulting disruption to business.\nEmployment and Wages\nMost contacts reported steady employment, though there were some reports of either layoffs or increased headcounts. Employment declines were centered in the energy industry and parts of the service sector. Manufacturing jobs recovered somewhat as more firms noted net hiring than noted net layoffs for the first time since January. Jobs grew in health care and professional and business services, while contacts more often noted employment declines in retail, leisure and hospitality, and transportation services. Energy contacts said more layoffs are coming, but that the worst is likely past.\nWage growth accelerated slightly in August; however, airlines and energy firms among others noted pay freezes and/or cuts.\nPrices\nInput costs rose at a moderate pace, except in oilfield services where costs were down 10-20 percent versus early-2020 contracts. Fuel costs have crept up and lumber prices have doubled since earlier in the year. Selling prices were largely flat.\nManufacturing\nManufacturing activity continued to recover, expanding moderately in July and August. Growth was led by high tech and construction materials manufacturing, while food manufactures noted a deceleration from previous months. Refiners noted that consumption of motor fuels had improved, but profit margins remained depressed. Manufacturing was still below normal levels, according to nearly three-fourths of contacts. They reported that July revenues were off by more than 30 percent from a typical July, on average.\nOutlooks remained positive, and most manufacturers expect increased demand and production six months from now.\nRetail Sales\nRetail sales fell steeply in July but stabilized somewhat in August. Wholesalers also noted declines, though not as pronounced. Auto dealers said sales were constrained by short inventories due to factory shutdowns or bottlenecks. One contact noted that they were not expecting normal new-vehicle inventory until September or October.\nJust over three-quarters of retailers said July revenues were below normal, by about 22 percent on average. More than half of retailers said supply chain disruptions were restraining revenues, in addition to weak demand. Expectations for future activity declined substantially, and uncertainty rose sharply.\nNonfinancial Services\nService sector activity declined overall in July after a short-lived expansion in June, but modest growth resumed in August. Face-to-face contact industries, such as leisure and hospitality, suffered as new COVID-19 cases rose sharply in Texas in July. However, while hotels have been hit hard, the single-family vacation rental market has been very strong. Airlines continued to struggle, with demand down 75 percent from a year ago according to multiple contacts, who also noted that business travel is virtually nonexistent. Colleges and universities across the district face logistical and financial challenges as they shift their fall semesters to a partially virtual environment with limited on-site learning and experience reduced enrollment. Some industries, like professional services, were less affected by COVID-19 trends and saw increased revenues in both July and August. Staffing contacts noted demand was stable recently but down year over year.\nRoughly three-quarters of contacts said July revenues were below normal, by just over 30 percent on average. This magnitude of the shortfall was higher for leisure and hospitality firms, who said July revenues were off 46 percent, on average.\nOutlooks worsened in July but improved in August, though uncertainty continued to climb, particularly regarding COVID-19 and the presidential election. When asked how likely it is that their business will permanently shut down within the next 12 months, 90 percent of contacts said it is not likely. Among leisure and hospitality firms, though, more than a quarter say it is at least somewhat likely their business will not survive to next July.\nConstruction and Real Estate\nActivity in the housing market was a bright spot. Existing-home sales climbed sharply in July and remained solid in early August. Home builders continued to note widespread strength in sales. Contacts said record-low mortgage rates were driving sales, and inventories remained very tight for both resale and new homes. Builders noted strong sales have enabled them to raise prices. New development was active, and outlooks were optimistic.\nApartment leasing improved further in July, but rents were flat to down compared to year-ago levels and concessions have increased, particularly in areas where there is a lot of new product. Office leasing activity was modest and sublease space has increased. Industrial demand remained solid.\nFinancial Services\nLoan volume increased over the past six weeks, driven by a sharp rise in residential real estate lending. Commercial real estate lending stabilized after falling over the prior three periods, while commercial and industrial and consumer loan volumes continued to decline. Loan pricing fell further, and credit standards and terms continued to tighten. Another significant increase was seen in loan nonperformance, and nearly three-quarters of bankers expect further increases in loan defaults. Contacts report that 11 percent of loan volumes are currently on payment deferral due to COVID-19, on average, down slightly from the prior period. Requests for loan modifications were most prevalent among businesses in accommodation and food services as well as real estate and rental and leasing.\nOutlooks were more pessimistic, with expectations for future loan demand turning slightly negative. Also, bankers voiced concern over the uncertainty about the PPP forgiveness process and that it could become arduous.\nEnergy\nThe Eleventh District rig count continued to erode over the reporting period, though well completion activity ticked up. Contacts continued to express a grim outlook. The recent increase in COVID-19 trends in parts of the U.S. and elsewhere is putting downward pressure on expectations for oil prices and fuel consumption. Contacts said it is unlikely that oil prices will reach above $50 per barrel anytime soon, which is roughly the average price at which Eleventh District firms need to profitably drill new wells.\nAgriculture\nSoil moisture conditions deteriorated across the western part of the district, where drought conditions intensified. Grain harvesting progressed and yields were fairly normal, though prices remained unprofitably low. Cotton prices inched higher over the past six weeks as demand exceeded expectations, though prices were still below break-even levels without government price supports. Cattle and dairy prices trended higher.\nFor more information about District economic conditions visit: www.dallasfed.org/research/texas\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Minneapolis | 2020-09-02T00:00:00 | /beige-book-reports/2020/2020-09-mi | "September 2, 2020\nSummary of Economic Activity\nNinth District economic activity grew slightly since the previous report, but remained well below its prepandemic benchmark. Employment was mixed, wage pressures fell moderately, and price pressures generally remained modest. The District economy saw growth in consumer spending, tourism, manufacturing, residential construction and real estate, and mining. Agriculture was mixed, while services, commercial construction and real estate, and energy declined.\nEmployment and Wages\nEmployment was mixed since the last report. Job postings rose through mid-July in District states, and staffing contacts in Minnesota confirmed that job orders had been rising. However, there were signs of ebbing job demand later in the month and into August. A District-wide survey in late July by the Minneapolis Fed suggested that more firms were cutting staff compared with those adding workers. A second survey of construction firms found that overall hiring sentiment was slightly negative. Contacts in multiple District states said that new job postings and hires have been skewed toward those that directly produce income\u2014sales, manufacturing, construction\u2014while administrative and support positions have pulled back as firms try to remain as lean as possible. Despite high unemployment, staffing and other contacts nonetheless reported that unfilled job orders have been rising. Firms looking for workers reported difficulty in finding labor, particularly in sectors like food and entertainment that were operating at reduced capacity and faced the prospect of future shutdowns. Initial unemployment claims across District states in early August were modestly lower than a month earlier, but still significantly above normal. In general, many firms expressed concern about future demand and its impact on staffing. A large professional services firm in Minneapolis-St. Paul said, \"I anticipate furloughs becoming layoffs if some of our shelved work doesn't start up.\"\nWage pressures continued to fall moderately overall since the last report. The Districtwide survey of general businesses found that most employers were holding steady on wages, but more reported wage decreases (30 percent) than those reporting increases (10 percent). A small share of local governments has also reported wage and other compensation cuts in the face of budget shortfalls. However, wage increases were seen in certain sectors. Staffing contacts reported slightly rising wages, driven by manufacturing clients who were still seeing good business. The Minneapolis Fed survey of construction firms also found that one-quarter had raised wages since the pandemic's onset, while 10 percent had cut wages.\nPrices\nPrice pressures remained modest, with some exceptions. Nearly half of early respondents to a survey of Ninth District professional services firms said input prices increased over a year earlier; however, a majority expected prices to remain flat over the coming 12 months. Structural lumber prices spiked since the last report, as inventories dwindled in the face of strong demand. Retail fuel prices in District states were little changed over the reporting period. Prices received by farmers in June increased from a year earlier for soybeans, potatoes, dry beans, and turkeys, while prices for corn, wheat, hay, cattle, hogs, chickens, and eggs decreased; milk prices were unchanged.\nConsumer Spending\nConsumer spending was modestly higher since the last report, but remained below prepandemic levels. Vehicles sales were up. A dealership in the western portion of the District reported strong year-over-year sales in July across multiple locations. Motor vehicle sales tax collections in Minnesota were also higher over this period. Passenger traffic at the eight largest airports in the District continued to increase modestly through early August. However, total traffic remains at just 35 percent of normal seasonal levels.\nCertain segments of tourism reported healthy activity. Businesses catering to summer outdoor leisure reported robust demand compared with earlier in the summer. Sales of equipment and other products catering to this market\u2014recreational vehicles, bikes, ATVs, boats, kayaks\u2014were reportedly strong, but held back by low inventories. But many retail shops, restaurants, and bars continued to report only moderate demand even in the face of restrained operating capacity. Hotel and convention business remained dour with most large business and social gatherings canceled. One notable outlier was the annual motorcycle rally in Sturgis, S.D. Attendance was down modestly from previous years, but offered a spike in regional consumer demand.\nServices\nActivity in the services sector decreased since the last report. Preliminary results of a survey of District professional services firms indicated that sales and profits decreased for a majority of respondents compared with a year earlier, and employment and productivity fell slightly. Firms' expectations for the coming 12 months were more optimistic. Contacts in the advertising and marketing fields continued to report weakened demand as clients looked to cut budgets. Demand for heavy equipment maintenance and repair services was strong, according to several contacts.\nConstruction and Real Estate\nCommercial construction was moderately lower since the last report. A Districtwide survey of more than 600 construction firms found significant cancellations and delays for both private and public projects. Firms reported staying relatively busy by pulling future work forward, but were also dealing with material shortages, supply chain problems, and labor difficulties. There was growing concern about new projects to bid on for the fall and early next year. Residential construction was modestly higher. While home building contractors reported project cancellations and delays, there were also more frequent reports of increased activity. July residential permitting activity saw year-over-year growth in Minneapolis-St. Paul and St. Cloud (Minn.), Bismarck and Fargo (N.D.), and Sioux Falls, S.D. But flat or lower activity was reported in other regions.\nCommercial real estate slowed modestly. In Minneapolis-St. Paul, vacancy rates in most segments have risen modestly. Industrial space was called a \"bright spot\" by one source. New, speculative construction has slowed, but client-driven demand continued, particularly for new manufacturing and distribution space. Leasing and sales for office space has slowed, and several sources noted some demand flight to the suburbs from downtown. New senior housing projects were reportedly struggling to find tenants. Residential real estate was moderately higher. Most markets saw home sales rise in July\u2014many by double digits\u2014over a year earlier, with the notable exception of Minneapolis-St. Paul, where sales were flat.\nManufacturing\nDistrict manufacturing activity increased slightly since the last report, though it remained below prepandemic levels. An index of manufacturing activity indicated expansion in Minnesota and South Dakota in July compared with a month earlier, but decreased activity in North Dakota. A producer of construction equipment reported that while demand from the commercial sector was down, it was offset by an increase in demand from residential building. Food processors reported a similar divergence between commercial and home demand. Contacts reported that while they've remained busy with backlogs through the pandemic, the pace of new orders had declined, leading to concerns about conditions later in the year and into 2021.\nAgriculture, Energy, and Natural Resources\nDistrict agricultural conditions were mixed. Lenders responding to the Minneapolis Fed's second-quarter (July) survey of agricultural credit conditions overwhelmingly reported decreased farm incomes in their area relative to a year earlier, with a similar share reporting decreased capital spending. Crops as of early August were in strong condition in most areas of the District, with some states on track for record or near-record production, but prices for most commodities remained low. Activity in the energy sector decreased further, while mining rebounded. District oil and gas exploration held steady at subdued levels. The number of drilling rigs in the District as of mid-August was unchanged from a month earlier. Meanwhile, recent North Dakota oil production fell well below its recent peak. Most District iron ore operations that were closed during the early stages of the pandemic have reopened.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Kansas City | 2020-09-02T00:00:00 | /beige-book-reports/2020/2020-09-kc | "Beige Book Report: Kansas City\nSeptember 2, 2020\nSummary of Economic Activity\nTenth District economic activity continued to strengthen in July and August. Overall, the economy expanded moderately, but activity in many sectors still remained below pre-pandemic levels. Consumer spending increased moderately as all subsectors reported improvement. In the months ahead, retail and auto contacts expected growth to continue, while tourism and restaurant contacts were more pessimistic. Manufacturing activity picked up, with both non-durable and durable goods producers reporting higher levels of production and new orders. Durable goods activity remained well below year-ago levels, but additional gains were expected in the next few months. Sales also picked up in the transportation, wholesale trade, and professional and high-tech sectors, and moderate growth was anticipated in coming months. Residential real estate activity continued to increase at a moderate pace, but commercial real estate conditions worsened further. Energy activity held relatively steady, but rig counts remained well below year-ago levels. The agriculture sector remained weak, and the deterioration in farm income accelerated. District employment rebounded further in July and August, but was still moderately below year-ago levels. Wages rose slightly, while overall input and selling prices increased at a modest pace.\nEmployment and Wages\nDistrict employment increased modestly since the last survey period but remained moderately below year-ago levels. The biggest gains were in real estate, transportation and tourism sectors, but despite these gains, tourism and transportation employment was still well below a year ago. Manufacturing, wholesale trade, and professional and high-tech employment rose modestly for the first time since declining this spring. Overall employment expectations improved in August, with manufacturers expecting moderate gains and services contacts expecting slight gains in the months ahead.\nRespondents were split regarding labor shortages, with many reporting a need for truck drivers, mechanics, and restaurant workers. Wages rose slightly, and modest gains were expected in the coming months.\nPrices\nInput and selling prices rose modestly in July and August and were expected to continue to do so in the next few months. Prices for raw materials and finished products in the manufacturing sector increased modestly, and expectations were for similar gains in the coming months. Transportation input prices rose moderately and selling prices increased slightly, but were still modestly below year-ago levels. Construction supply respondents noted a moderate increase in selling prices since the last survey and expected prices to continue to increase in the months ahead. Retail input prices increased moderately, while selling prices rose at a slightly slower pace. Restaurant input and selling prices continued to increase significantly, but the pace of increases moderated compared to the previous survey. Restaurant prices were above year-ago levels and were expected to continue to rise in the coming months.\nConsumer Spending\nConsumer spending increased moderately since the last survey period but remained modestly below year-ago levels. Sales rose for auto, retail, restaurant, and tourism, with retail sales moderately above a year ago, driven by strong grocery and home improvement sales over the past few months. While restaurant and tourism activity showed a moderate rise compared to the last survey, activity was still strongly below year-ago levels. More than half of retail, restaurant, auto, and tourism contacts reported that stimulus funds had a major positive effect on their businesses in recent months. Expectations were mixed. Contacts in the health services, retail, and auto sectors predicted moderate gains in the months ahead, while restaurant and tourism contacts anticipated declines.\nManufacturing and Other Business Activity\nManufacturing activity expanded for the second consecutive survey period, and strengthened in August to a moderate pace of growth. Gains in the non-durable goods sector outpaced those in the durables goods sector, but contacts in both sectors noted positive growth. Production and new orders increased robustly in the non-durable goods sector, leading to overall activity levels that were slightly above a year ago. Production and new orders rose modestly in the durable goods sector, but activity remained moderately down from year-ago levels. Many respondents indicated that if government support were to diminish in the next six months, more furloughs or layoffs would be needed. Expectations rose moderately regarding production and new orders, but capital expenditures were expected to remain roughly flat.\nOutside of manufacturing, sales in the transportation and wholesale sectors increased moderately compared to the last survey. Sales in professional and high-tech services showed modest improvement but remained moderately below year-ago levels. Contacts in wholesale trade, transportation, and professional and high-tech services sectors expected moderate increases in sales in the coming months. Expectations for capital expenditures were mixed across sectors.\nReal Estate and Construction\nResidential real estate conditions picked up moderately in July and August, while commercial real estate showed continued declines. Residential real estate experienced moderate increases in home sales and prices, with all respondents reporting stronger activity than a year ago. Construction supply sales continued to increase slightly, and expectations for future sales rose for the first time following declines in the spring. Home inventories decreased moderately and remained low, but contacts expected residential real estate activity to expand further in the coming months. Commercial real estate conditions continued to worsen as absorption rates, prices, rents, and sales fell since the previous survey period and remained moderately below year-ago levels. Commercial construction declined modestly, and contacts indicated that the slowdown in commercial construction may be accelerating. Additionally, access to credit remained difficult, and more respondents indicated higher vacancy rates. Commercial real estate contacts anticipated conditions to worsen in the next few months.\nBanking\nSince the last survey, bankers reported a slight increase in overall loan demand. Increases were concentrated in two categories, with strong increases in residential real estate loan demand and slight increases in consumer installment loan demand. Respondents indicated loan demand for commercial real estate held steady, while demand for agricultural loans declined modestly and commercial and industrial loans fell moderately. Credit standards tightened in all categories, with a modest tightening in commercial real estate and commercial and industrial loans and slight tightening in residential real estate, consumer installment, and agricultural loans. In comparison to a year ago, loan quality decreased somewhat, and bankers expected loan quality to continue decreasing over the next six months. Deposit levels rose at a moderate pace since the last survey.\nEnergy\nDistrict energy activity held relatively steady since the previous survey period, but was much lower than levels of activity in August 2019. Revenues and employment continued to decline, but the number of active oil and gas rigs in the District was mostly unchanged. Rig levels remained significantly below year-ago levels. Firms shut-in wells earlier this year, and indicated no immediate plans to bring more production capacity back online until the oversupply of oil and gas wanes and prices increase. Despite most regional energy firms taking advantage of the SBA PPP loan program, expectations for future drilling and business activity remained subdued. Continued uncertainty was a key factor inhibiting future capital expenditures.\nAgriculture\nWeak conditions in the Tenth District agricultural economy persisted, and farm income deteriorated further. The effects of the COVID-19 pandemic continued to constrain prices of key agricultural commodities, and profit opportunities remained limited. Prices for major crops and livestock increased slightly from the prior reporting period, but remained below pre-pandemic levels. Drought in the western portion of the District could further reduce revenues for some producers. Dry conditions were most prevalent in Colorado, where nearly 30 percent of corn acres had poor or very poor quality through mid-August. Alongside lower revenues, farm income across all states in the District declined at a noticeably faster pace than the prior survey period.\nFor more information about District economic conditions visit: www.KansasCityFed.org/Research/RegionalEconomy\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Atlanta | 2020-09-02T00:00:00 | /beige-book-reports/2020/2020-09-at | "September 2, 2020\nSummary of Economic Activity\nReports on economic activity in the Sixth District were mixed. Labor markets continued to modestly improve as firms slowly recalled workers. Nonlabor costs remained muted. Retail contacts reported continued strength in the home improvement and renovation segment, but softness in apparel sales. Auto dealers noted sales increased since the previous report. Tourism and hospitality activity remained soft. Residential real estate continued to strengthen, however, commercial real estate markets remained challenged. Overall manufacturing activity accelerated somewhat, though new orders and production levels varied across firms. District financial institutions reported that loan growth slowed, underwriting standards tightened, and loan loss reserves increased.\nEmployment and Wages\nAlthough labor conditions improved modestly since the previous report, payrolls remain below pre-COVID levels and the outlook for further improvements was less certain. Firms continued to slowly recall workers as demand returned. However, many contacts noted that some prior staff cutbacks were permanent, and others had used attrition to reduce headcount. Among those hiring, most indicated that the pool of available workers was ample, although there were reports that unemployment insurance benefits continued to present challenges attracting low-wage workers. Several contacts reported that employees quarantined while waiting for COVID-19 test results was disrupting operations. Many employers also expressed growing concern about workers' abilities to balance workloads with the demands of childcare and a return to school or virtual learning environments.\nReports on wages and compensation varied among contacts. Some businesses rescinded salary cuts, while others maintained pay cuts, froze salaries, or eliminated bonuses and/or contributions to 401K plans. Wage increases remained concentrated at the low-end of the pay scale.\nPrices\nOver the reporting period, contacts continued to note muted input costs and little to no pricing power. Increasing costs associated with personal protective equipment, testing, and sanitation practices to protect employees and customers from COVID-19 were notable, and rising shipping costs affected some industries, though neither of these costs were reportedly passed through. On balance, food prices stabilized, but shortages of some products caused prices to increase. The Atlanta Fed's Business Inflation Expectations survey showed year-over-year unit costs increased, on average, to 1.5 percent in August, up from 1.1 percent in July. Year-ahead expectations remained steady at 1.7 percent.\nConsumer Spending and Tourism\nDistrict retail contacts reported continued strong demand in the home improvement and renovation segment. Clothing retailers noted lower year-over-year sales. Auto dealers reported continued increases in sales since the last report, as consumers focused on personal mobility versus shared transportation because of COVID-19.\nSimilar to the previous report, tourism and hospitality contacts across the District noted that while most hotels and attractions reopened with limited capacity in order to uphold social distancing measures, both revenues and employment continued to be negatively impacted.\nConstruction and Real Estate\nHousing demand across the District remained resilient over the reporting period. Pending home sales soared as low interest rates and pent-up demand increased housing activity. Many markets experienced supply shortages, which accelerated upward pressure on home prices. Construction was unable to keep pace with the surge in demand experienced by homebuilders. Higher home prices, coupled with declining household incomes, continued to suppress home ownership affordability. Delinquencies remained elevated, especially in markets with high concentrations of workers in the leisure and hospitality sector, such as in South Florida and Orlando.\nCommercial real estate (CRE) contacts reported that the sector continued to encounter challenges associated with the coronavirus pandemic. Contacts in hard hit sectors like retail and hospitality reported that conditions continued to stabilize as local economies improved. Owners of lower-price multifamily properties reported an increase in late rent payments and a softening in occupancies. However, some contacts reported a decline in the number of tenants and borrowers seeking relief. While improving, low levels of tourism and travel are having a notable negative impact on activity across the hospitality and retail sectors. Investment property sales remained a fraction of pre-COVID levels. Contacts reported that capital was readily available at banks; however, underwriting criteria tightened for the financing of stabilized CRE projects. Contacts reported that high-quality asset values declined marginally, and hospitality and retail sector assets declined at a more accelerated rate.\nManufacturing\nWhile most manufacturing firms reported a modest acceleration in overall business activity compared with the previous report, the level of activity remains slightly below pre-COVID levels. While many contacts indicated that new orders and production levels increased, reports of subdued demand at some firms persisted. Purchasing managers reported a slight increase in supply delivery times and a decline in finished inventory levels. Expectations for future production levels increased, with nearly half of contacts expecting higher levels of production over the next six months.\nTransportation\nTransportation contacts indicated that demand was generally consistent with the previous reporting period. Activity at ports was mixed: some contacts noted continued softness in container traffic, while others reported increased container volumes tied to e-commerce and consumer goods. Exports of agricultural products such as wood pulp, cotton, and peanuts rose, but coal exports were down. Year-over-year total rail traffic declined, but intermodal traffic increased slightly. Trucking firms saw higher freight volumes, which contacts attributed to inventory restocking and surging online sales.\nBanking and Finance\nConditions at financial institutions rebounded slightly but continued to be impacted by issues related to COVID-19. Although requests for forbearance on loan payments declined, financial institutions increased loan loss reserves in preparation for increased charge-offs as the initial forbearance periods ended. Loan growth stalled, and underwriting conditions tightened for a majority of loan products. Compressed net interest rate margins, along with higher provisions for loan loss expenses and noninterest costs, continued to put negative pressure on earnings. Liquidity remained strong due to high deposit levels maintained by customers.\nEnergy\nEnergy markets continued to face a great deal of uncertainty. Crude oil production remained restrained by oversupply and weak demand. Demand for natural gas declined further over the reporting period, as COVID-19 shutdowns reduced power usage across the commercial and industrial segments. Re\ufb01neries cut back throughput and maintained historically low utilization rates amidst muted demand. Reports indicated that delayed maintenance at refineries is expected to occur in the coming months, which contacts expect to add strain to already limited resources. District energy firms operating in areas such as oil and gas production, petrochemical refining, pulp and paper, and power continued to delay or halt projects indefinitely and reduce headcount. In contrast, renewables projects, including solar and wind farms and renewable diesel production, remained active.\nAgriculture\nAgricultural conditions remained weak. Drought-free conditions prevailed in most parts of the District except in Georgia, where much of the state experienced abnormally dry conditions. On a month-over-month basis, July's production forecast for Florida's orange crop was unchanged from the previous month and remained below last year's production, while Florida's grapefruit production forecast was down from the previous month but remained ahead of last year. The USDA reported that in June, year-over-year prices paid to farmers were up for rice and soybeans but down for corn, cotton, cattle, broilers, eggs, and milk. On a month-over-month basis, prices increased for cotton, rice, soybeans, broilers, and milk but decreased for corn and eggs while cattle prices were unchanged.\nFor more information about District economic conditions visit: www.frbatlanta.org/economy-matters/regional-economics\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
St Louis | 2020-09-02T00:00:00 | /beige-book-reports/2020/2020-09-sl | "Beige Book Report: St Louis\nSeptember 2, 2020\nSummary of Economic Activity\nReports from District contacts suggest economic activity has increased modestly, but losses sustained during the pandemic have yet to be fully recouped. Activity was also highly variable across sectors. Employment increased modestly while wage growth was mixed. Auto dealers reported strong sales, and restaurants reported some improvement. Tourism and hospitality contacts reported that higher COVID-19 cases over the past month have reduced demand. The outlook among contacts remains pessimistic but has improved slightly since our previous report. While some contacts reported strong demand for their products and services, about half of contacts expect sales to return to pre-crisis levels in less than 12 months and one-third of contacts expect it will take more than 12 months.\nEmployment and Wages\nThe labor market has improved modestly since the previous report. Contacts across many industries reported hiring or rehiring workers, though they frequently reported difficulty doing so, citing potential workers' continuing health concerns and childcare obligations. A manufacturing contact reported that it was challenging to hire enough workers to staff half the plant's usual number of shifts. An employment agency stated that it was \"not uncommon\" for those it matched to jobs to quit within 48 hours. Service, hospitality, and healthcare firms continued to report more mixed employment trends, as did smaller firms. Some larger firms also reported laying off furloughed workers in the face of slower recovery.\nWage growth has been mixed, with wages at small firms remaining especially stagnant. On net, 15% of contacts reported that wages were up since this time last year\u2014less than half the number who usually report such increases. Some firms reported increasing pay to attract scarce workers: One peach farmer reported that a 10% pay increase for his packaging workers still left him so short-staffed he had to leave some of his crop unharvested.\nPrices\nPrices have increased slightly since the previous report. A significant share of contacts reported higher input costs; however, many contacts continued to report lower prices charged to consumers. Contacts noted increased prices for lumber and other building materials. The increase in food costs is causing restaurants to increase menu prices. Healthcare contacts noted that the costs of personal protective equipment remain elevated. In contrast, certain goods experienced price declines since the previous report. Contacts noted that prices for gasoline, chemicals, crops, and livestock have declined.\nConsumer Spending\nConsumer spending activity has been mixed since our previous report. Seasonally adjusted credit and debit card spending in early August increased or stayed the same compared with average spending in July. General retailers and restaurants reported mixed business activity over the past six weeks. Some retailers reported comparable or increased current-quarter sales compared with last year, and restaurants indicated that business has increased since they have been able to open up fractional seating capacity; however, some retailers and restaurants expressed concerns about their ability to stay open. Most auto dealers reported strong sales, some indicating year-over-year increases in current-quarter sales. Dealers cited that sales continue to be bolstered by low interest rates, but their outlook for the coming months is mixed due to an uncertain economic outlook. Hospitality contacts reported that business activity, which remains significantly below typical levels, has declined since early July as reported COVID-19 cases have increased. Restaurants that cater to business-travel continue to struggle.\nManufacturing\nManufacturing activity has moderately increased since our previous report. Multiple steel manufacturing contacts reported that they are now working at full capacity. Plastics manufacturers in southern Indiana reported a surge in production. Contacts in Louisville reported that the automotive production continues to lag, but that most automotive plants are in the process of resuming operations due to the resolution of supply chain problems. Survey-based indices indicate that production, new orders, and capacity utilization are on average still slightly lower than they were a year ago. On average, contacts expect production, new orders, and capacity utilization next quarter to be nearly back to their levels from one year ago.\nNonfinancial Services\nActivity in the nonfinancial service sector has improved slightly since the previous report. Airport passenger traffic has nearly doubled month over month, although levels are still down roughly 80% relative to this time last year. Cargo traffic has remained stable, increasing moderately month-to-month and year-over-year. A logistics firm was able to raise wages and expand its workforce. Hospital contacts noted that in-patient and ambulatory volumes have reached 90% of pre-crisis levels. However, hospitals indicate that they continue to deal with large numbers of COVID-19 patients. As a result, research remains sidelined and wholly devoted to COVID-19. Moreover, fellowship and residency programs are temporarily on hold. Hospital contacts noted that furloughed staff have begun to return in phases and hiring for physicians and nurses continues. Dentists and optometrists have reported increased activity, as patients who delayed care are now seeking treatment.\nReal Estate and Construction\nResidential real estate activity increased slightly since the previous report. Total home sales have improved slightly since early July. Home sales in most of the largest District MSAs are up through early August relative to the same period last year. Contacts cited high demand for housing and low interest rates as drivers of sales. However, a contact in St. Louis noted a recent downturn in demand after record-breaking sales in the later months of the second quarter.\nContacts reported a continued shortage of housing on the market and homes selling quickly once listed.\nResidential construction increased modestly. Contacts noted higher demand for new homes, with a contact in Louisville noting that the shortage of housing inventory contributed to demand for new home construction. However, builders reported higher costs and shortages of input materials.\nCommercial real estate activity has been mixed since the previous report. Contacts reported a lack of demand for retail and office real estate due to the pandemic. Contacts noted that existing tenants in retail spaces have been struggling due to consumer concerns over safety. Some contacts observed higher demand for industrial real estate.\nCommercial construction activity has been unchanged. Construction activity has generally been sustained for projects that were ongoing prior to the pandemic. Contacts reported little to no speculative building for office or retail space and that uncertainty surrounding the pandemic has disrupted their ability to obtain and plan for future projects.\nBanking and Finance\nBanking conditions have slightly worsened since the previous report. Overall business loan demand slowed after the surge of emergency lending through July. Consumer loan demand has increased, particularly for credit cards. Low interest rates continue to spur stronger-than-expected mortgage lending, refinancing, and new construction loans. Banks reported high levels of deposits and increasing loan loss reserves. Overall delinquencies have declined primarily in consumer products such as credit cards, mortgages, and auto loans. However, bankers continue to express some concern for loans in the leisure and entertainment industry.\nAgriculture and Natural Resources\nAgriculture conditions have improved slightly from the previous reporting period. Relative to early July, the percentage of District corn, rice, and soybeans rated fair or better has increased slightly while the percentage of cotton decreased slightly. Contacts indicated that, while crop conditions look promising, low crop prices will reduce profitability and there is still concern over trade disputes with China and the effects on commodity pricing.\nNatural resource extraction conditions continued to fall moderately from June to July, with seasonally adjusted coal production decreasing 7%. Production is down 31% from a year ago.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
National Summary | 2020-09-02T00:00:00 | /beige-book-reports/2020/2020-09-su | "Beige Book: National Summary\nSeptember 2, 2020\nThis report was prepared at the Federal Reserve Bank of Minneapolis based on information collected on or before August 24, 2020. This document summarizes comments received from contacts outside the Federal Reserve System and is not a commentary on the views of Federal Reserve officials.\nOverall Economic Activity\nEconomic activity increased among most Districts, but gains were generally modest and activity remained well below levels prior to the COVID-19 pandemic. Manufacturing rose in most Districts, which coincided with increased activity at ports and among transportation and distribution firms. Consumer spending continued to pick up, sparked by strong vehicle sales and some improvements in tourism and retail sectors. But many Districts noted a slowing pace of growth in these areas, and total spending was still far below pre-pandemic levels. Commercial construction was down widely, and commercial real estate remained in contraction. Conversely, residential construction was a bright spot, showing growth and resilience in many Districts. Residential real estate sales were also notably higher, with prices continuing to rise along with demand and a shortage of inventory. In the banking sector, overall loan demand increased slightly, led by solid residential mortgage activity. Agricultural conditions continued to suffer from low prices, and energy activity was subdued at low levels, with little expectation of near-term improvement for either sector. While the overall outlook among contacts was modestly optimistic, a few Districts noted some pessimism. Continued uncertainty and volatility related to the pandemic, and its negative effect on consumer and business activity, was a theme echoed across the country.\nEmployment and Wages\nEmployment increased overall among Districts, with gains in manufacturing cited most often. However, some Districts also reported slowing job growth and increased hiring volatility, particularly in service industries, with rising instances of furloughed workers being laid off permanently as demand remained soft. Firms continued to experience difficulty finding necessary labor, a matter compounded by day care availability, as well as uncertainty over the coming school year and jobless benefits. Wages were flat to slightly higher in most Districts, with greater pressure cited among lower-paying positions. Some firms also rescinded previous pay cuts. Others, however, have looked to roll back hazard pay for high-exposure jobs, though some have chosen not to do so for staff morale and recruitment purposes.\nPrices\nPrice pressures increased since the last report but remained modest. While input prices generally rose faster than selling prices, they were moderate overall. Notable exceptions included inputs experiencing demand surges or supply-chain disruptions, such as structural lumber, for which prices spiked. Several Districts also reported that costs for personal protective equipment and inputs to it remained elevated. Freight transportation rates rose in several Districts due to a resurgence in demand. In contrast, contacts in multiple Districts cited weak demand or lack of pricing power as a factor behind slower growth in retail or other selling prices.\nHighlights by Federal Reserve District\nBoston\nBusiness contacts continued to cite the disruptive effects of the pandemic on all aspects of their activity, even as recovery began or continued in some sectors. Employees of some firms were called back, while others remained on furlough or have permanently lost jobs. The strength of the region's housing markets in July provided some support for contacts' optimism that the pandemic merely delayed the usual spring rebound.\nNew York\nGrowth in the regional economy has stalled in recent weeks, with activity still well below pre-pandemic levels. Retail activity and the single-family housing market have continued to improve. The labor market remains weak, and hiring activity has slowed. Selling prices and wages have been mostly steady, on balance.\nPhiladelphia\nBusiness activity was flat during the current Beige Book period and remained far below levels attained prior to the onset of COVID-19. Firms continued to face hiring difficulties, and wages trended higher for low-wage jobs. Prices also trended slightly higher amid ongoing price spikes. Uncertainty is extremely high as contacts await layoffs, evictions, foreclosures, and bankruptcies while the coronavirus persists and the stimulus ends.\nCleveland\nThe region's economy grew modestly and at a pace similar to that of the previous reporting period. However, activity remained below pre-pandemic levels across most sectors. Staff levels changed very little and wages were mostly steady. Price pressures increased somewhat as input costs increased. Contacts expected moderate improvement in customer demand, although expectations have been scaled back.\nRichmond\nThe Fifth District economy continued to improve in recent weeks, but activity remained considerably below pre-pandemic levels in most segments. A few notable areas of strength were auto sales, existing home sales, and trucking shipments. Employment continued to increase, but the pace of hiring slowed compared with our prior report. Price growth picked up but remained modest overall.\nAtlanta\nEconomic conditions were mixed. Labor markets improved modestly, and nonlabor costs were subdued. Certain retail segments were strong, while others reported softness. Tourism activity remained soft. Residential real estate conditions improved, and commercial real estate activity was mixed. Manufacturing activity increased. Banking conditions rebounded slightly.\nChicago\nEconomic activity increased strongly, but the pace of growth slowed, and activity remained below pre-pandemic levels. Employment and manufacturing increased strongly, consumer spending and construction and real estate increased moderately, and business spending increased slightly. Wages increased slightly, and prices rose modestly. Financial conditions improved modestly. The pandemic continued to weigh on agriculture.\nSt. Louis\nEconomic activity has increased modestly but was highly variable across sectors. Auto dealers reported strong sales, and restaurants reported some improvement. Tourism and hospitality contacts reported that higher COVID-19 cases over the past month have reduced demand. The outlook among contacts remains pessimistic, on net, but has improved slightly since our previous report.\nMinneapolis\nNinth District economic activity rose modestly. Job postings rose, but many firms expressed concern about future demand. Some segments of consumer spending and tourism saw improvements, while many services firms reported decline. Despite an overall pullback in new construction projects, residential building showed signs of resilience. Crop conditions were strong but faced low prices, and oil production fell significantly.\nKansas City\nEconomic activity strengthened moderately but remained below pre-pandemic levels in many sectors. Consumer spending increased moderately, with gains in retail, auto, restaurant, and tourism sales. Residential home sales and prices also rose moderately, but commercial real estate conditions worsened. Manufacturing activity expanded moderately, while conditions in the energy and agriculture sectors remained weak.\nDallas\nIncreasing COVID-19 infections in the Eleventh District have disrupted the budding economic recovery in some sectors. While manufacturing activity continued to expand, service sector activity declined overall in July but resumed its nascent recovery in August. Energy activity remained depressed. Sharply rising home sales were a bright spot. Outlooks were increasingly uncertain, as surging COVID-19 cases disrupted business sentiment.\nSan Francisco\nEconomic activity in the Twelfth District expanded slightly. Employment levels increased marginally. Price inflation remained generally unchanged. Sales of retail goods rose slightly, while conditions in the consumer and business services sectors remained precarious. Activity in the manufacturing sector increased modestly, and the agriculture sector remained weak. Residential construction activity picked up briskly, while activity in the commercial market increased a bit. Lending activity ticked up further.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Richmond | 2020-09-02T00:00:00 | /beige-book-reports/2020/2020-09-ri | "September 2, 2020\nSummary of Economic Activity\nThe Fifth District economy continued to expand in recent weeks, but activity remained below pre-pandemic and year-ago levels. Manufacturers experienced a moderate increase in new orders and shipments, on balance, but demand was described as unreliable and varied across different goods. Ports saw a modest rise in both imports and exports, but volumes were comparatively low. Trucking companies reported robust growth in demand, particularly for pharmaceuticals, food, beverages, retail and industrial shipments. Much of retail shopping remained weak, particularly at brick and mortar stores. Auto sales, on the other hand, were strong. Travel and tourism activity improved slightly as short-term renting showed some strength. Residential home sales increased robustly and although the inventory of homes for sale increased recently, there were more potential buyers than homes available for purchase. Commercial real estate leasing was little changed, overall, although retail vacancies rose. Financial institutions reported strong demand for home purchase loans and mortgage refinancing but a modest decline in lending for business investment. Overall, demand for nonfinancial services increased slightly, but reports varied. Some firms said that workplace safety measures led to increased costs. Employment continued to increase, but the pace of hiring slowed and many businesses report having difficulty filling open positions. Price growth picked up in recent weeks, but remained modest, overall.\nEmployment and Wages\nEmployment in the Fifth District continued to rise in recent weeks, but the pace of hiring slowed compared to our previous report. There were several reports of employers having difficulty filling open positions. Some contacts cited skills mismatches as a barrier to finding the workers they needed while others believed that the generous unemployment insurance benefits had discouraged workers from applying for available jobs. Also, multiple contacts said that some former employees were recalled but did not report back to work. Many firms said they were trying to figure out how to provide flexibility to workers with children schooling at home. On balance, wages were unchanged.\nPrices\nSince our previous report, price growth picked up but remained at a modest rate, overall. According to our most recent surveys, manufacturers reported a rise in prices paid and prices received; both of which remained below two percent. Service sector firms, on the other hand reported a slight increase in prices paid and a slight decline in prices received. Energy and agriculture commodity prices generally remained at low levels.\nManufacturing\nFifth District manufacturers reported a moderate increase in shipments and new orders since our last report. Several contacts said that demand was unreliable while others expressed concerns about growing uncertainty relating to COVID and the upcoming presidential election. Manufacturers of food and home goods such as furniture reported strong business, but some manufacturers further up the supply chain struggled as uncertainty led to caution among customers and reduced orders. Several companies reported that supply chain disruptions were restricting production and that tariffs on inputs were hurting profits.\nPorts and Transportation\nFifth District ports saw a modest increase in shipments since our last report, but volumes remained below year-ago levels. Import volumes exceeded export volumes in recent weeks, but exports were down less over the year than imports. Auto shipments increased but were generally weak on both the import and export side. Imports of retail goods increased, but imports of machinery, farm equipment, and manufacturing inputs were low. On the export side, shipments of apparel and agricultural products rose while metal exports were down. An airport saw strength in cargo, as an increase in medical supplies and diversity of product offset weakness in auto shipments.\nTrucking volumes had strong growth in recent weeks. Contacts reported strength in pharmaceuticals and food and growth in retail, wine, and industrial shipments. Volumes of budget-friendly goods that have risen during the pandemic remained high. As demand strengthened, spot market rates rose, and driver shortages created capacity constraints. One executive reported buying new trucks due to strong demand. Despite strong business right now, other truckers expressed concerns over economic uncertainty from the pandemic and political uncertainty in an election year.\nRetail, Travel, and Tourism\nRetail demand was little changed in recent weeks, remaining at low levels overall. Customer traffic was low, and brick and mortar stores saw low demand, as the market shifted toward online sellers. Retailers cited COVID and civil unrest as deterrents to in-person shopping. Auto dealers reported strong demand, particularly online. Auto prices were high, boosting profits. Grocery stores also saw strong demand, but profit margins tightened due to increased cleaning costs.\nTravel and tourism grew slightly since our last report but generally remained weak. Hotel occupancy was improved over recent months but down significantly over the year. However, short-term rentals did fairly well as people looked for more secluded vacations or enjoyable places to work remotely. Travel was mostly by car, but tourists were willing to drive longer distances. Beaches had strong visitation, but museums and other indoor attractions were closed or saw weak visitation. Indoor capacity limits led restaurants to expand outdoor seating, making demand more dependent on weather. Business travel remained low, and venues reported little to no demand for conferences or events.\nReal Estate and Construction\nFifth District home sales increased robustly in recent weeks. Some realtors reported record months. Homes for sale rose from a few months ago, and demand continued to surge. Customer traffic increased, and customers were serious about buying. Days on the market fell, as many houses were bought sight unseen and some sold in hours. Home prices rose across most locations and price levels. Realtors attributed much of increased demand to low interest rates and to a desire to move from urban to suburban areas for larger homes with land.\nCommercial real estate leasing held fairly steady since our last report. Industrial leasing remained strong, but retail leasing was weak, as vacancies rose. Leasing to stores and restaurants was particularly soft and was expected to worsen with potential closures in the coming months. Office leasing held fairly steady, with tenants asking for short-term lease renewals, but there was not much new interest or construction in office space. Rental rates for retail and office were fairly stable, but many tenants were unable to pay rent in full due to cash flow issues. Multifamily leasing varied across markets as some urban areas saw falling rental rates and increasing concessions, while suburban areas had rising rental rates.\nBanking and Finance\nOverall, loan activity improved slightly for this period, driven primarily by strong demand for both home purchase and mortgage refinance loans. However, the respondents indicated a modest decline for conventional commercial lending, due to continued uncertainty for capital investment as a result of the prolonged COVID pandemic. Additionally, some financial institutions reported tightening underwriting standards in selected commercial sectors. Deposits grew moderately this period, despite lower rates on interest-bearing accounts, mainly due to federal aid disbursements. Credit quality remained excellent, but a few financial institutions reported a slight increase in delinquencies.\nNonfinancial Services\nNonfinancial services firms indicated a slight increase in demand in recent weeks, but individual reports varied considerably. Business that rely on events and in-person visits with clients, for example, reported very low levels of sales and revenue. Firms that provide services through federal government contracts, on the other hand, noted an increase in COVID-related contracts. A few businesses said that while their primary concern was the safety of their customers and employees, the additional safety measures were costly.\nFor more information about District economic conditions visit: www.richmondfed.org/research/data_analysis\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
San Francisco | 2020-09-02T00:00:00 | /beige-book-reports/2020/2020-09-sf | "Beige Book Report: San Francisco\nSeptember 2, 2020\nSummary of Economic Activity\nEconomic activity in the Twelfth District expanded slightly on balance during the reporting period of July through mid-August. Employment levels increased marginally, but hiring was curtailed by firms' cost-containing efforts. Wages were generally stable, as was price inflation. Sales of retail goods rose slightly, while conditions in the consumer and business services sectors remained precarious. Manufacturing activity increased modestly. Weak conditions persisted in the agriculture sector. Residential real estate activity increased at a brisk pace, while activity in the commercial market picked up a bit. Lending activity ticked up further.\nEmployment and Wages\nEmployment levels increased marginally on net, but many employers curtailed hiring efforts to control costs in the challenging economic environment. Some metal and wood manufacturing facilities returned to operating full-time and added workers due to increased demand. A large transportation and logistics services provider increased entry-level job recruiting but froze manager searches. Most health-care and financial services providers noted restrictions on new hiring and overall flat employment levels, though a payment-processing firm in the Pacific Northwest reported actively hiring for several positions. Restaurants increased staffing modestly over the reporting period, but the tourism and entertainment industries noted persistently low employment levels. Some manufacturers expressed difficulties in finding skilled labor. Contacts in the agriculture sector also noted dwindling availability of immigrant workers, reducing the supply of unskilled labor. A few employers reported increased use of flexible schedules, or in some cases absenteeism, due to concerns about COVID-19 exposure, childcare, or schooling alternatives.\nWages remained flat overall. Most employers reported unchanged wages over the reporting period, partially due to cost containment efforts and uncertainty. In California and Oregon, wages at the bottom of the distribution saw a slight increase due to the implementation of new minimum wage regulations in July. Building materials manufacturers in California and the Pacific Northwest reported reinstating cost-of-living wage adjustments, retracting previous wage cuts, or offering widespread wage increases due to a brisk increase in demand. Conversely, some retailers eliminated hazard pay bonuses for their employees.\nPrices\nInflation remained stable over the reporting period, on balance. Increased demand for logistics and transportation services resulted in additional surcharges designed to offset the cost of volume increases and greater dispersion of routes. Similarly, prices for metal products and building supplies strengthened on the back of recent additional demand. Food prices continued to climb at grocery stores, but prices declined slightly at restaurants and retail stores in an attempt to spur business. Some financial and business services providers either reduced or eliminated some types of fees because of lower demand. Contacts in other sectors such as health care, utilities, and machine supplies and repairs reported little to no changes in prices.\nRetail Trade and Services\nRetail sales rose slightly over the past six weeks, following a large bump in May and June when restrictions on nonessential businesses initially eased. Foot traffic to brick-and-mortar establishments decreased only slightly from end-June levels, while growth in e-commerce remained robust. Demand for do-it-yourself home materials soared, and sales of some specialty goods, for example bicycles and pet products, were on par with those from a year ago. Auto dealers reported continued high demand and lean inventories for both new and used vehicles, especially light trucks and SUVs. Retailers in some other sectors, such as apparel, mentioned reduced sales, operating hours, and capacity utilization, attributing the cutbacks to increases in COVID-19 cases and adherence to social-distancing guidelines.\nConditions in the consumer and business services sectors remained precarious. Sales remained strong in select markets, including logistics and delivery services, meeting technologies, and tax preparations. However, the bulk of food service, travel, and hospitality providers continued to operate at a fraction of their capacities and saw the bump in sales in late spring reversed during the current reporting period. Restaurants that have been able to continue operations reported weak sales, reduced seating, and dire prospects for the immediate future. Some have adapted by exclusively offering take-out service and operating straight from their kitchens. Air travel remained subdued with one airport in Southern California welcoming only 9 percent of its typical pre-pandemic monthly level for domestic passengers and virtually no international arrivals. Hoteliers in Southern California, Washington, and Hawaii reported lower booking volumes and occupancy rates, though those in Southern California performed somewhat better compared with the rest of the District. Demand for nonurgent legal services, elective health procedures, and live event-based entertainment remained soft, as clients socially distanced and postponed discretionary expenditures.\nManufacturing\nManufacturing activity increased modestly over the reporting period, but remains considerably below pre-pandemic levels. Demand for recycled metals and finished steel products strengthened as auto production and construction continued to pick up, though capacity utilization rates remained at about three-quarters of their year-ago levels. Building materials manufacturers have also benefited from increased construction activity, with a wood product manufacturer in the Pacific Northwest reporting many sawmills returning to normal working hours or even overtime. Energy usage by manufacturers across the District also rebounded, while a renewable energy equipment producer in California mentioned pent-up demand for its domestic output. Some manufacturers reported more challenging conditions depending on industry, raw material availability, and severity of supply chain disruptions.\nAgriculture and Resource-Related Industries\nConditions in the agriculture sector remained weak overall. Yields and quality of grain, fruit, and nut crops were high. In the Mountain West, bumper wheat crops contributed to already bulging inventories from previous harvests. General production and distribution were constrained by COVID-19-related supply chain disruptions and additional expenses incurred to adhere to social-distancing guidelines at farms and processing centers. Domestic demand remained mixed overall, but sales of grapes, apples, and cherries to grocery stores and lumber to retailers and contractors increased notably over the reporting period. Export demand was weak, with producers in California and the Pacific Northwest highlighting poor sales to Asian markets across a variety of products, including nuts and lumber.\nReal Estate and Construction\nResidential construction activity increased at a brisk pace, supported by the low interest rate environment. Contacts reported increased demand for new single and multifamily homes in most areas, which helped boost permit issuance across the District. Existing inventories remained low, and prices climbed further as many buyers placed competing bids on desired homes. Workers continued to seek opportunities to move away from major metropolitan areas as some jobs become more conducive to teleworking. In the Mountain West and Pacific Northwest, homebuilders reported having trouble keeping up with demand, and pointed to the increasing costs of building materials and supply chain disruptions as their main constraints. Some parts of California saw less building activity and delayed permit issuance, as many local government offices remained closed.\nActivity in the commercial real estate market picked up slightly, on net. Demand for new office space and hotel rooms remained soft, diverting construction into other commercial sectors. Existing commercial projects resumed, and new demand for industrial and warehouse space kept permitting high relative to pandemic-induced lows. A contact in Utah reported large investments in commercial properties including an airport, a convention venue, and an office tower.\nFinancial Institutions\nOverall lending activity ticked up further. Contacts noted a shift in loan demand toward home mortgages, auto loans, and standard commercial loans as PPP activity wound down. Bankers reported that new and refinanced mortgages drove the bulk of business over the reporting period, as households took advantage of low interest rates. Loans to agricultural businesses were weak, but demand from builders was robust. Bankers highlighted solid liquidity conditions and strong capital positions as well as double-digit increases for deposits in some areas. Some contacts noted a decline in lending standards, which reduced credit quality and could increase delinquencies in the coming months. A contact in Arizona reported limited service hours due to COVID-19-related precautions, delaying deliveries of financial services.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
New York | 2020-09-02T00:00:00 | /beige-book-reports/2020/2020-09-ny | "Beige Book Report: New York\nSeptember 2, 2020\nSummary of Economic Activity\nEconomic growth in the Second District economy has stalled in the latest reporting period, even as the spread of the virus has remained subdued and more businesses have gradually reopened. Employment overall has been little changed, though retailers and wholesalers have reported staff increases, as more restrictions have been lifted. Input prices accelerated somewhat, while selling prices have remained steady. Retail activity continued to expand, though it remains well below pre-pandemic levels, while tourism and travel have remained depressed. Home sales have been mixed, with the single-family sales market strengthening but other segments flat to weaker. Commercial real estate markets have softened further\u2014particularly for office and retail space. Residential and commercial construction activity has remained weak. Finally, banks reported increased loan demand, tighter credit standards, and further widespread increases in delinquency rates. Overall, business contacts have become less optimistic about the near-term outlook.\nEmployment and Wages\nThe labor market has been generally flat since the last report, though retailers and wholesalers indicated that they had added staff as more restrictions have been lifted. A major upstate New York employment agency and a payroll processing firm both reported that hiring activity has picked up somewhat since midyear. However, a major New York City agency specializing in office jobs indicated that hiring has remained sluggish, as fewer people are leaving jobs and companies have been reluctant to on-board new workers remotely. These contacts noted a marked increase in job seekers.\nSome businesses have noted less trouble bringing back furloughed workers and hiring new ones in recent weeks, as unemployment benefits were scaled back. However, a number of companies noted that concerns about child care and the upcoming school year remain constraints on worker availability.\nBusiness contacts have mixed expectations about their likely staffing levels in the months ahead. While more manufacturers said they anticipated staff increases than reductions, the reverse was true among service sector businesses\u2014especially those in the information, transportation, and warehousing industries.\nWages have generally been mixed but mostly steady, on balance, with declines in leisure & hospitality, information, and wholesale trade, but increases in retail, real estate, and construction. Looking ahead, businesses generally expect wages to remain steady.\nPrices\nBusiness contacts reported that input costs accelerated slightly, rising at a moderate pace, while selling prices were mixed but, on balance, little changed. While contacts in the finance and professional & business service sectors reported declines in selling prices, retailers noted some escalation in prices for the first time since the outbreak began in March, reflecting widespread increases in input costs. Notably, businesses in the leisure & hospitality and retail & wholesale trade sectors were somewhat more inclined to raise prices in the months ahead.\nConsumer Spending\nRetailers generally reported that sales, though still down substantially from a year ago, picked up in July and into August, as restrictions were lifted further. However, some reported softening in revenues in mid-August. A number of retail contacts mentioned difficulties in getting supplies on time. Some have also noted that safety concerns and capacity restrictions have limited customer traffic.\nNew vehicle sales softened in the latest reporting period, following a fairly strong rebound in May and June, according to dealers in upstate New York. This recent pullback is partly attributed to low inventories and reduced incentives, though inventory levels are expected to improve in the fall. Sales of used vehicles have remained strong in recent weeks, with no significant inventory problems reported. Credit conditions were reported to be in good shape.\nManufacturing and Distribution\nManufacturing growth has slowed to a crawl in the latest reporting period, while activity in the wholesale trade and transportation & warehousing sectors has contracted modestly. A number of contacts in these sectors have noted difficulties and delays in getting a variety of inputs.\nLooking ahead, manufacturers projected moderate growth in activity, while wholesalers and transportation & warehousing contacts anticipated little change. Businesses' overall capital spending plans remain depressed, though there have been scattered reports of companies investing in air filtration systems and other such equipment to enhance safety.\nServices\nService industry contacts generally reported that business activity has weakened since the last report and remains well below pre-pandemic levels. Information and professional & business services firms reported fairly widespread declines in activity, while those in leisure & hospitality and education & health reported flat to modestly declining activity. The falloff in economic activity in central business districts, most notably Manhattan, has distressed local businesses that provide services to offices and workers, as well as firms throughout the metro area that service them. Contacts at both business service and consumer service firms generally anticipated little change in business activity the months ahead.\nTourism has remained depressed, with New York City hotels still running at well under half capacity, though weekend occupancies have increased. Hotels have also seen some business as homeless shelter alternatives. Ongoing restrictions on capacity, as well as trepidation among customers, have restrained business at restaurants, hotels, and other providers of consumer leisure and recreation services. A large expansion in outdoor dining has helped mitigate New York City's ongoing ban on indoor dining, though many restaurants have still seen sizable reductions in overall capacity.\nReal Estate and Construction\nHousing markets across the District have continued to diverge, as New York City's sales and rental markets weakened further, while markets elsewhere\u2014particularly for single-family homes\u2014have generally continued to show strength.\nNew York City's rental market has been particularly weak, with vacancy rates reaching multi-year highs in Manhattan and rents down roughly 10 percent from a year ago with increased landlord concessions. Rents declined more moderately in Brooklyn and Queens, and were little changed in the Bronx and across outlying portions of the metro area. The single-family rental market has been relatively strong across much of the District.\nThe residential sales market has been mixed. Sales of condos and co-ops in New York City have rebounded modestly from depressed spring levels, while prices have fallen, as the number of listings has swelled. Elsewhere across the District, though, home prices have risen and bidding wars have been common, reflecting strong pent-up demand and a dearth of homes on the market, which has also restrained sales volume.\nCommercial real estate markets have weakened further. Office availability rates continued to rise, while rents were flat or declining. Retail rents have also been flat to lower, as vacancy rates have risen to multi-year highs.\nNew construction activity has remained quite sluggish and well below year-earlier levels, though a few areas have seen a pickup in multifamily construction starts. Contacts in real estate and construction have become less optimistic, on balance, about the near term outlook.\nBanking and Finance\nFinance sector contacts generally noted continued weak business and have grown more pessimistic about the near term outlook. Small to medium-sized banks across the District reported higher demand for consumer loans, residential mortgages, and commercial mortgages, but flat demand for commercial and industrial loans and little change in refinancing activity. Bankers reported tightened credit standards across all loan categories except consumer loans, where standards were unchanged. Banks reported narrowing spreads across all loan categories and lower average deposit rates. Delinquency rates rose across all categories\u2014particularly on residential mortgages\u2014though banks continued to report more lenient policies for delinquent accounts across all categories.\nFor more information about District economic conditions visit: https://www.newyorkfed.org/regional-economy\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
Cleveland | 2020-09-02T00:00:00 | /beige-book-reports/2020/2020-09-cl | "September 2, 2020\nSummary of Economic Activity\nThe Fourth District's economy grew modestly and at a pace similar to that of the previous reporting period. However, sales and activity generally remained below pre-pandemic levels across most sectors. Staff levels changed very little in all sectors, even as business activity continued to increase. Consequently, wages were mostly steady. Input cost pressures increased somewhat as prices for construction materials, metals, and materials used in pandemic-related medical equipment rose. Selling prices rose moderately as some of those costs were passed through to customers. Moreover, strong demand and low inventories helped to push up prices for vehicles and homes. Looking ahead, contacts expected moderate improvement in customer demand, although expectations have been scaled back since the previous reporting period because of the uncertainty of the coronavirus's path. Contacts expected to add staff slowly in the months ahead, and the majority of firms believed that by next spring, their staff levels would still be below pre-pandemic levels.\nEmployment and Wages\nLabor demand remained weak, and staff levels changed by little in all sectors, even as business activity increased. Fewer firms reduced staff levels in the past two months than in the previous period. However, only about one-fourth of contacts added workers, a share which was unchanged from the previous period. Firms noted that the weak level of customer demand was the primary reason for their lackluster hiring activity. Although the labor market is more stable than it was during the spring, a few firms reported that previously furloughed workers have recently been laid off permanently\u2014a sign that the labor market's recovery may not be smooth. Contacts expected to add staff slowly, and the majority of firms believed that by next spring their staff levels would still be below pre-pandemic levels. Most believed customer demand would not be strong enough to support pre-pandemic staff levels, but a sizeable minority noted their firms had become more efficient and did not need as many workers as they had at the beginning of the year.\nWages were mostly steady, with 8 out of 10 firms reporting no change in the past two months and with fewer firms cutting pay. Where pay increases were noted, a number of staffing agencies reported that before enhanced unemployment benefits had expired, the benefits motivated them to raise wages to attract workers. Also, a few firms reported that professional staff whose wages had been previously cut have had those wages restored.\nPrices\nNonlabor costs rose modestly after they had been flat or slightly lower in the prior two reporting periods. Construction firms widely reported that shortages of materials had caused input costs to rise. This was especially true of lumber. Manufacturers noted that prices rose for materials that were in limited supply and were also used for medical equipment, such as plastics or materials used in masks. Price increases for certain metals such as zinc, copper, and aluminum were also reported. Multiple firms in construction, manufacturing, and retail reported higher operating costs because of increased expenditures for personal protective equipment, extra sanitation measures brought about by COVID-19, and, in some cases, staggered shifts.\nSelling prices rose modestly, although there was variation across sectors. Most firms held their prices unchanged because of weak demand. Among sectors in which price increases were noted, higher materials costs boosted new-home prices. Auto dealers commented that low inventories of vehicles were pushing up prices for new and used cars. Further, transportation firms noted that increased cargo volumes gave them enough pricing power to raise their prices.\nConsumer Spending\nMost retailers reported an increase in consumer spending since the last report. However, demand remained below its pre-pandemic level, and sales growth lost momentum in July. Auto dealers indicated that sales had increased significantly in June, although some momentum was lost in July because of unusually low inventories caused by factory shutdowns in the spring. Similarly, one large department store reported that sales plateaued in July. Furthermore, an apparel retailer commented that it did not see the usual boost to sales during the back-to-school season because many schools were planning to go virtual. Most restauranteurs reported that carryout and delivery orders continued to be strong, but the number of dine-in customers remained very low. Hoteliers noted there was some improvement in occupancy relative to that of a few months ago, but the lack of business travel and group events were major drags on the sector's recovery. Looking ahead, contacts expressed uncertainty regarding the outlook for consumer spending, citing the path of the virus, future of fiscal stimulus, and reopening of schools as major unknowns.\nManufacturing\nManufacturing activity improved slightly, although there was variation in performance and production remains below pre-pandemic levels. Steelmakers saw a boost to sales from the growth in auto production and from customers who were making purchases that had been delayed. Food and beverage producers also noted growth, thanks to continued growth in consumer spending. Also, strength in residential construction boosted demand for electrical equipment used in homes. However, demand in the aerospace sector continued to decline, as air travel remains weak. Moreover, a sizeable share of producers that serve a range of markets reported that uncertainty about the economic outlook had caused their customers to either reduce or delay their orders for capital goods. On balance, contacts expect demand to improve slowly over the next few months, although expectations have been scaled back since the previous period.\nReal Estate and Construction\nHomebuilders and realtors widely reported that activity in the housing market continued to be strong. According to contacts, low mortgage rates and tight inventories of homes spurred home sales by creating a sense of urgency among homebuyers. Realtors noted that the low level of housing inventory also helped to boost prices. Renovation activity was reportedly strong as more homeowners expect to work from home for an extended time. Residential builders and real estate agents expect activity to remain at its current high levels in the near term.\nBy contrast, nonresidential real estate activity weakened. Builders reported diminished backlogs of new public projects, a situation which they believed could be a result of constrained government budgets. Demand for private-sector projects was reportedly flat, and contacts expect little improvement given the economy's uncertain path. Moreover, commercial real estate developers expressed concern that a rising number of mall tenants could be insolvent if economic conditions do not improve soon.\nFinancial Services\nBanking activity softened during the reporting period. Contacts noted that demand for business loans declined as the Paycheck Protection Program wound down. This decrease was partially mitigated by strong demand for purchase mortgages, mortgage refinancing, and auto loans. Delinquency rates of commercial and consumer loans remained relatively low because of forbearance agreements and various fiscal relief measures. However, if the economy remains weak, most contacts expect delinquencies to rise as consumer and commercial deferral programs end. Bankers were uncertain about the future, particularly because of the lack of clarity about future government stimulus and the path of the coronavirus.\nProfessional and Business Services\nMost professional services firms reported stronger business activity. IT firms experienced strong demand as firms adapted to a virtual work environment. Demand for payroll processing increased as more businesses reopened, and the continued shift toward online purchases heightened demand for transaction authentication services. An accountancy firm with a national footprint noted that deal flow had improved. Similarly, a large consultancy reported some clients restarted longer-term projects that were previously put on hold. Contacts expect demand to remain on a positive trajectory.\nFreight\nDemand for freight services grew moderately, thanks to improved manufacturing production and continued growth of consumer spending. A number of contacts reported that ongoing shortages of trucks made it difficult to meet customer demand. Moreover, the variation of businesses' reopening across states made it difficult to anticipate where trucks are needed. Contacts expect demand for transportation service to remain stable in the coming months.\nFor more information about District economic conditions visit: www.clevelandfed.org/region/\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n" |
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