WASHINGTON (MNI) -The following is the first part of the Federal Reserve Beige Book summary, prepared at the Federal Reserve Bank of Chicago based on information on or before October 16, published Wednesday:
The following is the first part of the Federal Reserve Beige Book summary, prepared at the Federal Reserve Bank of Chicago based on information on or before October 16, published Wednesday: Reports from the twelve Federal Reserve Districts suggest that national economic activity continued to expand at a modest to moderate pace during the reporting period of September through early October. Eight Districts reported similar growth rates in economic activity as during the previous reporting period, while growth slowed some in the Philadelphia, Richmond, Chicago, and Kansas City Districts. Contacts across Districts generally remained cautiously optimistic in their outlook for future economic activity, although many also noted an increase in uncertainty due largely to the federal government shutdown and debt ceiling debate.
Consumer spending continued to increase and activity in the travel and tourism sector expanded in most Districts. Business spending and payrolls grew in many Districts. Demand for nonfinancial services rose, and manufacturing activity also expanded modestly. Residential construction continued to increase at a moderate pace. By comparison, nonresidential construction again expanded at a slower rate. Residential and commercial real estate activity varied across Districts, but largely continued to improve. Financial conditions were little changed on balance, with lending activity remaining modest in most Districts. There were mixed reports on agriculture, with excess precipitation and drought both impacting the sector. Energy and mining activity expanded or maintained high levels, with the exception of the coal industry in the eastern half of the nation. Price and wage pressures were again limited.
Consumer Spending and Tourism
Consumer spending grew modestly in most Districts. Auto sales continued to be strong, particularly in the New York District where they were said to be increasingly robust. In contrast, Chicago, Kansas City, and Dallas indicated slower growth in auto sales in September. Growth in retail sales was steady in most of the Districts, but picked up some in Cleveland and Richmond and slowed in Chicago, Kansas City, and Dallas. Contacts in Chicago and Atlanta noted that back-to-school spending was lower than a year ago. However, retailers generally remained optimistic about the holiday shopping season, with contacts in Philadelphia and Chicago expecting this year's holiday sales to be about equal to last year's despite the traditional holiday period being six days shorter this year. In addition, Dallas noted strength in retail imports in advance of the holiday season, with growth stronger than a year ago. Activity in the travel and tourism sector also expanded in most areas, with the reports from the Atlanta, Boston, and New York Districts being particularly upbeat. Dallas indicated that airline passenger demand slowed seasonally, but was slightly stronger than year-ago levels. Tourism contacts in the Boston District were concerned about the potential impact of a protracted federal government shutdown; and Richmond noted that the shutdown had led to the closing of some tourist attractions, although hotel contacts indicated that these closures did not result in guest cancellations. In addition, Kansas City noted lower tourism activity due in part to the severe effects of recent flooding in Colorado.
Business Spending and Hiring
Business spending grew modestly in most Districts. Overall, inventory investment proceeded at a moderate rate. Retail inventories were said to be in-line with sales in the Boston, Cleveland, Chicago, and Dallas Districts. Philadelphia and Cleveland reported that inventories were on the low side at auto dealers, and Chicago noted the same was true at steel service centers. Philadelphia reported an increase in manufacturers' demand for equipment, while manufacturers in Cleveland and Chicago indicated that current capital outlays were primarily for productivity enhancing investments. Cleveland noted that low natural gas prices and regulatory uncertainty were slowing the build-out of shale-gas transport and processing infrastructure. In contrast, additional infrastructure projects to support natural resource extraction were mentioned in the Richmond, Minneapolis, and Kansas City Districts. Philadelphia and Chicago reported an increase in spending on information technology. Looking ahead, several Districts noted an improvement in capital spending plans. Manufacturers in Philadelphia and St. Louis, high-tech service firms in Kansas City, and retailers in the Cleveland and St. Louis Districts expected to increase capital spending in the months ahead. Technology contacts in San Francisco relayed expectations for a near-term pick-up in spending on both hardware and software products. In addition, Philadelphia and
Minneapolis reported slight increases in activity at architecture firms. Employment growth remained modest in September. Several Districts reported that contacts were cautious to expand payrolls, citing uncertainty surrounding the implementation of the Affordable Care Act and fiscal policy more generally. Cleveland and Dallas noted that retail hiring was primarily limited to staffing of new stores in their Districts, while contacts in Philadelphia, Cleveland, and Chicago reported that hiring for the holiday season would be about the same as last year. In manufacturing, Boston indicated that hiring primarily was for replacement or to fill key needs, New York noted slower job growth, and Chicago reported that manufacturers were cutting back on overtime. Dallas cited scattered reports of hiring in high-tech, fabricated metals, and food manufacturing. Furthermore, demand for skilled labor remained high in many Districts. Examples included technology, healthcare, and engineering occupations in Richmond, economic and health consulting in Boston, legal and compliance positions in the financial services industry in New York, and accountants and financial analysts in the Dallas District.
Nonfinancial Services
Demand for nonfinancial services increased modestly from the prior reporting period. Boston reported robust growth in consulting, but noted that activity at a government consulting firm remained weaker due to the effects of sequestration. The Minneapolis District reported increased activity in professional business services, whereas demand was more mixed in the Dallas District with strength in accounting services and a modest decrease in legal services. Demand for staffing services increased in the New York, Philadelphia, Cleveland, and Minneapolis Districts, with New York citing strong demand for information technology occupations and Cleveland highlighting healthcare and manufacturing. In contrast, staffing service activity was down slightly in the Chicago and Dallas Districts. Demand for technology services increased in the Kansas City and San Francisco Districts, but San Francisco indicated that overall demand for nonfinancial services was mixed with healthcare services somewhat weak.
Demand for transportation services increased on balance. Port activity remained robust in the Richmond and Atlanta Districts, reflecting exports of grain, auto parts, and forest products and imports of energyDemand for nonfinancial services increased modestly from the prior reporting period. Boston reported robust growth in consulting, but noted that activity at a government consulting firm remained weaker due to the effects of sequestration. The Minneapolis District reported increased activity in professional business services, whereas demand was more mixed in the Dallas District with strength in accounting services and a modest decrease in legal services. Demand for staffing services increased in the
New York, Philadelphia, Cleveland, and Minneapolis Districts, with New York citing strong demand for information technology occupations and Cleveland highlighting healthcare and manufacturing. In contrast, staffing service activity was down slightly in the Chicago and Dallas Districts. Demand for technology services increased in the Kansas City and San Francisco Districts, but San Francisco indicated that overall demand for nonfinancial services was mixed with healthcare services somewhat weak.
Demand for transportation services increased on balance. Port activity remained robust in the Richmond and Atlanta Districts, reflecting exports of grain, auto parts, and forest products and imports of energy products and steel. Atlanta, Kansas City and Dallas cited a modest rise in demand for transportation services. Cleveland reported that the rate of growth in shipping freight volume had slowed recently, and demand for trucking services softened slightly in the Richmond District.
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