Wednesday, September 3, 2014

FEDERAL RESERVE BEIGE BOOK: Economic Activity continues to Expand at Moderate Pace


Reports from the twelve Federal Reserve Districts indicated that economic activity has expanded since the previous Beige Book report; however, none of the Districts pointed to a distinct shift in the overall pace of growth

The New York, Cleveland, Chicago, Minneapolis, Dallas, and San Francisco Districts characterized their growth rates as moderate; Philadelphia, Atlanta, St. Louis, and Kansas City reported modest growth. Boston reported that business activity appeared to be improving, and Richmond reported further strengthening. 

Philadelphia, Atlanta, Chicago, Kansas City, and Dallas explicitly reported that contacts in their Districts generally remained optimistic about future growth; most of the other Districts cited various examples of ongoing optimism from specific sectors.

General consumer spending grew in most Districts at rates ranging from slight to moderate, with few changes in the pace of growth compared with the last Beige Book. Most Districts reported a continued expansion of auto sales, noting record-high levels for several markets within the Philadelphia and Dallas Districts; however, in some parts of the New York and Philadelphia Districts sales began to fall back from their relatively high levels. Tourism activity was reported to have increased across much of the nation, with many Districts reporting higher hotel booking and occupancy rates.

Activity among nonfinancial service sectors improved overall. District reports on manufacturing were mixed--divided almost evenly into one of three characterizations of the sector's activity: expanding, contracting, or unchanged. Among Districts reporting on their firms' near-term expectations, the manufacturing outlook remained generally upbeat, with New York, Philadelphia, Richmond, and Atlanta reporting increased optimism.

Since the previous Beige Book, residential real estate activity, particularly sales of existing homes and construction of new homes, generally expanded or held steady in about half of the Districts. About half of the Districts also reported some growth in construction and in sales or leasing of nonresidential properties.

Overall, loan demand rose in eight Districts and held steady in one. Credit standards were largely unchanged. Six Districts reported improving credit quality, falling delinquency rates, or both.Reports regarding farm products were mixed; for some crops, high anticipated harvests have put downward pressure on prices and expected farm incomes. Generally, oil and gas production and demand for related activities continued to edge up from already high levels, while total coal production mostly held steady.

Trends in employment, wages, and prices were relatively unchanged in the Federal Reserve Districts, with greater wage pressures reported in sectors where shortages of skilled labor persisted.

Overall, price pressures remained largely unchanged. Input prices were described as modest, stable, or benign in reports from Boston, Cleveland, Atlanta, and Kansas City. Chicago noted that prices fell for corn, soybeans, hogs, and cattle but rose for milk during the current Beige Book period. San Francisco cited higher building supply prices, Minneapolis cited higher prices for some metals, and Chicago noted that energy prices generally remained elevated. Cleveland District contacts in the manufacturing and freight transportation sectors noted some ability to pass higher input prices through to customers with little pushback.

By contrast, only a few companies in the Atlanta District noted plans to increase prices over the remainder of the year and expressed confidence that any increases would stick.-

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