NATNews Blog > December 2016 > ​The Fed reports moderate growth pattern continues

    ​The Fed reports moderate growth pattern continues

    12/1/2016 7:24:14 AM
    According to the Federal Reserve’s Nov. 30 Beige Book release, the economy continued to expand across most regions from early October through mid-November. Activity in the Boston, Minneapolis, and San Francisco Districts grew at a moderate pace, while Atlanta, Chicago, St. Louis, and Dallas cited modest growth. Philadelphia, Cleveland, and Kansas City cited a slight pace of growth. Richmond characterized economic activity as mixed, and New York said activity has remained flat since the last report. Outlooks were mainly positive, with six Districts expecting moderate growth.
    Demand for manufactured products was mixed during the current reporting period, with the strong dollar being cited as a headwind to more robust demand in a few districts. Modest to moderate increases in capital investment are expected in several other districts.
    Business service firms saw rising activity, especially for high-tech and information technology services. Reports from ground freight carriers were mixed, while port cargo increased.
    A majority of Districts reported higher retail sales, especially for apparel and furniture. New motor vehicle sales declined in most Districts, with a few Districts noting a shift in demand toward used vehicles. Tourism was mostly positive relative to year-ago levels.
    Residential real estate activity improved across most Districts. Single-family construction starts were higher in a majority of Districts, while multifamily construction reports were mixed. Activity in nonresidential real estate expanded in many Districts.
    Banking conditions were largely stable, with some improvement seen in loan demand. Farmers across reporting Districts were generally satisfied with this year's harvests. However, low commodity prices continue to weigh on farm income. Investment in oil and gas drilling increased slightly, while reports on coal production were mixed.
    A tightening in labor market conditions was reported by seven Districts, with modest employment growth on balance. Districts noted slight upward pressure on overall prices.
    Real Estate and Construction
    Residential real estate activity improved across districts. Reports about existing- and new-home sales were mixed, but most districts noted a slight to modest increase during the period. Residential construction was up in the Cleveland, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, and Dallas districts. Home prices grew in many Districts, including Boston, Philadelphia, Cleveland, Atlanta, St. Louis, Kansas City, and San Francisco. Philadelphia reported that the strength of the single-family market is in high-end housing. In contrast, Kansas City reported that sales of low- and medium-priced homes continued to outpace sales of higher-priced homes. Dallas reported that the sales of lower-priced homes remained solid. Home inventories were generally reported to be low or declining and restraining sales growth. Boston, Philadelphia, Cleveland, Richmond, and Minneapolis reported low or decreasing inventories. Reports on inventory levels varied in Atlanta, while inventories held steady in Kansas City.
    Commercial construction activity moved higher in the New York, Cleveland, Richmond, Atlanta, St. Louis, Kansas City, and San Francisco Districts. In contrast, Minneapolis noted a slowing in commercial construction. The Boston, Richmond, Minneapolis, and San Francisco Districts reported increases in leasing activity, while Philadelphia noted a lull in nonresidential leasing growth compared with the prior period. Dallas reported leasing activity as mostly unchanged. Commercial sales activity continued to be robust in Minneapolis and grew modestly in Kansas City. Ongoing multifamily construction has been steady at a fairly high level in New York. Multifamily construction varied in the Atlanta District and slowed somewhat in Richmond, Minneapolis, and San Francisco.
    Banking and Finance
    District reports indicated that the demand for credit varied widely. On the commercial side, New York, Philadelphia, and St. Louis experienced strong demand for commercial and industrial loans, while C&I lending was slower in Dallas. Commercial real estate lending was strong in the New York, Philadelphia, and Cleveland Districts. In Atlanta, some small businesses had trouble obtaining credit, and St. Louis reported slightly lower credit worthiness for agricultural customers only. Residential mortgage activity was steady in New York and Kansas City; higher in Philadelphia, Richmond, Chicago, and Dallas; and strong in Cleveland and St. Louis.
    Auto lending was unchanged in St. Louis, up in Philadelphia and Dallas, and strong in Cleveland and Chicago. Credit quality was unchanged across most Districts, though improvements were seen in New York, Philadelphia, and Chicago. Credit standards tightened in select loan categories in the Boston, New York, and Philadelphia Districts, but they loosened slightly in Richmond, where contacts reported facing competition that used more aggressive loan structures.
    Employment, Wages and Prices
    Employment continued to expand during the period. The Richmond, Chicago, St. Louis, and San Francisco Districts all reported moderate increases, while Boston and Minneapolis saw employment rise at a modest pace. Overall, employment increased slightly in Philadelphia, was little changed in Cleveland, and held steady or increased in Dallas.
    Manufacturing employment reports were mixed, with four Districts reporting flat or declining payrolls and two Districts reporting increases in manufacturing employment. The Boston, Philadelphia, and Cleveland Districts noted increases in retail employment or hours, while the Richmond District noted decreases. Most Districts saw increases in staffing activity. Boston reported fairly strong activity, with most staffing firms' revenues increasing 10 percent to 25 percent year-over-year. Staffing firms in Cleveland attributed a modest decline in the number of job openings and placements to uncertainty stemming from the presidential election.
    As in the past four Beige Books, wage growth was characterized generally as modest, on balance, by district contacts. Staffing services reported rising wages or difficulty filling positions without wage increases in a majority of the Districts.
    Overall, there was slight price growth during the period. The Philadelphia, Chicago, St. Louis, and Minneapolis Districts reported modest price increases, while most of the remaining Districts reported slight or limited price increases. The retail and services sectors reported slight to modest price increases, while agricultural product prices have stabilized at low levels. Contacts in the Philadelphia, Cleveland, Atlanta, St. Louis, and Minneapolis Districts reported increases in the cost of building materials, and contacts in the Atlanta and Dallas Districts noted downward pressure on freight transportation prices.