Beige Book
For use at 2:00 PM EST
Wednesday
January 18, 2017
The Beige Book
Summary of Commentary on Current Economic Conditions
By Federal Reserve District
January 2017
Federal Reserve Districts
Minneapolis
Boston
Chicago
New York
Cleveland
Philadelphia
San Francisco
Kansas City
St. Louis
Richmond
Atlanta
Dallas
Alaska and Hawaii
are part of the
San Francisco District.
The System serves commonwealths and territories as follows: the New York Bank serves the Commonwealth of Puerto Rico and the U.S. Virgin
Islands; the San Francisco Bank serves American Samoa, Guam, and the Commonwealth of the Northern Mariana Islands.
National Summary
Boston
1
A-1
First District
New York
B-1
Second District
Philadelphia
C-1
Third District
Cleveland
D-1
Fourth District
Richmond
E-1
Fifth District
Atlanta
F-1
Sixth District
Chicago
G-1
Seventh District
St. Louis
H-1
Eighth District
Minneapolis
What is The Beige Book?
The Beige Book is a Federal Reserve System publication about current
economic conditions across the 12 Federal Reserve Districts. It characterizes regional economic conditions and prospects based on a variety
of mostly qualitative information, gathered directly from District
sources.
The qualitative nature of the Beige Book creates an opportunity to
characterize dynamics and identify emerging trends in the economy
that may not be readily apparent in the available economic data. Because this information is collected from a wide range of business and
community contacts through a variety of formal and informal methods,
the Beige Book can complement other forms of regional information
gathering.
How is the information collected?
Each Federal Reserve Bank gathers anecdotal information on current
economic conditions in its District through reports from Bank and
Branch directors, plus phone and in-person interviews with and online
questionnaires completed by businesses, community contacts, economists, market experts, and other sources.
How is the information used?
The anecdotal information collected in the Beige Book supplements the
data and analysis used by Federal Reserve economists and staff to
assess economic conditions in the Federal Reserve Districts. This
information enables comparison of economic conditions in different
parts of the country, which can be helpful for assessing the outlook for
the national economy. The Beige Book also serves as a regular summary of the Federal Reserve System’s efforts to listen to businesses
and community organizations.
I-1
Ninth District
Kansas City
J-1
Tenth District
Dallas
K-1
Eleventh District
San Francisco
Twelfth District
L-1
This report was prepared at the Federal Reserve Bank of Boston based
on information collected on or before January 9, 2017. This document
summarizes comments received from contacts outside the Federal
Reserve System and is not a commentary on the views of Federal
Reserve officials.
National Summary
The Beige Book ■ January 2017
Overall Economic Activity
Reports from the twelve Federal Reserve Districts indicated that the economy continued to expand at a modest pace
across most regions from late November through the end of the year. Manufacturers in most Districts reported increased sales with several citing a turnaround versus earlier in 2016. Growth in the energy industry was mixed; two
Districts reported weakness in coal production but others reported improvements in coal, oil, or gas activity. Most Districts said that non-auto retail sales had expanded, but several noted that sales over the holiday season were disappointing and reports in more than one District suggested that growth in e-commerce had come at the expense of bricks
-and-mortar retailers. All Districts reported varying degrees of growth in employment and a majority described their
labor markets as tight. Residential construction and sales were generally mixed, although San Francisco reported
strong real estate market activity throughout the 12th District. Financial conditions were stable. Firms across the country and industries were said to be optimistic about growth in 2017.
Employment and Wages
Labor markets were reported to be tight or tightening during the period. Employment growth ranged from slight to moderate and most Districts indicated that wages increased modestly. A couple of Districts mentioned layoffs, but even in
those Districts, as in other regions, most responding firms were said to have added employment, on net. District reports
cited widespread difficulties in finding workers for skilled positions; several also noted problems recruiting for lessskilled jobs. Wages in some Districts were pushed up a bit by increases in the states’ minimum wages and most Districts said wage pressures had increased. Many Districts said contacts expect labor markets to continue to tighten in
2017, with wage pressures likely to rise and the pace of hiring to hold steady or increase.
Prices
Pricing pressures intensified somewhat since the last report. Eight out of twelve Districts saw modest price increases
and the remainder experienced slight increases, or flat prices in the case of the Atlanta District. Increases in input costs
were more widespread than increases in final goods prices. Cost increases were reported for coal, natural gas, and
selected building and manufacturing materials. Retailers’ selling prices were mixed, but on balance were flat or down
amidst competitive discounting. Prices of most agricultural commodities stayed flat at very low levels. Home prices
were stable or up modestly. Businesses in several districts reportedly expect further modest increases in input costs
and selling prices in 2017.
Highlights by Federal Reserve District
Boston
New York
Economic activity in the First District expanded at a
modest to moderate pace in the final weeks of 2016.
Firms undertaking hiring cited difficulties finding employees; a contact in the restaurant industry, in particular,
noted worker shortages. At the same time, most employers said they were not raising wages substantially. Business contacts remained optimistic about 2017.
Economic activity has held steady. Labor markets remained tight and wages continued to grow moderately.
Input cost increases have become increasingly widespread, and selling prices have increased at a somewhat
faster pace. Housing markets have continued to weaken
at the high end, while commercial real estate markets
have slackened.
1
National Summary
Philadelphia
St. Louis
Overall economic activity appeared to pick up to a modest pace of growth in the Third District with nonauto retail
sales, nonfinancial services, and manufacturing providing the boost from the prior period of slight growth. Hiring
also rose to a modest pace, and tightening labor markets
sustained modest pressure on wages and prices.
Economic conditions in the Eighth District continued to
expand at a modest pace. On a positive note, District
contacts anticipate an uptick in consumer spending
activity in early 2017. Conversely, low commodity prices
continue to put many agricultural parts of the District
under financial stress.
Cleveland
Minneapolis
Economic activity in the Fourth District grew slightly.
Labor markets showed signs of tightening. Upward
pressure on selling prices increased. Retail sales disappointed, while motor vehicle unit sales increased. Residential and commercial construction activity remains
elevated. Activity in the energy sector edged higher, and
manufacturing output was little changed.
Economic activity in the Ninth District grew modestly.
Consumer spending was lower than expected through
the holidays, though winter tourism started well. Manufacturing activity picked up, and the outlook for the sector
appeared more optimistic. Commercial construction held
steady at high levels, but heavy and residential construction lagged. Homes sales were strong in most regions.
Richmond
Kansas City
Economic activity increased at a moderate pace on
balance, with strengthening in the manufacturing sector.
Retail sales also grew at a faster pace since the previous
report. Real estate agents reported strong industrial
leasing, with more e-commerce tenants looking for large
facilities. Stronger multi-family construction was reported
in Washington, D.C., Charlotte, North Carolina, and
Charleston, South Carolina.
Economic activity in the Tenth District expanded modestly in late November and December. Consumer spending
increased, and contacts expected moderately higher
sales in the months ahead. Manufacturing production,
shipments, and new orders grew at their fastest pace in
over two years. The energy sector expanded further, and
higher energy prices led to continued optimism in the
sector.
Atlanta
Dallas
Economic activity expanded modestly. Retailers cited an
increase in sales. Home prices increased modestly.
Commercial real estate contacts continued to indicate
improving demand. Manufacturers noted an increase in
new orders and production. The labor market remained
tight and wages were stable. Non-labor input costs remained relatively unchanged.
Economic activity grew moderately in the Eleventh District, and outlooks were more optimistic than the previous
report. The energy sector noted improved demand and
an uptick in employment, following depressed activity for
nearly two years. Manufacturing activity expanded,
although job growth remained weak. Retail sales continued to be weak in energy-related and peso-sensitive
areas.
Chicago
San Francisco
Growth in the Seventh District continued at a modest
pace. Manufacturing production grew at a robust rate,
business spending grew at a moderate rate, consumer
spending increased modestly, and construction and real
estate activity edged up. Financial conditions improved
some, prices increased modestly, and farm incomes
were little changed.
Economic activity in the Twelfth District continued to
expand at a moderate pace. Holiday retail sales picked
up, and activity in the services sector remained strong.
Conditions in the agricultural sector were mixed, while
activity in the manufacturing sector was stable. Contacts
reported strong activity in the housing market and moderate growth in overall lending activity.
2
Federal Reserve Bank of
Boston
The Beige Book ■ January 2017
Summary of Economic Activity
Business activity continued to expand in the First District at the close of 2016. Both retailers and manufacturers cited
modest to moderate increases in revenues in recent weeks compared with a year earlier. Software and information
services firms reported strong order increases in the fourth quarter. Commercial real estate markets were mostly steady
in the region; in the Boston area office rents increased and sales prices for commercial properties were stable. Residential real estate markets across the region continued to experience increases in both sales and prices. Although none
sought substantial additions to headcount, a number of firms reported difficulty finding workers to fill openings. Prices
were largely stable. Most responding firms cited a positive outlook, expecting end-of-year growth rates to continue in
2017.
Employment and Wages
Retail and Tourism
Contacts in multiple sectors mentioned tightening labor
markets. For example, one retailer reported that their
firm’s labor costs went up 5 percent in 2016 because
they had to pay more to attract workers and they faced
state-mandated minimum wage increases. A majority of
manufacturing contacts reported that they were actively
recruiting and half indicated that they were struggling to
find workers. Manufacturers’ mentions of hiring difficulty
extended across both skilled and unskilled workers and
appeared to be an issue all across the region, including
western Massachusetts, central Connecticut, and Rhode
Island, as well as the Boston area. Software and IT
services respondents kept headcounts relatively stable
this past quarter and raised wages by mid-single digit
percentages.
Retail contacts consulted for this round reported that
sales growth was generally good between midNovember and early January. In one case, this more
positive recent trend made up for lower-than-expected
sales earlier in 2016, which were partly driven by weather. Apparel sales were up, but demand for hardware
items was reported to be down. Two respondents concluding their fiscal years on December 31 reported 2016
sales increases ranging from 1 percent to just over 3
percent. Another contact cited preliminary 2016 sales
increases in the mid-single digit range. Continued modest sales growth is expected for 2017.
A contact in the restaurant industry reported that sales in
December were generally good, which he indicated
serves as a positive predictor for the next couple of
months, as customers spend gift cards purchased during
the holiday season. Locally owned restaurants were said
to be doing better than the larger publicly-traded chain
outlets. This respondent expected that overall restaurant
sales will be up 1 to 2 percent for 2016. Looking forward,
there was concern that a tight labor market combined
with increases required by minimum wage laws will stifle
restaurant expansion and job growth over the next few
years, and some sense that this trend has already started. Restaurant expansion may also be limited by rising
real estate costs.
Prices
Retailers reported that input and selling prices remained
generally steady. Manufacturing contacts similarly did
not report exceptional pricing pressure from either customers or suppliers. A global supply glut of selected
chemicals reduced prices of both those chemicals and
products made with them. A supplier to the auto industry
expressed concern that high levels of inventory in the
auto business would lead to discounting and, in turn,
price-cutting pressure on suppliers as occurred in the
mid-2000s.
A-1
Federal Reserve Bank of Boston
Manufacturing and Related Services
estimated that office rents in greater Boston increased
10 percent on average in 2016. Apartment construction
activity slowed in recent months in both Boston and
Portland, while office construction was stable at a slow
pace in Boston and minimal in the rest of the region.
All eight manufacturers contacted this cycle reported
higher sales versus the same period a year earlier. A
sporting goods manufacturer reported robust year-overyear sales increases in the fall but does not expect that
pace to continue. A manufacturer and retailer of furniture
reported that sales slowed in mid-November but recovered in the balance of the year and were up slightly
versus the year-earlier period. A toy maker reported
exceptionally strong sales in the fourth quarter. A manufacturer of components for capital goods said that the
second half of 2016 was better than the first half.
The outlook among contacts was cautiously optimistic,
with significant uncertainty related to domestic politics.
Contacts across the District expected capitalization rates
to increase in 2017 to keep pace with rising interest
rates, noting that such increases imply that rents will
have to increase and/or valuations will have to decrease.
On balance, contacts anticipated that property values will
remain flat in 2017. Apartment construction activity was
expected to slow further in coming months as borrowing
costs continue to rise and lending terms continue to
tighten, but prospects for new office construction appeared brighter for 2017 in light of rising office rents and
low office vacancy rates around the region.
Most respondents reported higher capital expenditures
but none reported major revisions to spending plans.
Information technology remained a major area of capital
expenditure for several firms. A manufacturer of components for capital goods said that new technologies were
allowing firms to get more out of existing equipment and
that this was depressing capital expenditures.
Residential Real Estate
All the contacted manufacturers cited a positive outlook
notwithstanding some uncertainty about the impact of
possible policy changes by the new administration.
Continuing recent trends, residential real estate markets
in the First District showed robust increases in sales and
prices relative to last year. Closed sales for single-family
homes and condos increased in all six First District
states as well as in the Boston metro area (five of the six
First District states and Boston reported changes from
November 2015 to November 2016; Maine reported on
October 2015 to October 2016). Massachusetts recorded the most closed sales on record for the month of
November. As usual, many contacts cited falling inventories as an issue: inventories decreased year-over-year in
every reporting region. A contact in Massachusetts reported that “with such little inventory, buyers needed to
be quick with their best offers from the start.”
Software and Information Technology Services
Contacts in software and IT services—with a very limited
number of respondents—reported mixed revenue results
near the end of 2016, but strong demand in Q4. A
healthcare software firm reported a slight decline in 2016
revenue from 2015, though they attributed this to accounting changes more than a real decline in business.
They experienced a “huge” Q4 for new orders, and thus
were gearing up for a strong 2017. The contact identified
uncertainty surrounding the future of the Affordable Care
Act as a possible headwind for their hospital clients. An
IT firm selling to manufacturers summed up 2016 as “a
stable year after a rocky 2015.” They reported high single-digit growth in bookings in Q4 over last year. The
contact was hopeful that manufacturing will continue to
recover in the coming year, possibly including tailwinds
from the incoming administration. However, they expressed concern about a resurging U.S dollar.
Home prices also rose year-over-year. For single-family
homes, the median sales price increased in every reporting region. The same was true for condos, except in
Vermont where prices decreased slightly.
Overall, contacts were optimistic about the outlook for
the end of the year and into 2017. Many said rising interest rates would stimulate buyers to make offers at the
end of 2016, but they did not expect further moderate
increases in interest rates to restrain the region’s consistently strong buyer demand.■
Commercial Real Estate
Conditions in commercial real estate markets across the
First District were stable in recent weeks. Office leasing
activity was steady or modestly slower in the region’s
major metro areas. Investment sales activity and sales
prices for prime commercial properties in Boston were
also stable, as foreign investors were undeterred by
higher interest rates and a stronger dollar. One contact
For more information about District economic conditions visit:
www.bostonfed.org/regional-economy
A-2
Federal Reserve Bank of
New York
The Beige Book ■ January 2017
Summary of Economic Activity
Economic activity in the Second District has held steady since the last report, while labor markets have remained fairly
tight. There have been increasingly widespread increases in input costs and scattered signs of a pickup in selling prices.
Manufacturers indicated that business rebounded following an autumn slump, while service-sector contacts reported
steady to moderately expanding activity. Consumer spending has been mixed, even as consumer confidence climbed to
a multi-year high. Housing markets have been mixed, with weakness continuing at the high end, and commercial real
estate markets were steady to somewhat slacker. Residential construction was sluggish, while there has been some
pickup in office and especially industrial construction. Banks reported that both loan demand and delinquency rates
were steady to moderately improved.
Employment and Wages
service sector contacts noted only scattered increases.
Both manufacturers and service firms also said they
anticipate increasingly widespread cost increases in the
months ahead. Retailers generally maintained that selling prices were steady to down slightly. Broadway theaters reported that ticket prices have increased by considerably more than the seasonal norm during this past
holiday season.
The labor market has remained fairly tight, while hiring
activity has been mixed. Businesses in most service
industries reported that they have been hiring, on net,
while manufacturers indicated that they are keeping
headcounts steady. On balance, contacts said they plan
to increase headcounts in the months ahead, particularly
manufacturers. Contacts at employment agencies remained fairly upbeat about the job market, though they
said it was hard to judge during this typically slow season. Still, an upstate New York agency noted that hiring
remained fairly strong longer into December than usual
and a New York City agency reported that hiring has
picked up surprisingly early in January.
Consumer Spending
Retail merchandise sales were mixed but generally
sluggish in November and December. Two major chains
reported that same-store sales were down moderately
from 2015 levels and below plan, though one noted that
its on-line sales were up by double-digit percentages. By
contrast, business picked up for upstate New York retailers. Cold weather reportedly boosted sales of winter
apparel and outerwear. Despite the disappointing sales
performance, inventories were said to be at reasonably
satisfactory levels. Retail contacts were generally not
very optimistic about the near-term sales outlook.
Contacts generally reported only a very modest pickup in
wage growth, though contacts in service industries indicated that they anticipate rising wages in the months
ahead—particularly in education and health, retail,
wholesale and distribution industries. Though New York
State raised its minimum wage structure on January 1, it
is too early to assess its effects.
Auto dealers in upstate New York reported that sales of
new and used vehicles picked up in the final two months
of the year. Inventories of new vehicles have remained
on the high side. Retail and wholesale credit conditions
were reported to be in good shape.
Prices
Business contacts reported some pickup in both input
prices and selling prices. Manufacturing contacts noted
particularly widespread price increases, while most
B-1
Federal Reserve Bank of New York
Consumer confidence in the Middle Atlantic states (NY,
NJ, PA) surged in December, reaching its highest level
in more than nine years.
Commercial real estate markets were steady to somewhat slacker in November and December. Office availability rates rose modestly in upstate New York, Long
Island, Westchester and Fairfield counties, while rates
remained steady in New York City and Northern New
Jersey. Asking rents for office space were flat to up
modestly in most of the District, though they declined in
upstate New York. In contrast, the market for industrial
space has shown continued strength. Across the New
York City metro area, industrial vacancy rates have
declined further and rents have risen fairly sharply. In
upstate New York, though, vacancy rates have been
mostly flat, and rents have edged lower.
Manufacturing and Distribution
Manufacturers reported that business activity has picked
up noticeably since the last report and expressed increased optimism about the near-term outlook. Similarly,
businesses in the wholesale trade and transportation
industries reported widespread improvement in business
activity and were increasingly optimistic about future
business conditions.
Services
Service-sector businesses reported steady to slightly
improving business conditions since the last report.
Looking ahead, these businesses were generally optimistic about the outlook—particularly those in the information and professional & business services sectors.
Tourism activity has remained sluggish, as hotel business and Broadway theater attendance were flat to down
from a year earlier.
New multi-family development has been weak in most of
the District, except in northern New Jersey where it has
held steady at a strong level. Single-family construction
has remained sluggish across the District. Office construction has picked up somewhat in Manhattan but has
been flat to down modestly across most of the District.
Banking and Finance
Small- to medium-sized banks reported strengthening
demand for commercial mortgages but little change in
demand for consumer loans, residential mortgages, and
commercial and industrial (C&I) loans. Bankers reported
that credit standards were unchanged across all loan
categories. No change was reported in spreads of loan
rates over cost of funds across all loan categories except
C&I, for which banks reported wider spreads. Bankers
indicated lower delinquency rates for commercial mortgages and C&I loans but no change in delinquency rates
for the remaining loan categories. ■
Real Estate and Construction
Housing markets have been mixed across the District
since the last report, with weakness continuing at the
high end. New York City’s rental market has weakened
noticeably, as rents for smaller units have leveled off,
while rents of larger units have declined. Apartment rents
elsewhere have been mostly flat of late, but still up modestly from a year earlier. Rental vacancy rates have
increased in New York City, as well as across upstate
New York, while they have edged down in northern New
Jersey.
New York City’s co-op and condo resale market has also
weakened. Both sales activity and prices have slipped,
except on small and moderately priced units. Bidding
wars have become considerably less prevalent than
earlier in the year. Elsewhere across the District, conditions have been more mixed. Home sales in the suburbs
around New York City picked up considerably, though
prices have remained fairly stable. In upstate New York,
the market is still characterized as quite strong. Sales
activity has been fairly robust for this time of year, inventories have remained tight, prices have continued to
climb and sellers have continued to see multiple offers
above the listing price. In contrast, home prices have
remained generally flat in northern New Jersey, though
activity has picked up somewhat.
For more information about District economic conditions visit:
www.newyorkfed.org/data-and-statistics/regional-datacenter/index.html
B-2
Federal Reserve Bank of
Philadelphia
The Beige Book ■ January 2017
Summary of Economic Activity
Aggregate business activity in the Third District grew at a modest pace during the current Beige Book reporting period
— a bit faster than the prior period. Notable shifts in activity included nonfinancial services and existing home sales,
which improved to a moderate pace of growth. Four sectors — nonauto consumer spending, manufacturing, and nonresidential construction and leasing — improved to a modest pace of growth. Employment growth also picked up to a
modest pace. This pickup included manufacturing firms, which had been reporting job losses for much of the year.
Contacts continued to report that wages rose modestly as the labor market continued to tighten. On balance, general
prices also continued to grow at a modest pace. Overall, firms continued to expect moderate growth over the next six
months.
Employment and Wages
Prices
Employment has picked up notably to a modest pace of
growth since the prior report. Manufacturing firms noted
an increase in employment for the first time in a year,
while average hours worked lengthened for the second
consecutive month. Employment indicators from nonmanufacturing firms improved, as contacts reported
increases in the use of full-time workers and part-time
hires and in workweek hours.
On balance, price levels continued to rise modestly.
Although about 70 percent of the firms reported no
change at all in prices paid and prices received, more of
the remaining firms reported increases than decreases.
The differential was similar to last period for prices paid
but diminished for prices received.
Retail analysts used the term “price deflation” to depict
the deep discounting of many retailers throughout the
holiday sales period. Overall, home prices continued to
rise slightly, although this varies across markets and
price categories. Both residential and commercial developers have noted the high cost of developable land.
However, descriptions from staffing firms were mixed,
with Pennsylvania firms noting some quieter-than-normal
lulls around the holiday season, while a New Jersey firm
reported finishing strong through year-end.
On balance, wage pressures continued to be modest
although the labor market has tightened for many occupations, according to banking and staffing contacts. One
staffing contact described the labor market as tightening,
with wages trending up and more turnover in mid-market
placements; the contact also noted that small businesses will have to raise wages to remain competitive. Manufacturing contacts estimated that wages and nonhealth
benefits would increase 2.0 percent to 2.5 percent in
2017 and that total compensation, including health benefits, would rise 3.5 percent to 5.5 percent.
Manufacturing
Overall, manufacturing firms reported modest growth —
noting improvements in general activity and shipments,
for which over one-third of the firms reported increases.
New orders also continued to grow, but with somewhat
fewer firms noting increases compared with the prior
period.
The makers of paper products, chemicals, and primary
metal products noted overall gains in activity from the
prior period, while the makers of lumber products noted
C-1
Federal Reserve Bank of Philadelphia
weaker activity. Fabricated metals, industrial machinery,
and electronics firms reported mixed results.
Commercial real estate loans and commercial and industrial loans continued to be two of the fastest growing loan
categories; however, both grew at a slower pace than
during the same period one year ago. Volumes of home
mortgages, home equity loans, auto loans, and other
consumer loans were mostly unchanged over the current
Beige Book period.
More than half of the manufacturing contacts were optimistic that orders, shipping, and general activity would
grow over the next six months. Firms also expressed
broader optimism for future capital expenditures and
employment.
On balance, banking contacts continued to report
healthy loan portfolios and improving customer credit
quality. In addition, several contacts noted holding the
line on their own credit standards against more lenient
terms and conditions offered by competitors.
Consumer Spending
Nonauto retail sales grew modestly over the holiday
sales period, according to several analysts. They also
noted that retailers offered heavy discounts on many
items even before Black Friday and maintained these
bargains throughout the season. Our contacts anticipate
that while some retailers succeeded in clearing their
shelves and creating the opportunity to restock with new
inventory, they may have constrained their profits. Customers were described as “more savvy with technology”
and as spending more money per trip.
Several contacts noted that the recent optimism and
enthusiasm expressed by Main Street firms and Wall
Street investors have not yet translated into tangible
business investment. Overall, banking contacts continued to express cautious optimism for slow, steady
growth, and are not yet convinced of potentially greater
growth.
Auto dealers described light vehicle sales as holding
steady at high levels through year-end. Annual sales
figures were estimated to finish slightly above those of
2015. For New Jersey, this meant a second consecutive
sales record. Generally, dealers do not expect an increase in 2017 but hope sales will remain at or near
2016 levels.
Real Estate and Construction
On balance, homebuilders continued to report little
change in activity. However, reports were mixed: Pennsylvania builders of mid-priced homes noted a pause in
activity, while a South Jersey builder of higher-priced
homes reported a pickup at year-end with strong backlogs going into January.
Tourism contacts generally indicated a continuation of
modest growth relative to the high levels of the prior
year. Philadelphia area hotels set records for a third
consecutive year. A shore location contact boasted an all
-time record December — the third record month in the
past year. Mild winter weather helped boost traffic at
shore locations over the holidays, filling restaurants and
retail shops. However, casino revenues in Atlantic City
continued to decline against prior-year levels.
Brokers in most major Third District housing markets
reported an upsurge in home sales to a moderate pace
but noted that this season accounts for a relatively low
percentage of annual sales volume. Moreover, sales
continued to be constrained by very low inventory levels.
Nonresidential real estate contacts covering much of the
Third District reported that slow, steady incremental
growth was supporting leasing (and pre-leasing) activity,
falling vacancy rates, rising rents, and new construction.
Industrial/warehouse space is in greatest demand
throughout the District. The market for office space is
tightest in Philadelphia’s central business district, while
most suburban office markets are still strengthening. ■
Nonfinancial Services
Overall, Third District service-sector firms reported that
activity picked up to a moderate pace of growth. Contacts also noted that the pace of sales and new orders
improved. However, reported expectations of future
growth have outpaced reports of current growth, though
falling shy of many other reports over the past six years.
Financial Services
Third District financial firms reported modest growth of
total loan volume, a bit off the moderate pace of the prior
Beige Book period. However, the significant seasonal
increase in credit card volumes anticipated for the recent
holiday period was much larger in 2016 than in 2015.
For more information about District economic conditions visit:
www.philadelphiafed.org/research-and-data/regionaleconomy
C-2
Federal Reserve Bank of
Cleveland
The Beige Book ■ January 2017
Summary of Economic Activity
Economic activity grew slightly on balance across the Fourth District since our last report. Labor markets continue to
show signs of tightening. Upward pressure on selling prices increased. Retailers reported disappointing same-store
sales through the early part of the holiday shopping season, while motor vehicle unit sales increased. Production at
manufacturing plants was stable. The housing market improved, with higher unit sales and higher prices. Commercial
builders reported some pull back in inquiries and backlogs. Reports indicated a healthy increase in upstream shale gas
activity. Coal production rose. Freight volume expanded over the period, but volume was flat compared to that of the
same time period a year ago.
Employment and Wages
downs of domestic power plant coal inventories, the
strengthening gas prices, and a firming in export prices
that was supported by continued tightness in international coal supplies. Shortages of homebuilding materials
have been driving up prices, especially for concrete,
drywall, and framing lumber. Commercial building contractors saw rising prices for structural steel and rebar. A
few retail chains reported reassessing their shelf prices
because of intensifying price competition. New motor
vehicle average transaction prices have risen about 1
percent in the past year, but that number hides distinct
trends for cars and light trucks. Car prices have declined
because of rising dealer and OEM incentives. In contrast, light truck prices increased because of larger sticker price increases and lower incentives. Upward pressure on freight hauling rates is expected during 2017
because implementing regulations associated with the
new electronic logging requirements may lead to a temporary reduction in freight capacity.
Payrolls were little changed on balance since our last
report. Job gains in banking were offset by losses in
construction and freight hauling. Staffing firms reported a
slight improvement in the number of job openings and
placements; healthcare professionals were in highest
demand. Job losses in manufacturing since late summer
have been stemmed. While not creating new positions,
manufacturers are replacing employees who leave voluntarily. Homebuilders and commercial contractors
reported temporary seasonal layoffs. The construction
industry continues to experience some wage pressure,
especially from high-skilled workers. Staffing levels at
banks increased on net. Many bankers noted wage
pressure at the entry level and for high-skilled jobs, citing
competition from within and outside their industry.
Prices
Upward pressure on selling prices increased over the
period. Manufacturers reported widespread increases in
finished goods prices in response to rising raw-material
costs, primarily for steel. Increasing wellhead prices for
natural gas were attributed to the cold weather and storage withdrawals. Coal prices rose in response to draw-
Consumer Spending
Retailers reported disappointing same-store sales
through the early part of the holiday shopping season.
The unusually warm weather was cited as driving down
purchases of cold-weather items. An apparel chain noted
D-1
Federal Reserve Bank of Cleveland
significant price competition from several competitors
who are in the process of liquidating. Another chain
reported that although foot traffic has increased, price
declines for select product lines has resulted in flat sales
in those lines. Going forward, traditional retailers expect
little change in sales because of intensifying price competition, especially from Internet sellers. Several contacts
reported cutting capital budgets because of weakening
sales. However, investment in e-commerce remains
strong. Year-to-date unit sales through November of new
motor vehicles declined 1 percent when compared to the
year-earlier period. Light trucks continue to dominate
transactions. Used motor vehicle transactions have
increased about 3 percent.
ed to seasonal factors and uncertainty leading up to the
presidential election. General contractors are expecting
to see an increase in spending on infrastructure projects
and for warehousing and distribution centers. Many
general contractors reported raising billing rates to cover
higher material costs, especially for steel.
Banking
Bankers reported that lending pipelines are relatively
strong, but there is little organic growth. Several contacts
reported seasonal slowing in select product lines, especially on the retail side. The outlook is more positive
since the presidential election because some clients are
expecting regulatory relief. One banker noted the first
round of federal funds rate increases is unlikely to be
passed through to savers. However, future increases will
likely result in higher interest rates paid on savings accounts. Credit quality remains strong, and little change
was reported in loan-application standards. On the commercial side, the strongest demand was for CRE loans.
Reports from retail banking indicated that the highest
demand was for auto loans and home equity products.
Core deposit balances continued to increase.
Manufacturing
Factory output was little changed over the period, though
several contacts cited a seasonal downturn in new orders. Activity for suppliers to the motor vehicle and construction industries remains elevated. Factors tempering
output growth for other manufacturing industries include
a general malaise in the industrial products market and
weakness in the energy sector. Year-to-date production
through November at District auto assembly plants fell 5
percent when compared to that of the same time period
during 2015. Car inventories remain significantly higher
than those for light trucks. Steel producers reported
rising volumes, a situation which they attributed to lower
imports. Capital spending increased slightly over the
period, but a large share of the monies was allocated for
maintenance projects. Spending on new equipment and
product development fell. Post-election confidence has
buoyed the outlook of many contacts; however, it remains uncertain how potential changes in the regulatory
environment ultimately will affect capital investment.
Energy
Reports showed a healthy increase in the number of
permits issued and the number of drilling rigs operating
in the Marcellus and Utica Shales during the past couple
of months. Nonetheless, upstream activity is below levels seen two years ago. Natural gas output remains at
historic highs. Coal production continued to move higher
as customers respond to their low inventories and improving market conditions for their products.
Freight Transportation
Freight volume expanded over the period on balance
and was attributed to a slowly improving economy. However, volume was flat compared to that of the same time
period a year ago and was characterized as sluggish. As
a result, some carriers reduced staffing through attrition.
Freight shipping rates were relatively stable, other than
select increases in the fuel surcharge. Capital spending
was primarily for new equipment. ■
Real Estate and Construction
Year-to-date unit sales through November of new and
existing single-family homes increased 5 percent compared to those of a year earlier. The average sales price
rose 4.5 percent. Homebuilders are concerned about
rising interest rates and the affect they will have on consumers’ willingness to purchase new homes. First-timebuyer and first-move-up contracts moved higher, whereas sales of high-end homes slowed. Year-to-date estimates of single-family construction starts were much
higher in Ohio and Kentucky, but lower in Pennsylvania,
compared to a year earlier.
Although overall activity remains elevated, nonresidential
contractors reported a slowing in the number of inquiries
and a decline in backlogs, a situation which they attribut-
D-2
Federal Reserve Bank of
Richmond
The Beige Book ■ January 2017
Summary of Economic Activity
Fifth District economic activity grew at a moderately faster pace since the previous Beige Book report. Reports were
strongly upbeat in early December, while assessments reported later in the month and in the surveys were more restrained. Demand for labor increased at a moderate pace, and reports of wage pressures were more common than
earlier. Price changes were generally mild, except at retail and services firms where prices received rose at a slightly
faster pace. The manufacturing sector strengthened and producers indicated moderate growth in new orders. Retail
sales rose briskly, while tourism at winter resorts strengthened to seasonal levels. Residential real estate activity was
little changed at seasonal levels. Commercial real estate leasing rose moderately and sales increased modestly. Residential and commercial loan demand was flat to slightly stronger in the weeks since the previous report. Revenue
growth at non-financial services firms remained modest. Indicators for agricultural and natural resource production were
mixed.
modestly in recent weeks, and Northern and Central
Appalachian coal prices edged slightly higher.
Employment and Wages
Labor demand increased at a moderate pace since the
previous Beige Book. District businesses reported modest increases in wages, with more contacts reporting
increased wage pressures. The supply of well-qualified
workers, especially in the skilled trades, continued to be
a problem. A Virginia recruiter reported slightly stronger
demand for employees in customer service, health care,
legal, and government positions. Staffing firms reported
that the volume of worker conversion from temporary to
permanent remained at normal levels. A contact in
Charleston, South Carolina said companies there were
doing more direct hiring in recent weeks. Also a staffing
firm in West Virginia reported increased placement of
temporary workers due to high demand from manufacturers, especially in the automotive sector.
Manufacturing
More manufacturers reported a rise in shipments and
growth in backlogs since the previous report, as well as
moderate growth in new orders. In addition, increased
capacity utilization was more widespread. Producers of
paper products, batteries, and office furniture reported
stronger overall business conditions. Manufacturing
executives expected further strengthening during the
next six months.
Ports and Transportation
The volume of container traffic rose moderately at two of
the District’s ports since the previous report. At another
port, container traffic increased by double digits every
month in the fourth quarter, in part because of calls from
larger, post-Panamax vessels. Imports of autos remained strong at one major port in recent weeks, while
both imports and exports of farm and construction machinery remained very weak. In addition, exports of
autos declined.
Prices
Manufacturers reported that average input prices rose
modestly in recent weeks, with the exception of copper
and stainless steel, which advanced more rapidly. Average manufacturing output prices increased only slightly.
Services and retail prices continued to rise moderately
and at a slightly faster pace than reported in our previous
Beige Book. Cotton prices were unchanged while peanut
and corn prices remained low. Natural gas prices rose
A couple of national trucking firms in the District reported
that demand for dedicated freight services increased
moderately, as businesses locked in services to ensure
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Federal Reserve Bank of Richmond
their freight needs will be met when an electronic log
mandate becomes effective in late 2017.
Banking and Finance
Loan demand was reported as stable or increasing
slightly in recent weeks. On the residential mortgage
side, demand for new originations was unchanged while
demand for refinancing rose modestly. A banker in West
Virginia attributed the rise in refinance demand to anticipated interest rate increases. Commercial loan demand
was described as stable overall, with reports of strength
in D.C., while West Virginia’s coal regions continued to
be depressed. Business lending was unchanged; however lenders’ outlooks improved. One banker said there
was an increase in optimism although most business
owners were in a ‘wait and see mode.’ Reports on core
deposit growth were mixed. A Virginia banker reported
strong growth in core deposits while a West Virginia
banker reported a slight decline. Credit standards were
unchanged or slightly tighter while credit quality was
stable. In West Virginia, however, quality declined slightly and past-due payments rose marginally.
Retail, Travel, and Tourism
Retail sales rose briskly in recent weeks, with strong
shopper traffic and big-ticket sales. A sporting goods
store manager said his sales to large-scale customers,
such as schools, were particularly strong. A wholesaler
of construction equipment and a chain store in the home
and garden business also reported that sales increased.
Contacts generally indicated that tourist activity strengthened to normal seasonal levels at winter resorts. In
addition, a source on the outer banks of North Carolina
said tourist stays were above year-ago levels. However,
an hotelier in western North Carolina reported a softer
market in his area.
Real Estate and Construction
Residential real estate sales were flat since the previous
report, with typical low levels of buyer traffic for the winter months. Inventories remained low, while days on the
market were generally unchanged. However, a contact in
Roanoke, Virginia stated that demand for more expensive homes improved while noting that smaller down
payment requirements contributed to increased sales of
modestly priced homes, particularly for first-time home
buyers. Residential builders reported that home starts
and closings were steady at modest levels, while one
contact said that seasoned builders finished another
good year. However, many sources continued to report a
lack of lots and limited new home inventories.
Non-Financial Services
Most services firms reported that revenue growth remained modest since the previous report. However, legal
and accounting services providers indicated that revenues rose more quickly.
Agriculture and Natural Resources
Reports on agricultural activity in recent weeks were
mixed. A South Carolina farmer indicated that improved
weather conditions after Hurricane Matthew allowed
crops to dry out enough to be harvested; yields, however, were down markedly from historical averages. A
Maryland contact said that the fall harvest finished early,
which allowed grain farmers to get moderately better
prices than growers in the Midwest. Dairy farm consolidation continued and milk production was stable due to
technology enhancements. Agriculture investments rose
slightly for light equipment while large equipment sales
remained weak.
On balance, commercial real estate leasing rose moderately in recent weeks. Rental rates rose moderately in
both retail and industrial markets. The retail sector remained the most active in terms of leasing, with continued demand for fast casual restaurants and grocery
stores. Real estate agents reported strong industrial
leasing, with more e-commerce tenants looking for large
facilities. Office leasing was generally unchanged at low
levels, although some contacts reported tightening in the
Class A market. Commercial real estate sales increased
modestly for retail, industrial, and multifamily properties,
with slightly improved sales prices. Commercial construction remained steady at modest levels, except in
Washington, D.C., Charlotte, and Charleston, South
Carolina, where multi-family construction was reported to
be stronger.
Coal production declined slightly in the southern part of
West Virginia but rose in the northern part. Natural gas
extraction rose modestly in recent weeks. ■
For more information about District economic conditions visit:
www.richmondfed.org/research/regional_economy
E-2
Federal Reserve Bank of
Atlanta
The Beige Book ■ January 2017
Summary of Economic Activity
Sixth District business contacts indicated that economic activity expanded at a modest pace since the previous report.
The outlook among most contacts for first half of 2017 remains optimistic. Businesses continued to report a tightening
labor market and steady wage growth. Non-labor input costs remained relatively unchanged since the previous report.
District merchants and automobile dealers cited an increase in sales. Tourism reports were mixed. Residential real
estate contacts indicated that December new home sales were flat to slightly up from a year earlier and that existing
home sales were mixed. Home prices increased modestly since the last report. Commercial real estate contacts continued to indicate improving demand. Manufacturers noted an increase in new orders and production.
Employment and Wages
prices due to excess supply. According to the Atlanta
Fed’s Business Inflation Expectations survey, year-overyear unit costs were up 1.7 percent in December. Survey
respondents indicated they expect unit costs to rise 2.1
percent over the following twelve months.
Contacts reported continued tightening in the labor market since the previous report. Firms and staffing agencies had difficulty filling positions for certain professional
jobs, craft labor jobs, and low-skill jobs. For professional
positions in particular, employers noted that they were
being more selective than they were prior to the recession. Manufacturers reported moderate increases in
payroll levels, while retailers encountered the typical
seasonal uptick in payrolls. In order to fill vacancies for
low-skill positions, a number of firms and staffing agencies reported that they had reduced job qualification
requirements. Businesses continued to report investing
in technology to automate certain positions as a way to
address the challenges of finding workers. Firms continued to engage in partnerships with community colleges
and workforce development organizations to develop
customized training programs, apprenticeship programs,
and internship opportunities. Most contacts reported
relatively stable wage growth, despite continued upward
pressure for select high-skill or high-demand positions.
Consumer Spending and Tourism
Most District retail contacts reported that sales levels
rose modestly since the last report. Early reports from
merchants for holiday sales indicated that levels appeared to have been slightly above expectations. Automobile dealers noted that incentives, such as cash bonuses and discounts, boosted overall vehicle sales in
November.
Reports from tourism and hospitality contacts across the
District continued to be mixed. Contacts in Georgia reported continued growth in business, leisure, and group
travel; while contacts in Florida reported a slight decrease in tourism activity since the last report. The outlook among most contacts for the first quarter of the year
remains optimistic.
Prices
Construction and Real Estate
Contacts reported little change in input costs and prices.
Exceptions were reports from purchasing managers of
continued increases in commodity prices, downward
pricing pressure in trucking and maritime shipping due to
excess capacity, and lower refined gasoline and diesel
Overall, reports from District residential real estate contacts continued to note slow but steady growth in December. The majority of builders noted that construction
activity was up from the year-ago level. Many builders
indicated that home sales were flat to slightly up relative
F-1
Federal Reserve Bank of Atlanta
to the year-earlier level, while brokers indicated home
sales were mixed over the same period. Most builders
and brokers noted that buyer traffic was equal to or
higher than the previous year’s level. Brokers reported
that inventory levels were mixed relative to the yearearlier level, while most builder reports indicated that
inventory levels were flat or rising. Builders and brokers
continued to note modest gains in home prices in December. Home sales expectations improved a bit since
the previous report, with many brokers and builders
anticipating sales to remain flat or increase slightly over
the next three months relative to the year-earlier level.
Most builders anticipate construction activity will hold
steady at the current pace or increase slightly over the
next three months.
Intermodal traffic was also down. Trucking companies
reported a continued slowdown in truckload freight;
however, holiday e-commerce shipment volumes far
exceeded expectations, placing constraints on capacity
and negatively impacting on-time delivery rates. The
majority of transportation contacts forecast higher levels
of activity over the next year.
Banking and Finance
Credit remained readily available for most qualified borrowers. However, some small businesses continued to
have difficulty obtaining credit.
Energy
Contacts continued to report weak demand and an oversupply in the oil and gas sectors. Contacts among a
growing global liquefied natural gas export market along
the Gulf Coast noted that they are positioned to meet
demand and capacity. Utility industry contacts noted that
investment in windfarm projects continued to expand,
and that changing customer behaviors and energy efficiency improvements in end-use technologies continued
to challenge growth in electricity demand.
Most commercial real estate contacts noted improvements in demand resulting in rent growth and increased
absorption, but continued to caution that the rate of improvement varied by metropolitan area, submarket, and
property type. The majority of commercial contractors
indicated that the pace of nonresidential construction
activity had increased from one year ago, with many
reporting backlogs greater than one year. Reports on the
pace of multifamily construction were mixed, with roughly
half indicating that the pace had increased from the yearearlier level and the rest suggesting that the pace had
leveled off or slowed. Looking forward, most District
commercial real estate contacts expect the pace of nonresidential construction activity to increase slightly over
the next quarter while many anticipate the pace of multifamily construction to continue to level off in the coming
quarters.
Agriculture
Agriculture conditions across the District were mixed. By
the end of November, much of the District was categorized as experiencing severe to exceptional drought
conditions. December rains brought some relief, although parts of Alabama and Georgia remained classified
in severe or extreme drought categories and dry conditions expanded through most of Florida. The USDA
again designated many counties in the District as natural
disaster areas due to damages and losses attributed to
the drought. Florida’s December orange forecast was
unchanged from November, remaining below last season’s production. On a year-over-year basis, prices paid
to farmers in November were up for cotton, soybeans,
and broilers, but down for corn, rice, beef, and eggs. In
light of poor pasture conditions caused by the drought,
livestock producers using corn for feed benefited from
low corn prices. ■
Manufacturing
Manufacturing contacts reported that overall business
activity increased since the last report. Purchasing managers indicated that new orders increased and production activity continued to rise at a firm pace. Supplier
delivery times were reported to be slightly longer, while
inventory levels of finished goods rose notably compared
to the previous report. Expectations for future production
remained fairly consistent with the previous report, with
almost half of firms anticipating an increase in production
levels over the next six months.
Transportation
District transportation contacts reported mixed levels of
activity. Ports cited substantial growth in containerized
cargo, which was attributed to a strengthening in export
demand and a busy peak season. Year-over-year total
rail traffic fell further since the last report due to significant declines in the shipments of petroleum and petroleum products, metallic ores, coal, and farm products.
For more information about District economic conditions visit:
frbatlanta.org/economy-matters/regional-economics
F-2
Federal Reserve Bank of
Chicago
The Beige Book ■ January 2017
Summary of Economic Activity
Growth in economic activity in the Seventh District continued at a modest pace in late November and December, though
contacts expected it to move up to a moderate pace over the next six to twelve months. While manufacturing production
grew at a robust rate and business spending grew at a moderate rate, consumer spending increased modestly and
construction and real estate activity edged up. Financial conditions improved some, prices increased modestly, and farm
incomes were little changed.
Employment and Wages
Consumer Spending
Employment growth slowed to a modest rate over the
reporting period, though contacts expected growth to
pick up to a moderate rate over the next six to twelve
months. Contacts continued to indicate that the labor
market is tight and that they are experiencing more
difficulty filling positions at all skill levels. One manufacturing contact reported such difficulty finding high-skilled
workers that they had traded in expensive, sophisticated
machinery for cheaper, less sophisticated equipment
that was easier to operate. A staffing firm reported no
change in billable hours and ongoing difficulty filling
orders at the wages employers were willing to pay. That
said, overall, wage growth picked up to a moderate
pace. Some contacts reported larger wage increases for
high-skilled occupations, while a number of contacts
indicated that they raised wages equally for all employees. Many contacts also reported rising healthcare costs.
Growth in consumer spending picked up to a modest
pace over the reporting period, and most contacts expected that pace to continue in 2017. Contacts reported
stronger sales in the food and beverage, general merchandise, hardware, and personal services sectors.
Sales of new light vehicles strengthened further, supported in part by even more aggressive incentives. Many
dealers reported record sales for the calendar year and
expected similar sales levels in 2017. Used light vehicles
sales increased as well, as the high number of new
vehicles coming off lease helped push down prices.
Business Spending
Growth in business spending remained at a moderate
pace overall in late November and December. Retailers
largely indicated that inventories were at comfortable
levels, though many auto dealers reported that inventories were uncomfortably high in spite of strong sales.
Manufacturing inventories were generally at desired
levels, though steel service center inventories were
below historical norms. Current capital expenditures
grew at a moderate pace and contacts expected that
pace to continue over the next six to twelve months.
Outlays were primarily for replacing industrial and IT
equipment. Shipping volumes increased slightly.
Prices
Prices again rose modestly in late November and December. Retail prices increased only slightly. Contacts
reported rallies in energy and metals prices and that
these had led to higher steel prices. Higher transportation costs continued to weigh on agricultural returns,
particularly for milk producers.
G-1
Federal Reserve Bank of Chicago
Construction and Real Estate
Agriculture
Construction and real estate activity edged up over the
reporting period. Residential construction grew slightly
across home types and locations. Home sales and prices increased slightly overall, though growth varied by
price range: demand for homes under $250,000 grew
strongly, while demand for homes between $250,000
and $500,000 was flat, and demand for homes over
$500,000 was up slightly. Nonresidential construction
increased modestly on balance. While one contact reported having the largest backlog of projects in years,
another reported that demand for more space from automotive suppliers had eased. Commercial real estate
activity increased slightly in both the for-sale and forlease segments. Commercial rents and availability of
sublease space were little changed, and commercial
vacancy rates decreased slightly.
Farm incomes were little changed in late November and
December. Corn prices moved higher and sales picked
up some, but inventories remained high following the
record harvest. Soybean sales were up moderately while
soybean exports remained strong. Contacts reported
modest declines in input costs, as fertilizer and seed
prices fell. Farmland rents were also somewhat lower,
but had not fallen as much as land values. A rally in
cattle prices, as well as increases in dairy, egg, and hog
prices, provided some relief for stressed livestock operations. ■
Manufacturing
Growth in manufacturing production picked up to a robust pace in late November and December. Growth
continued to be strong in autos and aerospace (though it
slowed a bit in autos) and was moderate overall among
other industries. Demand for steel increased some, but
remained modest. Contacts expected production of steel
to pick up in 2017, driven partly by a projected recovery
in oil and gas demand. Heavy machinery manufacturers
reported growth in sales, reflecting both strengthening
end user demand and a smaller-than-expected cutback
in dealers’ inventories. A number of speciality metals
manufacturers indicated that order book growth was
stronger than expected at the end of the year. Manufacturers of construction materials again reported slow, but
steady, increases in shipments, in line with the modest
pace of improvement in construction.
Banking and Finance
Financial conditions improved on balance over the reporting period. Financial market participants reported
broad-based growth in equity prices and low volatility.
Loan demand from middle-market businesses increased
slightly overall, with improvements spread widely across
sectors. Credit quality and standards were little changed,
though one contact reported that standards were loosening because of competitive pressure. Consumer loan
demand was little changed. Residential mortgage activity
increased slightly, and with rising rates, there was a shift
in the mix from refinancing to new originations. Contacts
reported a slight decline in auto loan demand and that
auto loan quality was unchanged.
For more information about District economic conditions visit:
www.chicagofed.org/cfsbc
G-2
Federal Reserve Bank of
St. Louis
The Beige Book ■ January 2017
Summary of Economic Activity
Information from contacts suggests that economic conditions have continued to expand at a modest pace since our
previous report. Reports of planned activity in the manufacturing and nonfinancial services sectors were generally positive. Labor market conditions remain tight, with moderate growth in both employment and wages. Reports indicate that
consumer spending growth was generally unchanged, but with expectations of improvement in the first part of this year.
Residential real estate conditions were somewhat mixed, while commercial real estate activity remained robust. District
bankers reported that loan demand remained modest, with growth among most loan types.
Employment and Wages
tories and the low price of oil. Another contact in Little
Rock cited concerns that the strengthening of the U.S.
dollar is putting downward pressure on grain prices.
However, since the previous report, cash prices for coal
and feed corn both increased moderately, those for corn
meal, soybeans, and sorghum increased slightly, those
for rice declined slightly. Across the District, home prices
continued to increase moderately. A contact in the Memphis area also reported higher prices in industrial and
retail properties.
Anecdotal evidence suggests moderate increases in
employment and wages since our previous report. Contacts described the year-end increases in employment
as in line with growth in previous years. Reports indicated that manufacturing employment increased moderately
in Missouri and modestly in Arkansas. Contacts in Louisville expressed difficulties finding seasonal workers
because of the high demand for seasonal employment
combined with a tight labor market, leading some to
increase wages temporarily to attract employees. Contacts in Little Rock reported that wages for skilled workers continue to steadily increase. In addition, the number
of unemployed workers per advertised vacancy fell
modestly throughout the District in December.
Consumer Spending
Reports from general retailers and auto dealers indicate
consumer spending growth in the District was generally
unchanged. Contacts described the increase in year-end
sales as in line with typical seasonal fluctuations. Arkansas taxable sales picked up in December after a sluggish
November. The purchasing sentiment of District households continued to indicate that the next few months
should be a good time to buy major household items.
Multiple business contacts cited relatively low gas prices
compared with the national average as a source of optimism. Furthermore, nearly half of surveyed auto dealers
expect year-over-year increases in sales in the first
quarter of 2017, and the majority anticipates increases in
inventory over the same period.
Prices
Price pressures in the District remained modest. In general, business contacts did not report many changes in
prices charged to customers. Low commodity prices
continue to put pressure on profit margins in sectors
dependent on the agricultural sector. For example, agricultural equipment dealers outside of Memphis reported
they have reduced prices on late-model used trade-ins to
fuel sales. A contact in Arkansas reported there has
been no shale drilling activity recently due to large inven-
H-1
Federal Reserve Bank of St. Louis
Manufacturing
Banking and Finance
Manufacturing activity has increased modestly since our
previous report. Many companies reported capital expenditure and facility expansion plans in the District,
including several manufacturers of food products and
wood products. In contrast, a large manufacturer of
transportation equipment announced plans to close a
large facility and relocate operations outside of the District. Manufacturers were generally optimistic and expect
new orders and production to increase over the first
quarter. Contacts expressed concern about the strong
dollar, the possibility of trade restrictions, and global
economic weakness.
Credit market conditions within the District improved at a
moderate pace since the previous reporting period.
According to a survey of 85 small- and mid-sized District
banks, overall lending activity experienced moderate
growth across all lending categories with some signs of a
slight tapering. Increases in real estate lending made the
largest contributions to aggregate loan growth since the
previous reporting period. Over the same time frame,
loans to individuals expanded at the highest rate for any
singular loan category. Bankers reported demand for
commercial real estate loans was generally unchanged
while commercial and industrial loan portfolios grew at a
moderate pace. Some banks have reported increases in
non-performing loans in their agricultural loan portfolios,
which they attribute to low commodity prices throughout
last year.
Nonfinancial Services
Reports of plans in the District’s service sectors have
been positive since the previous report. In particular,
several firms that provide healthcare, retail, and utilities
services announced plans to build or expand facilities
and hire new employees. Reports from information services, leisure and hospitality, and professional and business services were mixed, with some expansion but also
several facility closings and layoffs. Reports from the
transportation sector were positive. A Little Rock contact
noted that trucking activity has outperformed seasonality
in the past 5 or 6 weeks.
Agriculture and Natural Resources
As of late November, 95 percent of the District’s planned
winter wheat had been planted, which is a roughly 1percentage-point improvement over last year. Faster
planting occurred partly because District farmers
planned to plant 13 percent fewer acres than they did for
the prior crop year. Reports suggest that low snow accumulation, which serves as insulation for winter wheat,
and periods of extremely cold temperatures may reduce
yields.
Real Estate and Construction
Residential real estate activity was mixed across the
District, with little overall change in home sales from the
previous reporting period, while inventory remained tight.
Residential construction activity was also roughly unchanged since the previous report. Seasonally adjusted
building permits for November were flat, on average,
across District metropolitan areas. Still, permit activity
was higher than a year ago. Some local homebuilders
indicated concerns over rising mortgage rates.
District seasonally adjusted coal production dropped 3
percent from November to December, while year-to-date
production through December was 18 percent below last
year’s level. ■
Commercial real estate activity increased at a moderate
pace. Multifamily and industrial demand continued to
strengthen. Commercial construction activity improved
moderately. The amount of new non-residential space
started in November was significantly lower than a year
ago in the largest metro areas in the District. However, a
number of new projects were announced or approved
across the District. St. Louis in particular saw plans
established or greenlighted for a multitude of new multifamily and office buildings. A local contact also noted
that field work has been steadily increasing despite the
slowdown in construction starts.
For more information about District economic conditions visit:
www.research.stlouisfed.org/regecon/
H-2
Federal Reserve Bank of
Minneapolis
The Beige Book ■ January 2017
Summary of Economic Activity
The Ninth District economy grew modestly overall since the last report. Employment was mixed, with notable hiring and
layoff events, but an optimistic outlook overall among different sources. Wage pressure was moderate, while price pressure was modest overall. The District economy showed growth in manufacturing, real estate, commercial construction,
energy, and tourism. But consumer spending dropped, residential construction slowed, and agriculture remained weak.
Employment and Wages
Wage pressure was moderate since the last report. The
survey of manufacturers found that 2016 wages and
benefits rose by an average of 2.5 percent to 3 percent,
with slightly smaller increases expected in the coming
year. A smaller ad hoc survey of professional services
firms produced roughly similar results, though the
outlook for 2017 wages was somewhat higher. A
Minneapolis-St. Paul staffing contact said wages
“increased slightly” during the fourth quarter as
employers competed for labor, especially in the retail
sector. A North Dakota source said that although
unemployment was still very low, wage pressure
“appeared to have leveled off” with slightly slower
demand there for labor.
Employment was mixed since the last report, but labor
markets continued to be tight, and the 2017 hiring
outlook was positive. Initial unemployment claims in the
five-week period ending in mid-December were
unchanged in Minnesota and Montana relative to a year
earlier, but were higher in the Dakotas. A retail
distribution center in Minnesota announced plans to hire
1,000 full-time employees in the coming year, and
energy companies were reportedly hiring again in the oil
fields of western North Dakota. Results from the
Minneapolis Fed’s annual survey of manufacturers,
conducted in November and December, showed that
hiring activity was flat in 2016, though the outlook was
positive as one-third of respondents planned to increase
employment in the coming year. A Montana staffing
agency reported solid hiring expectations among clients.
“There is a level of optimism I haven’t seen in a long
time,” said a source there. A survey of employers by a
multistate staffing firm found a positive, but somewhat
softer hiring outlook for the first quarter of 2017 in the
District compared with earlier surveys. In Minnesota
more than a half-dozen layoff events occurred, or were
announced, involving between 60 and several hundred
workers, including a transportation company, health care
provider, boat manufacturer, medical device firm, and
private higher education firm. Eight department store
closures were also announced.
Prices
Price pressure was modest since the last report. The
majority of respondents to the Minneapolis Fed’s
manufacturing survey reported that prices were
unchanged over the past year, but one-third expected to
increase their prices in 2017. One manufacturer noted
that steel prices have been flat for two years, but cement
prices have increased around 15 percent. Home heating
costs were expected to be as much as 30 percent higher
this winter than last year, due to a combination of colder
weather and higher fuel prices. Most prices received by
farmers decreased in November from a year earlier, with
the exception of chickens and soybeans.
I-1
Federal Reserve Bank of Minneapolis
Consumer Spending
Rapid City and Sioux Falls, S.D. Activity in highway and
other heavy construction sectors was slower. A
construction supply contact in Minnesota said firms
working on infrastructure projects statewide “are feeling
the pinch” because of delayed public funding. A Montana
source said the building sector there “has been fairly
robust,” but the highway sector has slowed significantly
because of lower-than-expected state fuel tax
collections. This has curtailed maintenance projects and
postponed project lettings. Residential construction
slowed, as total single-family permits fell in NovemberDecember compared with a year earlier in Billings,
Fargo, Bismarck, N.D., Minneapolis-St. Paul, and
Rochester. Only Sioux Falls saw a slight uptick over this
period.
Consumer spending across the District was down
modestly since the last report. A mall manager in
Minneapolis-St. Paul reported a “very odd” holiday
season for consumer spending in recent months; overall
spending was down roughly 2 percent to 3 percent.
Contributing factors included unfavorable weather,
holiday timing that corresponded with a weekend, and
increased online shopping. Weather was warm in
November, “so there was no Christmas feel in the air”
and weather in December was “too cold to encourage
shopping.” Conditions were similar in Fargo, N.D., where
consumer spending was down 4 percent to 5 percent,
according to a mall manager there. “Cold weather and
storms deterred many shoppers, especially because 40
percent of our mall shoppers live outside of the city
limits.” Clothing retailers, in particular, have seen a drop
in sales; one national clothing retailer has closed five
stores in the Minneapolis-St. Paul region. Automotive
sales were modest since the last report. A car dealership
in Devils Lake, N.D., reported that new car sales were
down slightly, but used-car sales made up for the small
loss. “We’re all pretty optimistic for 2017; 2016 ended up
doing pretty well.”
Real estate activity was moderate to strong since the last
report. Sales of office, industrial, and apartment
properties in Minneapolis-St. Paul were strong, though
office vacancy rates there have ticked higher as several
major tenants vacated space for new, build-to-suit
space. Home sales in November were higher relative to
a year earlier, including double-digit increases in 18
northern Wisconsin counties, the Flathead Valley region
in Montana, and across Minnesota.
Tourism
Manufacturing
Tourism conditions were up moderately since the
previous report. Snowy weather had a positive impact on
winter tourism activity. Ski lodges and restaurants in
Montana, Minnesota, and Michigan’s Upper Peninsula
reported ideal conditions for winter activity, including low
fuel prices for travelers. Since the last report, hotel
occupancy rates have flattened as reported by owners in
Billings, Mont., and Minneapolis-St. Paul. A tourism
official in northern Wisconsin reported that December
businesses experienced strong demand. A tourism
official in the Upper Peninsula said, “We are having a
terrific start to the new year; looks like we will have the
best winter conditions that we’ve had in five years.”
District manufacturing increased modestly since the
previous report. An index of manufacturing conditions
produced by Creighton University indicated increased
activity in December in Minnesota and the Dakotas.
Although respondents to the Minneapolis Fed’s annual
manufacturing survey indicated that 2016 demand and
production was flat to slightly down, respondents
expected orders, production, investment, productivity,
and profits to increase in the coming year. A supplier of
machinery used in producing heavy equipment for
forestry and other uses indicated recent demand was up
dramatically.
Agriculture, Energy and Natural Resources
Construction and Real Estate
District agricultural conditions remained weak, with
bountiful harvests offset by low commodity prices. Some
District logging operations were reducing production in
response to low timber prices. Activity in the energy
sector was up slightly. Regulators approved an
environmental permit for a large wind power
development in South Dakota. District oil and gas drilling
as of late-December was roughly unchanged from a
month earlier; however, reports indicated that multiple
firms were hiring oilfield service crews. ■
Construction activity was mixed since the last report.
Projects out for bid through mid-December were at
similar levels to a year earlier, according to an industry
database. Industrial and retail space currently under
construction in Minneapolis-St. Paul was higher than a
year ago, while office space construction was
significantly lower. Multifamily permits in NovemberDecember rose considerably over a year earlier in
Minneapolis-St. Paul and Rochester, Minn., along with
I-2
Federal Reserve Bank of
Kansas City
The Beige Book ■ January 2017
Summary of Economic Activity
Economic activity in the Tenth District increased modestly in late November and December, and most sectors were
optimistic about growth in the next few months. Consumer spending increased with retail, auto and tourism contacts
reporting stronger sales than the previous survey period. Manufacturing activity expanded moderately due to stronger
activity in both the durable and nondurable goods sectors. Contacts in transportation, professional, and high-tech firms
reported increased sales, but firms in the wholesale trade sector noted a continued moderate decline in activity. District
real estate conditions were modestly weaker as residential real estate activity declined and commercial real estate
activity remained flat. Energy activity across the District experienced moderate growth, and expectations remained
positive. District farm income remained subdued as low crop and livestock prices persisted. Employment increased
slightly since the previous survey period, and contacts reported modest wage growth. Input prices were up slightly in
most sectors, and selling prices were mixed.
Employment and Wages
increase in the coming months. Respondents in the
transportation sector reported slightly higher input prices,
but selling prices held steady after contracting during the
prior survey period. Prices in the construction sector
rose, with additional moderate increases expected in the
coming months. Manufacturers reported a modest rise in
finished goods prices after falling in the previous survey,
while raw material costs edged up. Manufacturers expected a slight increase in both finished goods and raw
materials prices over the next few months.
Employment and employee hours rose slightly since the
previous survey period. Contacts in the transportation,
professional and high-tech, real estate, education and
manufacturing sectors noted increased employment
levels in late November and December, while employment declined in the wholesale trade sector. Additionally,
employment in the retail and auto sectors was below
year-ago levels, but was flat in the restaurant sector.
Employment in the energy sector increased, although
remained below year-ago levels. Contacts across all
sectors expected stable-to-increasing employment levels
over the next six months. Average employee hours
worked increased slightly in the service and manufacturing sectors. Respondents noted a shortage of commercial drivers, skilled technicians, and service workers.
Consumer Spending
Consumer spending increased modestly in late November and December, and was expected to increase moderately in the next six months. Retail sales rose moderately since the previous survey and were considerably
above year-ago levels. Winter and holiday items sold
particularly well, while sales of luxury products were
sluggish. Retailers anticipated sales to rise in the next
few months, and inventory levels were expected to increase slightly. Auto sales rebounded modestly over the
survey period, but remained below year-ago levels.
However, dealer contacts expected a strong pickup in
sales during the months ahead. Auto inventories increased and were expected to rise slightly in the coming
months. Restaurant sales fell modestly and were slightly
below year-ago levels. Respondents in the restaurant
Contacts in most sectors continued to report modest
wage growth, and anticipated moderate wage growth in
the months ahead.
Prices
Input prices were up slightly in most sectors compared to
the previous survey period, while selling prices were
mixed. In the retail sector, input prices edged up, while
selling prices fell modestly. Both input and selling prices
declined in the restaurant industry, but were expected to
J-1
Federal Reserve Bank of Kansas City
sector expected a moderate increase in activity heading
forward. District tourism activity remained above yearago levels, and a strong increase in activity was expected moving into the winter months.
Banking
Most bankers reported steady overall loan demand in
late November and December including steady demand
for commercial and industrial, commercial real estate,
residential real estate, agricultural and consumer installment loans. Loan quality was unchanged compared to a
year ago according to most bankers. In addition, a majority of respondents expected loan quality to remain
essentially the same over the next six months. Credit
standards remained largely unchanged in all major loan
categories, and a majority of respondents reported stable deposit levels.
Manufacturing and Other Business Activity
District manufacturing activity expanded moderately
since the previous survey period, while the pace of other
business activity varied. Manufacturers reported considerable improvement in both durable and nondurable
goods production, particularly in metals, machinery, and
food products. Production, shipments, and new orders
grew at their fastest pace in over two years. Manufacturers’ capital spending plans expanded moderately, and
many contacts expressed signs of optimism heading
forward.
Energy
District energy activity increased moderately in late
November and December, and expectations remained
positive. The number of active oil and gas drilling rigs
continued to pick up modestly across the District. Oil
prices rose moderately to reach eighteen-month highs
after OPEC announced a lower oil production target in
late November 2016. However, the majority of survey
contacts expected actual production to exceed the target. Most firms projected U.S. oil production to be above
previous forecasts due to continued expectations of
higher oil prices. Natural gas prices were slightly higher
due to strong seasonal demand. Local firms expected
natural gas prices to be near current levels through
2017, but not high enough to substantially increase
drilling activity.
Outside of manufacturing, professional, high-tech, and
transportation firms reported moderate sales increases,
with strong improvements expected in future months.
Wholesale trade contacts noted a continued moderate
decline in activity but were optimistic about future sales.
Professional, high-tech, and wholesale trade firms reported favorable capital spending plans, while transportation contacts expected capital spending to continue to
fall.
Real Estate and Construction
Overall District real estate conditions were modestly
weaker as residential real estate activity declined and
commercial real estate activity remained flat. Residential
sales and inventories were moderately lower than the
previous survey period, but contacts expected sales to
increase over the coming months as adverse seasonal
factors abated and buyers sought to purchase homes at
low interest rates. Home prices remained moderately
higher in late November and December and were expected to rise further. Residential construction activity
declined since the previous survey, with flat housing
starts and moderately lower construction supply sales.
Contacts anticipated residential construction activity to
increase moderately in the months ahead. Contacts in
the commercial real estate sector reported similar conditions since the previous survey period as absorption and
completions increased slightly, but construction underway, sales, vacancy rates and prices were flat. Commercial real estate expectations were modestly positive.
Agriculture
Farm income expectations weakened slightly as most
agricultural commodity prices remained lower than a
year ago. In the livestock sector, cattle prices declined
from the previous year due to growing inventories, and
hog prices also remained lower than year-ago levels. In
the crop sector, large corn and wheat inventories kept
prices subdued, but strong yields in some areas helped
to offset losses from low prices. However, strong export
demand boosted soybean prices moderately from a year
ago. With the exception of soybeans, livestock and crop
prices remained below the cost of production for some
producers. District contacts reported weaker loan repayment rates than the previous year as farm income and
cash flow continued to tighten. Weaker farm income and
credit conditions also continued to pressure farmland
values downward modestly. ■
For more information about District economic conditions visit:
www.KansasCityFed.org/Research/RegionalEconomy
J-2
Federal Reserve Bank of
Dallas
The Beige Book ■ January 2017
Summary of Economic Activity
Economic activity in the Eleventh District expanded moderately over the past six weeks. Manufacturing activity increased, and demand for nonfinancial services strengthened. Retail and automobile sales rose, although there were
some reports of weakness. Housing demand grew and commercial leasing activity expanded in most markets. Loan
demand was stable, and the energy sector saw further improvement. Agricultural producers faced mixed conditions, as
record grain yields pressured prices, despite firm demand. Prices, employment and wages increased. Outlooks generally improved.
Employment and Wages
Manufacturing
Overall employment rose, although hiring in manufacturing remained weak and there were reports of layoffs in
health care. Some energy service firms reported higher
employment levels and a recruiter for oilfield services
firms said they had some orders for hiring and training
new employees for 2017. A retailer said they will likely
layoff some employees in 2017 if soft sales persist.
Reports of skilled labor shortages continued, particularly
in construction. Upward wage pressures were similar to
the last reporting period.
The manufacturing sector expanded during the reporting
period. Output rose for durables, although continued
weakness was seen in fabricated metals manufacturing.
Demand for construction materials was stable, and a
brick manufacturer said that year-over-year demand was
flat in Dallas, but down in Houston and Austin and up in
San Antonio. Nondurable manufacturing production was
flat to down, but food manufacturers noted increases.
Outlooks remained positive, although a few contacts
cited the strong dollar as a headwind for exports.
Prices
Gulf Coast refiners noted seasonally strong utilization
rates, and said that large inventories and modest growth
in demand will likely pressure margins this year. Chemical manufacturers noted a positive outlook for 2017, as
they expect to receive better margins due to the wider
spread between oil and natural gas prices—
domestically, chemicals are produced with natural gas
and have a cost advantage over oil-based production in
other parts of the world.
Input costs and selling prices rose during the reporting
period. Staffing firms said pricing was flat, although one
firm said they were renegotiating certain contracts at
lower rates. Air fares edged up, while downward pressure on rail shipping rates was noted. Oilfield service
firms reported an increase in prices, reflecting a pickup
in demand for their services. Oil and natural gas prices
rose, as did retail gasoline and diesel prices. Cotton and
grain prices remained depressed. Cattle prices rebounded slightly and dairy prices generally increased but remained below profitable levels for smaller producers.
Retail Sales
Retail demand rose during the reporting period, although
one respondent said that the holiday season was very
competitive. Contacts cited sluggish sales in border
K-1
Federal Reserve Bank of Dallas
cities and energy-related areas. Still, outlooks were
mostly optimistic. Automobile sales increased modestly
on net, although there were reports of softness due to
energy-related weakness.
mained sluggish in Houston, but office sublease inventory fell after growing rapidly during the past two years.
Industrial demand was solid in DFW, but moderated in
Houston.
Nonfinancial Services
Financial Services
Demand for nonfinancial services generally increased
over the past six weeks at a slightly faster pace than in
the prior period. Most staffing services firms saw a
pickup in demand. Orders for temporary and contract
workers remained solid, while demand for direct hires
was mixed. Professional and technical services firms
noted mixed activity, although revenues increased on
net. Reports from food service firms varied as well, with
some contacts noting continued growth, while others
cited a decline in activity. Airlines saw an increase in
passenger demand, which was driven by continued
strength in domestic travel and a slight uptick in travel to
South America. Cargo volumes were stable to up over
the reporting period. Rail cargo increased, led by strong
gains in grain shipments, although petroleum and coal
shipments continued to decline. Seaport cargo volumes
rose in large part due to strength in container traffic,
while air shipments dipped to a slower pace than earlier
in the year. Most services firms noted improved outlooks,
although some expressed concern about the uncertainty
surrounding the incoming administration.
Loan demand was stable over the past six weeks, with
most contacts reporting increases in total loan balances.
Real estate and auto loan categories continued to perform well; however, demand for commercial and industrial loans was soft. Some contacts cited slight increases in
interest rates on loans following the December federal
funds rate hike. Two contacts noted a dip in non-interest
income, driven in part by the poor performance of oil and
gas firms and fewer mortgage refinancings because of
higher rates. Credit quality remained solid and most
respondents cited an uptick in deposit volumes. Outlooks
were mostly optimistic, mainly due to elevated hopes for
regulatory and tax relief following the presidential elections.
Energy
Drilling activity and demand for oilfield services improved
modestly over the reporting period, with the increase
largely driven by a pickup in Permian Basin activity.
Outlooks were more optimistic than earlier in the year,
although several contacts were skeptical about the implementation of the recent OPEC production cuts. Firms
expect oil prices to be higher a year from now, and anticipate steady increases in activity over that period.
Construction and Real Estate
Growth in home sales picked up during the reporting
period, although respondents noted continued softness
at the higher end. Several contacts attributed the increase to a post-election surge and higher mortgage
rates. There were reports of pushback from builders on
lot pricing. Home prices were flat to up slightly, and
some contacts said builders were beginning to focus on
bringing more affordable product to the market.
Agriculture
Record grain yields in 2016 have created burdensomely
high stock levels, despite firm demand, keeping prices
below the cost of production for most producers. Very
strong cotton yields in West Texas led to another upward
revision of Texas (and U.S.) cotton production, putting
further downward pressure on prices which were already
near breakeven or sub-profitable levels. Still, cotton
prices are relatively better than feed grain or wheat
prices, and contacts expect an increase in cotton acreage in 2017. Beef exports have increased, and low feed
costs are helping producers’ bottom lines. ■
The DFW apartment market continued to lead other
major Texas metros, with nearly full occupancy and
strong rent gains, despite large deliveries. Demand in
Houston was better than expected noted one contact,
although it has been unable to keep up with supply,
resulting in further declines in rents and occupancy
rates. Rent growth slowed markedly in Austin and occupancy dipped, while rents and occupancy rose in San
Antonio. Contacts noted that financing for new multifamily properties has become more difficult to obtain.
Office leasing demand remained solid in DFW, particularly for new product or recently built space. Rents ticked
up, despite elevated construction. Leasing activity re-
For more information about District economic conditions visit:
www.dallasfed.org/research/texas
K-2
Federal Reserve Bank of
San Francisco
The Beige Book ■ January 2017
Summary of Economic Activity
Economic activity in the Twelfth District continued to expand at a moderate pace during the reporting period of midDecember through early January. Overall price inflation increased modestly, while upward wage pressures strengthened. Sales of retail goods picked up, and growth in the consumer and business services sectors remained strong.
Manufacturing activity changed little on balance, and conditions in the agriculture sector were largely stable. Contacts
reported continued strong activity in residential real estate markets, while conditions in the commercial sector strengthened. Lending activity grew at a moderate pace.
Employment and Wages
On balance, wage pressures strengthened. Labor shortages in the technology, health-care, and financial industries boosted wages for skilled workers. Minimum wage
legislation increased compensation for unskilled workers
across the District. One contact in the media and entertainment industry reported that some companies were
postponing filling vacant positions in order to offset rising
costs from minimum wage increases. Wage growth for
skilled and unskilled labor in the construction industry
picked up further, and contacts reported substantial labor
shortages among contractors in metropolitan areas.
sales of beverage products were strong, particularly in
the Mountain West, where consumer spending was
boosted by a tight labor market and rising wages. Sales
at apparel retailers were on par with the prior year’s
holiday season. Demand for personal computing devices
slowed slightly from the same period last year. Strong
growth in e-commerce continued to reduce foot traffic at
traditional brick-and mortar retailers, with one contact
reporting that an apparel retailer planned to close 15
percent of their store locations.
Activity in the consumer and business services sector
generally grew at a strong pace. Demand for IT business
services remained strong, and expectations of future
increases in the demand for cloud computing services
boosted infrastructure investment in data centers. Sales
of gaming products picked up, particularly for games
sold through online channels. Growth in e-commerce
sales increased demand for transportation services, with
one contact noting that holiday sales had nearly doubled
volumes from their typical daily level. Contacts in the
tourism industry noted that air travel demand was around
the same level as the previous year’s holiday season.
Hotel bookings grew moderately compared with last
year’s holiday season, and one contact noted that advance 2017 holiday bookings have already surpassed
Prices
Overall, price inflation increased modestly over the reporting period. Contacts in the hospitality and restaurant
industries reported increasing the price of goods and
services to offset rising labor costs. Price increases for
branded drugs and some generic drugs moderated
somewhat from a strong pace. In general, prices for
commodities and agricultural goods increased minimally
and remained relatively low. However, one contact reported that steel prices strengthened from a low level
after a modest pick-up in demand.
Retail Trade and Services
On balance retail sales picked up over the reporting
period, but reports varied somewhat by sector. Holiday
L-1
Federal Reserve Bank of San Francisco
levels experienced as of this time last year. Contacts
observed that demand for restaurant and dining services
remained sluggish, in part due to adverse holiday weather in the Pacific Northwest. Uncertainty surrounding
fiscal policy and the future of the Affordable Care Act
reduced providers’ demand for some health-care goods
and services.
Financial Institutions
Lending activity grew at a moderate pace over the reporting period. Loan demand expanded, and competition
for borrowers remained elevated. On balance, deposits
grew at a moderate pace, with one contact in the Mountain West noting that strong economic growth led to a
surge in deposits at banks in the region. Credit quality
strengthened, and liquidity remains ample. Contacts
noted that regulatory costs continued to constrain profitability at community banks in some regions. ■
Manufacturing
Manufacturing activity was mixed across sectors but
largely flat on balance over the reporting period. Production of pharmaceuticals continued to grow at a strong
pace, and contacts reported robust merger and acquisition activity throughout the industry. Demand for energy
generation from manufacturers picked up from a low
level. Deliveries and new orders for commercial aircraft
declined relative to the same period a year earlier. In the
steel manufacturing sector production was suppressed
by increased global supply, dollar appreciation, and
sluggish demand growth from domestic energy producers.
Agriculture and Resource-Related Industries
Activity in the agriculture sector was mixed over the
reporting period. Demand for timber products remained
strong. Harvests of cherries and apples grew at a moderate pace. Profit margins in the dairy industry improved
somewhat. However, contacts noted that dairy producers’ investment in equipment was sluggish and focused
on replacing aging machinery. Dollar appreciation
slowed beef exports, and profitability remains a concern
for many producers. Contacts reported that some farmers in California took land out of production due to
drought conditions and labor shortages.
Real Estate and Construction
Real estate market activity continued to grow at a strong
pace. On balance, activity in the housing market remained strong, yet the pace of growth in metropolitan
centers outpaced that in rural areas. Contacts in the
Pacific Northwest and Mountain West reported that,
while housing demand remained high, construction
activity was constrained by shortages in available land,
labor, and materials. Demand for new commercial construction strengthened, and one contact noted that activity in the Sacramento area remained robust. Overall, the
pace of price increases in the housing market picked up
further, yet a few contacts noted that the pace in their
regions had slowed slightly. Prices for commercial real
estate increased, and vacancy rates remained at historical low levels.
L-2
Cite this document
Federal Reserve (2017, January 31). Beige Book. Beige Book, Federal Reserve. https://whenthefedspeaks.com/doc/beige_book_20170201
@misc{wtfs_beige_book_20170201,
author = {Federal Reserve},
title = {Beige Book},
year = {2017},
month = {Jan},
howpublished = {Beige Book, Federal Reserve},
url = {https://whenthefedspeaks.com/doc/beige_book_20170201},
note = {Retrieved via When the Fed Speaks corpus}
}