Beige Book
For use at 2:00 PM EDT
Wednesday
April 19, 2017
The Beige Book
Summary of Commentary on Current Economic Conditions
By Federal Reserve District
April 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
E-1
Fifth District
Atlanta
F-1
Sixth District
Chicago
G-1
Seventh District
St. Louis
H-1
Eighth District
Minneapolis
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?
Fourth District
Richmond
What is The Beige Book?
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 Richmond
based on information collected on or before April 10, 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 ■ April 2017
Overall Economic Activity
Economic activity increased in each of the twelve Federal Reserve Districts between mid-February and the end of
March, with the pace of expansion equally split between modest and moderate. In addition, the pickup was evident to
varying degrees across economic sectors. Manufacturing continued to expand at a modest to moderate pace, although
growth in freight shipments slowed slightly. Consumer spending varied as reports of stronger light vehicle sales were
accompanied by somewhat softer readings in non-auto retail spending. Tourism and travel activity generally picked up.
On balance, reports suggested that residential construction growth accelerated somewhat even as growth in home
sales slowed, in part due to a lack of inventory. Nonresidential construction remained strong, but became more mixed
in some regions; leasing activity generally improved at a more modest pace. More than half of the reports suggested
that loan volumes increased, while only one said they were down modestly. Non-financial services generally continued
to expand steadily. Energy-related businesses noted improved conditions while agricultural conditions varied.
Employment and Wages
Employment expanded across the nation and increases ranged from modest to moderate during this period. Labor
markets remained tight, and employers in most Districts had more difficulty filling low-skilled positions, although labor
demand was stronger for higher skilled workers. Modest wage increases broadened, and reports noted bigger increases for workers with skills that are in short supply. A larger number of firms mentioned higher turnover rates and more
difficulty retaining workers. A couple of Districts reported that worker shortages and increased labor costs were restraining growth in some sectors, including manufacturing, transportation, and construction. Businesses generally
expected labor demand to increase moderately in the next six months, and looked for modest wage growth.
Prices
On balance, prices rose modestly since the previous report. Input prices generally increased at a modest rate and
outpaced gains in selling prices, which rose only slightly. Price increases were noted for some building materials, such
as lumber and concrete, whereas metal prices remained fairly stable. Retail prices rose moderately, on the whole.
Energy prices were flat to slightly lower. Reports on agriculture prices varied, with increases in cotton, peanuts, chickens, and hogs, and declines for corn and wheat. Home prices generally moved slightly higher. Businesses mostly
expected mild to moderate price growth to persist in the next several months.
Highlights by Federal Reserve District
Boston
New York
Overall activity expanded and most business contacts
reported modest to moderate increases in revenues.
Firms continued to cite difficulty filling selected positions
and planned small wage increases, if any. Prices were
said to be stable or up slightly. Respondents said their
outlook remained positive.
Economic activity has expanded modestly. Labor markets remained tight and wages continued to grow moderately. Input cost pressures have remained fairly widespread, while selling prices have continued to increase
at a modest pace. Housing markets have improved
somewhat except at the high end, while commercial real
estate markets have been steady to slacker.
1
National Summary
Philadelphia
St. Louis
Overall, economic activity continued to rise modestly in
the Third District with continued moderate growth among
manufacturers and homebuilders. However, activity was
essentially flat in several other sectors, including consumer spending. Many contacts remained cautiously
optimistic. In general, employment, wages, and prices
continued to rise at a modest pace.
Economic activity has continued to increase at a modest
pace. Reports from retail contacts suggest a modest
uptick in consumer spending after a slow start to the
year. District activity in natural resource extraction also
improved modestly from the previous report. February
District coal production was 10 percent higher than one
year ago.
Cleveland
Minneapolis
The economy expanded at a moderate pace, as improved consumer and business expectations have
boosted activity levels and hiring for some businesses.
Conditions in manufacturing improved, but some manufacturers remain notably cautious. Housing market conditions have cooled slightly but remain above year-ago
levels. Pressures from input prices continued to rise.
Ninth District economic activity increased modestly
during the reporting period. The heavy construction,
manufacturing, energy, and mining sectors saw growth,
while commercial real estate activity was steady at
strong levels. Consumer spending was down, and a
wave of retail closures continued across the District,
affecting both large and small stores.
Richmond
Kansas City
Economic activity increased at a slightly faster, but still
modest pace. Warmer weather brought out more tourists, and manufacturing continued to rebound amidst
stronger new orders, including from overseas. However,
tighter margins cut into manufacturers’ capital spending
plans. Labor demand strengthened, but skills shortages
constrained output in some industries, notably homebuilding. Wages and prices rose at a slightly faster pace.
Economic activity in the Tenth District increased moderately. Manufacturing activity expanded at a strong pace,
and energy activity continued to rebound following several years of decline. Consumer spending rose modestly
with the exception of autos which fell moderately. Agricultural conditions remained generally weak with some
improvement in cattle and soybean markets. Employment was modestly higher, and prices rose slightly.
Atlanta
Dallas
Economic activity increased modestly. The labor market
remained tight with firms noting increased use of training
programs. Wage pressures were reported for high demand positions. Retail sales were soft. Manufacturers
noted a solid increase in new orders and production.
Drought and cold weather impacted agriculture conditions.
Economic activity grew moderately in the Eleventh District. Retail sales growth accelerated slightly, and the
nonfinancial services sector continued to expand. The
energy sector picked up notably, and a rebound was
seen in fabricated metals manufacturing—a segment
with strong ties to oil and gas. Employment continued to
rise, and prices generally increased, except in retail.
Overall outlooks generally improved.
Chicago
San Francisco
Growth continued at a moderate pace. Employment,
wages, and manufacturing production grew at moderate
rates, while prices, business spending, and construction
and real estate activity increased modestly. Consumer
spending was flat, financial conditions were little
changed, and lower crop prices put further stress on the
agricultural sector.
Economic activity in the Twelfth District continued to
expand at a moderate pace. The labor market continued
to tighten. Activity in the retail sector improved moderately, and sales of business services remained strong.
Conditions in the agriculture sector expanded modestly,
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 ■ April 2017
Summary of Economic Activity
Business activity continued to expand in the First District in recent months, with the year-over-year pace of increase said
to be modest to moderate. Most responding retailers and all contacted manufacturers and software and information
technology services firms reported increases in revenue from a year earlier when contacted in early April. Commercial
real estate markets were somewhat mixed in the region. Residential real estate markets across the region saw price
increases and sales declines in February compared with a year earlier, which contacts attributed to low inventories.
Across sectors, hiring was reportedly modest as were wage increases, while many respondents cited difficulty filling a
range of positions. Retailers and manufacturers said some selling prices were up modestly. Most responding firms cited
a positive outlook amid some ongoing policy uncertainty.
Employment and Wages
Prices
Labor markets in the First District continued to tighten
somewhat. Many employers sought to add modestly to
head counts (although one manufacturer laid off about 4
percent of staff over the last year), while wage increases
were modest. Some smaller retailers noted increasing
labor costs, in part driven by increases in state minimum
wages being implemented over a multi-year period.
Restaurant contacts, particularly in heavy tourism regions, expressed concern about possible labor shortages this summer, exacerbated by an expected slowdown
in granting H-2B visas. Half of contacted manufacturers
were hiring, though none in large numbers; several firms
said it was hard to find workers. One respondent said
that during a recent six-month attempt to add to staff for
a new product, two-thirds of applicants for assembly line
jobs were screened out before hiring via math tests and
drug tests; of 400 workers hired, only 180 worked out.
All software and IT services respondents said they
expect to grant wage increases in the low single digits
and plan net increases in headcount between zero and 3
percent through the end of the year. They reported that
high-skill positions such as engineers and data scientists
were increasingly hard to fill, and covering attrition
remained a challenge in both technical and unskilled
areas; for example, one contact noted difficulty covering
very high attrition in a Maine call center.
Business contacts reported modest price increases, if
any. Retailers said prices remained steady or were up by
only small amounts. Restaurant respondents said their
ability to raise menu prices to offset higher labor costs
was limited by declines in grocery store prices. Pricing
reports from manufacturers were mixed: six of ten contacts said that input prices had not changed; the others
generally cited idiosyncratic factors causing price increases. Most manufacturers reported increases in the
price of the goods they sell but such increases were not
large.
Retail and Tourism
Retail contacts consulted for this round reported that
comparable-store sales between mid-February and the
end of March ranged from slightly down to mid-single
digit increases from a year earlier. Some brick and mortar stores have seen a drop in customer traffic, but this
was balanced by increases in the average sale amount.
The outlook for 2017 is generally optimistic.
A contact in the restaurant industry reported that Q1
sales, when tallied, should be up 1 percent to 2 percent
over last year, helped by the relatively mild winter. Respondents said expected visa reductions and limited
ability to raise prices augmented uncertainty about the
outlook, acting as a check on their plans for expansion.
A-1
Federal Reserve Bank of Boston
Manufacturing and Related Services
Office construction activity continued to be restrained
across the District. Apartment construction activity
remained significant but the pace of new deliveries
slowed and the pipeline of planned projects contracted
somewhat amid evidence of slowing rent growth.
Respondents noted that borrowing rates for commercial
property loans were flat despite recent increases in short
-term rates. Most contacts expect further improvements
in their respective commercial real estate markets moving forward, but likely at a slower pace. A Hartford contact was somewhat less optimistic, citing drags on
growth related to severe fiscal strain in his state, while a
Providence contact was more upbeat, based on signs
that business confidence in Rhode Island had improved
recently.
All ten contacted manufacturers said sales were higher
in recent periods versus the comparable period a year
ago. Reports ranged from growth that was slow and
below expectations for a data and publishing firm to
“tremendous growth” for a packaging firm. The latter firm
said that increased e-commerce was driving increases in
demand for boxes for mailing. Otherwise, firms reported
sales growth that was in line with expectations.
Most contacts reported that capital expenditures were
confined to maintenance of existing equipment. Two
exceptions were a chemical manufacturer looking for a
site for a new plant, having exhausted the avenues of
acquisition and more intensive use of existing facilities
they used during the great recession, and a manufacturer of jet engines which continued to invest large amounts
in a new product line.
Residential Real Estate
Residential real estate markets in the First District continued to struggle with a shortage of inventory. All six First
District states as well as the Greater Boston area reported large declines in inventory for both single-family
homes and condos from February 2016 to February
2017. Closed sales also declined in every state and
Boston for single-family homes. Results for condos were
mixed, with closed sales increasing in New Hampshire
and Vermont but decreasing elsewhere. Respondents
ubiquitously reported strong buyer demand. A contact in
Boston said: “Sales could have been much stronger had
the inventory been up. Unfortunately, we’ve noticed that
potential sellers have become more reluctant to list their
homes because they are apprehensive that they may not
be able to find another home themselves.”
Several contacts expressed concerns about policy
uncertainty. A manufacturer of test equipment which
exports a significant portion of its production worried
about trade deals. Firms said that a Border Adjustment
Tax would have mixed effects but hoped for some resolution.
Software and Information Technology Services
Firms experienced revenue growth in the range of 1
percent to 20 percent year-over-year, and even the
1-percent-growth firm saw “incredible” new orders in the
first quarter. While health care and health services are
generally strong in New England, multiple contacts indicated that business sentiment turned positive lately,
bolstering firms that serve more cyclical industries, such
as manufacturing and industrial IT.
Given the robust demand and low inventory, contacts
were not surprised that prices generally rose year-overyear. For single family homes, median sales price rose in
each state except Connecticut. For condos, prices rose
in all reporting regions. A New Hampshire contact said
the low inventory situation and rising prices were
“particularly hard on first-time buyers struggling to get
into the market.” In general, contacts saw no remedy for
ongoing declines in inventories. Most were confident,
though, that buyer demand would stay strong, even in
the face of increasing interest rates. ■
All contacts were optimistic. One contact expressed
concern that continued legislative struggles could put a
damper on business confidence in the future, and another noted that hostile immigration policy could further
tighten labor markets for skilled and unskilled labor.
Commercial Real Estate
Reports on commercial real estate activity in the First
District were mixed. Contacts in Boston and Hartford
reported a modest softening of commercial leasing activity in recent weeks, while activity was reportedly stable in
Portland and somewhat stronger in Providence. In Connecticut the weaker activity extended to both the industrial and office sectors. In Boston reports of slower demand
pertained to the urban office sector, which still enjoyed a
single-digit vacancy rate. Investor demand for prime
Boston properties remained strong but price appreciation
slowed further.
For more information about District economic conditions visit:
www.bostonfed.org/regional-economy
A-2
Federal Reserve Bank of
New York
The Beige Book ■ April 2017
Summary of Economic Activity
Economic activity in the Second District has expanded modestly since the last report, with labor markets remaining tight.
Input price pressures have remained fairly widespread, while selling prices have continued to rise modestly. Manufacturers noted a deceleration in business activity, following brisk growth in the first two months of the year, while servicesector contacts have generally continued to report steady to modesty expanding activity. Consumer spending has been
mixed in recent weeks, even as consumer confidence climbed to a multi-year high. Housing markets were mixed but, on
balance, somewhat stronger since the last report, although the high end has remained relatively weak. As for commercial real estate, office markets were steady to somewhat slacker, while the industrial market continued to strengthen.
New construction activity has been sluggish—both on the commercial and residential side. Banks reported that loan
demand strengthened, while delinquency rates were mostly steady.
Employment and Wages
Prices
The labor market has remained fairly tight. Contacts at
employment agencies continued to report tight job market conditions and fairly brisk labor demand—particularly
for engineers and other tech workers. One New York
City agency characterized hiring as steady at a moderate
level, while two others—one in the city and one upstate—noted a pickup in hiring. However, one noted a
pullback in hiring in the health insurance industry.
Business contacts reported continued moderate growth
in input costs but only modest increases in selling prices.
Manufacturers, retailers and businesses in the leisure &
hospitality industry anticipated moderate increases in
selling prices in the months ahead, while those in other
industries said they expect to keep their prices fairly
steady. Broadway theaters reported that ticket prices,
which had increased by more than the seasonal norm in
the first two months of the year, have returned to more
normal levels.
Manufacturers indicated that they have ramped up hiring
in recent weeks, and businesses in education & health
services reported that they have continued to add jobs,
on net. Employment was reported to be steady to up
slightly in other service industries. In contrast, contacts in
the leisure & hospitality industry reported declining employment. Looking ahead, however, businesses in all
industries indicated that they expect employment to rise,
on balance.
Consumer Spending
Retailers reported that sales were steady to up moderately. Retailers in upstate New York reported that sales
picked up in March, after a flat February. A major retail
chain noted that same-store sales were down slightly
from a year earlier in March but still somewhat ahead of
expectations. Sales in New York City were on par with
the region overall, with little adverse effect from the midMarch snowstorm. Inventories were generally said to be
at desired levels. Retail contacts have grown somewhat
more optimistic about the near-term sales outlook.
Contacts across all service industries reported moderate
wage growth and expected this to continue in the months
ahead. Employment agency contacts in New York City
noted some pickup in wages for new job openings, while
a major agency in upstate New York indicated that wages have held steady.
Auto dealers in upstate New York reported that sales of
new and used vehicles have continued to be strong in
both February and March. Inventories of new vehicles
have remained a bit high for certain makes and models,
B-1
Federal Reserve Bank of New York
but are generally at satisfactory levels. Retail and wholesale credit conditions were reported to be in good shape,
though one contact notes tightening for sub-prime loans.
slipping in Manhattan. Inventories have risen somewhat
in Manhattan but remain low; properties have been
taking longer to sell, and bidding wars have become less
common. In Long Island, Westchester and Fairfield
counties, home sales activity was increasingly robust,
while prices were steady to up only modestly. In upstate
New York, the market has continued to strengthen, with
exceptionally low resale inventories boosting prices and
bidding wars.
Consumer confidence in the Middle Atlantic states (NY,
NJ, PA) climbed again in March, reaching a 16-year
high.
Manufacturing and Distribution
Manufacturers reported that growth in business activity
has receded from the brisk pace seen in early 2017.
Businesses in the wholesale trade and transportation
industries reported steady to moderately growing activity.
Businesses in manufacturing and wholesale trade remained widely optimistic about the outlook, while those
in transportation & warehousing have become less upbeat.
Commercial real estate markets were steady to somewhat slacker in the first quarter. Office availability rates
rose modestly across downstate New York and northern
New Jersey but were steady in upstate New York. Asking rents, on the other hand, edged down in upstate New
York but were steady to up slightly elsewhere. In New
York City, office rents were flat but still up roughly 10
percent from a year earlier. In contrast, the market for
industrial space has shown continued strength. Industrial
vacancy rates continued to decline in northern New
Jersey but leveled off elsewhere; however, asking rents
continued to rise briskly and were up roughly 10 percent
from a year earlier across the District. The market for
retail space has softened noticeably with vacancy rates
rising and asking rents flat to down modestly.
Services
Business in most service industries reported little change
in general business activity since the last report, though
contacts in education & health services reported steady,
moderate growth. Looking ahead, businesses were
generally optimistic about the outlook—particularly those
in the information and professional & business services
sectors. However, businesses in the leisure & hospitality
industry were considerably less upbeat about the outlook.
Finally, both residential and commercial construction
were generally sluggish—likely adversely affected by
wintry weather in March.
Tourism has been mixed in New York City. Both hotels
and Broadway theaters have seen a bit of a pickup since
the last report. However, the outlook for international
visitors has weakened noticeably: one industry expert
has observed an increase in cancellations (conferences,
meetings, school trips, etc), a drop in airline ticketing and
a marked decrease in inquiries from abroad. At least
some of this slack is expected to be picked up by an
increase in domestic visitors.
Banking and Finance
Small to medium sized regional banks reported stronger
demand across all loan categories—especially residential mortgages. However, banks also indicated that refinancing activity decreased. Bankers reported that credit
standards were unchanged. Contacts noted wider
spreads of loan rates over cost of funds across the
board, as well as an increase in the average deposit
rate. Finally, bankers reported an increase in delinquency rates for C&I loans, but no change in delinquencies
across other loan categories. ■
Real Estate and Construction
Housing markets across the District have been mixed
but, on balance a bit stronger since the last report, with
ongoing slack at the high end of the market. New York
City’s rental market has been steady to somewhat weaker. Landlord concessions have grown more prevalent in
an effort to keep rents and vacancy rates steady. Effective rents (factoring in these concessions) have continued to decline—particularly on larger units and particularly in Manhattan. Elsewhere, rents continued to rise in
northern New Jersey but were mostly flat across upstate
New York.
New York City’s co-op and condo resale market has
improved somewhat. Sales volume increased, while
prices were mixed—rising in Brooklyn and Queens but
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 ■ April 2017
Summary of Economic Activity
Aggregate business activity in the Third District continued at a modest pace during the current Beige Book reporting
period. Manufacturing, nonfinancial services, and homebuilding continued at a moderate pace of growth. Five sectors —
nonauto consumer spending, auto sales, lending, and nonresidential construction and leasing — were essentially flat,
similar to the prior period. Existing home sales grew slightly after declining last period. According to most contacts,
employment, wages, and prices continued to grow at a modest pace. Overall, firms continued to expect moderate
growth over the next six months.
Employment and Wages
remaining firms, more reported increases than decreases with the exception of prices received by nonmanufacturing firms, which decreased slightly, on net. Homebuilders noted large increases in lumber and millwork
costs and continued pressures for labor costs. Overall,
the sales prices of existing homes rose slightly, although
this varied across markets and price categories.
Employment has continued at a modest pace of growth
since the prior report. A higher percentage of manufacturing firms reported increases in employment this period
than during the prior period. Manufacturers also continued to note increases in the number of average hours
worked. Employment indicators from nonmanufacturing
firms also improved, as contacts reported overall increases in full-time and part-time staff as well as workweek hours.
Manufacturing
Reports from manufacturers continued to suggest overall
moderate growth. Higher percentages of firms reported
increases in both new orders and shipments this period
compared with the prior period.
On balance, wage pressures continued to be modest,
although contacts reported tightening labor markets. A
majority of manufacturers reported labor shortages and
skills mismatches, but less than half indicated increasing
wages as a result. A Pennsylvania staffing firm continued to see strong demand for staffing services from
companies across various sectors and noted a stronger
pickup in wages than usual. Wage pressures remained
modest for nonmanufacturers, though a slightly lower
percentage of nonmanufacturing contacts reported wage
increases this period than during the prior period.
Overall, gains in activity were indicated by most major
sectors, including the makers of lumber products, paper
products, chemicals, primary and fabricated metal products, industrial machinery, and electronic products.
Roughly two-thirds of the manufacturing contacts were
optimistic that orders, shipments, and general activity
would grow over the next six months, up slightly from the
prior Beige Book period. Firms also expressed broader
optimism for future employment and capital expenditures.
Prices
On balance, price levels continued to rise modestly.
More than two-thirds of firms’ contacts reported no
change at all in prices paid and prices received. Of the
C-1
Federal Reserve Bank of Philadelphia
Consumer Spending
Financial Services
Nonauto retail sales were little changed on balance
during the period, according to several analysts. One
area chain reported a good month followed by a tough
one that was largely impacted by the March snowstorm.
However, the contact has started to express slight concern of a general slowdown in consumer spending beyond the weather impacts, as sales continued to underperform expectations. A mall operator noted pronounced
weakness for winter apparel and also reported mixed
sales over the Beige Book period — modestly up one
month then down the next — with only a few retailers
showing positive trends. Restaurant and food sales at
malls were also down slightly.
Third District financial firms have reported little change in
overall loan volumes excluding credit cards since the last
Beige Book, similar to the prior period. Commercial real
estate loan volumes grew notably, and volumes of residential mortgages grew slightly. Home equity loans
posted modest decreases, and auto loans and commercial and industrial loans decreased slightly. Separately, a
seasonal decline in credit card volumes that began in the
prior period continued in this period, with a rate of decline similar to the change observed over the same
period last year.
Most contacts continued to report competitive loan pricing and no signs of inflation. In general, banking contacts
continued to express cautious optimism for slow, steady
growth.
Auto dealers reported year-over-year sales were flat to
slightly down this period, after increasing slightly during
the last Beige Book period. Pennsylvania dealers reported fairly steady activity, slightly up but similar to last
year. Sales in New Jersey declined relative to last year’s
levels. Although contacts in New Jersey expressed
uncertainty about keeping pace with the historic highs of
the past two years, they expressed optimism that 2017
would still be a strong year. Dealers also continued to
face high inventory and difficulty sustaining profitability
and margins.
Real Estate and Construction
Homebuilders continued to report moderate increases in
traffic, contract signings, and construction backlogs. A
South Jersey builder noted a continuation of the longest
run of steady sales (since November) in over 10 years,
while a Pennsylvania builder started to see more firsttime homebuyers compared with last year. Some contacts wondered if recent interest rate increases helped
get potential buyers off the fence.
Tourism contacts generally indicated a continuation of
modest growth. Philadelphia area hotels continued to
report strong demand. A contact in the Poconos reported
that while February had been a weaker month because
of the mild weather, the late-season snowstorm in March
led to a significant pickup in snow-related activities and
boosted overall first-quarter performance. A Delaware
contact noted that traffic counts and spending were up at
Delaware beaches. In Atlantic City, casino revenues
flattened this period after posting year-over-year gains in
the prior period.
Brokers in most major Third District housing markets
reported a slight increase in existing home sales, following a modest decline last period. Contacts continued to
report low levels of inventory.
Nonresidential real estate contacts covering much of the
Third District continued to report little change overall to
the relatively high levels of construction and leasing
activity. Contractors noted a slight seasonal lull in construction activity, but they expect a pickup later in the
year from large projects in the pipeline. ■
Nonfinancial Services
Third District service-sector firms continued to report
moderate growth in general activity, overall, although the
pace slowed somewhat from the prior period. Responses
suggested little change in the pace of new orders but a
slowing in the pace of sales. Expectations about future
growth, which had tempered during the prior Beige Book
period, changed little, and contacts remain optimistic.
For more information about District economic conditions visit:
philadelphiafed.org/research-and-data/regional-economy
C-2
Federal Reserve Bank of
Cleveland
The Beige Book ■ April 2017
Summary of Economic Activity
Economic activity grew moderately on balance across the Fourth District since our last report. Labor markets continued
to strengthen, with moderate to strong wage gains. Upward pressure on prices paid by producers increased; selling
prices rose, though at a slower pace. Consumer spending was stable; Internet and mobile transactions continued to
offset declines at brick and mortar establishments. New motor vehicle sales strengthened. The outlook by manufacturers noticeably improved as factory output picked up. Nonfinancial services firms experienced moderate revenue growth
overall. Freight volume expanded over the period, especially for steel, coal, and consumer products. The housing market cooled slightly, but unit sales remain above year-ago levels, and selling prices are higher. Commercial builders are
experiencing stronger than usual inquiries and growing backlogs. Lending pipelines were satisfactory.
Employment and Wages
also cited pressures on capacity utilization in the materials manufacturing industry. Oil and gas field materials
prices moved higher because of the expansion in upstream activity. The steepest increases were for steel
and sand. Even though producer selling prices are rising,
they have not kept pace with the upsurge in input costs.
A few contacts noted that productivity increases have
helped soften margin contraction. Manufacturers, homebuilders, and general building contractors experienced
little pushback when attempting to raise their selling
prices. Concerns were raised about rising apparel and
motor vehicle prices if a border-adjustment tax were
enacted.
District payrolls continued to expand at a steady, albeit
slow, pace. Increases were prevalent in the financial
services, construction, and manufacturing industries.
Brick-and-mortar retail was the only industry to report an
overall staffing decline. Here, several contacts announced job cuts because of store downsizing or closures. Staffing firms noted that their clients expect that
both the pace of hiring will pick up as the year progresses and the number of openings for permanent jobs will
rise. One staffing firm reported that billable hours for the
first quarter were 20 percent higher compared to the
historic average. Workforce development officials told us
that while the number of entry-level jobs is rising, finding
candidates with the required core skills is difficult. Job
churning has become an issue confronting many hiring
managers. Wage increases during 2017 are expected to
average about 3 percent, with significantly higher increases needed to retain high-skilled employees.
Consumer Spending
Consumer spending remains stable. Growth in the number of transactions completed over the Internet or via
mobile devices offset declines in brick-and-mortar transactions. Traditional retailers reported that mall traffic
continues to weaken and that there is less impulse buying. One chain said that the apparel segment has been
on a downswing as consumers’ disposable income is
being allocated for other priorities. Another chain cited
the unusually warm weather as a factor for the decline in
purchases of cold-weather merchandise. Retailers noted
that they have little room to raise shelf prices. As a result
Prices
Upward pressure on prices paid by producers increased
over the period. Manufacturers attributed increases to
the partial recovery in steel and other primary materials
prices. A homebuilder said that his industry is feeling
pent-up pricing pressure from materials suppliers. He
D-1
Federal Reserve Bank of Cleveland
of these circumstances, brick-and-mortar retailers are
cutting back on inventories and capital spending. Year-to
-date unit sales through February of new motor vehicles
increased more than 5 percent when compared to those
of the year-earlier period. The share of light truck transactions continues to trend higher.
housing and distribution facilities. Contractors noted that
demand for retail-related work has diminished significantly. There is optimism about the impact that national
infrastructure legislation would have on the construction
industry. However, if an infrastructure bill were passed,
the impact would not be felt until 2018 at the earliest.
Industrial Production
Financial Services
Manufacturing sentiment has noticeably improved during
the past couple of months, though a few large manufacturers cautioned that the new found optimism may be
unwarranted. Reasons for the optimism include slowly
improving global economic conditions, a partial recovery
in commodity prices, and expectations for tax and regulatory reform on the part of the new administration. Activity for suppliers to aerospace, automotive, construction,
and Internet-retailing end markets remains elevated.
Factors tempering output growth include the strong
dollar and trade policy uncertainty. Year-to-date production through February at District auto assembly plants fell
about 2 percent when compared to that of the same time
period during 2016. Reports indicated that a growing
number of manufacturers are expanding capital budgets.
Additional monies are being allocated primarily for new
equipment and long-stalled maintenance projects.
Bankers generally remain satisfied with their credit portfolios. Although customer confidence is higher, that
confidence has not yet translated into additional commercial or retail lending. Bank customers seemingly are
waiting for more definitive proposals on tax and regulatory reform from the new administration before moving
ahead with projects. On the commercial side, strongest
demand is for CRE loans and M&A financing. Two largebank contacts reported that manufacturers are increasingly turning to non bank sources for capital project
financing. Several bankers noted a seasonal decline in
consumer lending overall, especially for credit cards. A
drop in auto loans was attributed to increased competition from OEM captives and credit tightening for subprime applicants. A rise in interest rates and low existinghome inventory were cited as factors for a decline in
mortgage borrowing.
A small rise in oil and gas drilling is spurring additional
investment in midstream and pipeline projects. Drillers
are being motivated by a slow upward trend in wellhead
prices and a need to perform on their leases. With the
new presidential administration, oil and gas producers
are hopeful for a less restrictive permitting process.
Nonfinancial Services
Professional and business services firms reported moderate levels of activity on balance over the period.
Strongest demand was seen by bioscience, IT, logistics,
and management consulting firms. An IT executive reported that year-to-date results have been unusually
positive so far. A management consultant said that his
firm has recently seen a broad-based rise in demand.
Factors contributing to increased demand are a stronger
economy and a need for assistance in navigating emerging uncertainties such as changes in health-care laws.
Real Estate and Construction
Year-to-date unit sales through February of new and
existing single-family homes increased 1.6 percent compared to those of a year earlier. The average sales price
rose more than 6 percent. Homebuilders reported that
rising interest rates and rising list prices are motivating
potential buyers to move off the fence. The impact of
these factors on demand for new home construction may
not be known for months owing to the significant time
lags in the new home buying process. Year-to-date
estimates of single family construction starts were much
higher in Ohio compared to a year earlier. Strongest
demand was found in the first-time and move-up price
point categories. Sales of high-end homes continued to
slow.
Freight volume expanded over the period on balance,
and this expansion was attributed to improving economic
conditions and lean inventories. Increases were seen
primarily in shipments of steel, coal, and lower-value
consumer products. A few carriers reported that they
were able to push through rate increases. ■
Nonresidential contractors reported rising optimism
across their markets. The number of inquiries was described as strong for early on in the year, and backlogs
are strengthening. Strongest demand was for public
infrastructure projects, commercial buildings, and ware-
D-2
Federal Reserve Bank of
Richmond
The Beige Book ■ April 2017
Summary of Economic Activity
The Fifth District economy expanded at a slightly faster, albeit still modest, pace than during the previous Beige Book
reporting period. Manufacturing activity increased amidst reports of stronger shipments and new orders, but tighter
margins reportedly cut into capital spending plans. Port volumes remained very robust and increased modestly further
despite some weather disruptions, while reports on other freight were mixed. Retail sales rose at a modest pace while
tourism activity was boosted by the early arrival of warm weather. Realtors reported an increase in the number of new
residential listings, but quick sales left inventories unchanged at lower-than-desired levels. Nonresidential leasing activity advanced modestly while commercial construction was mostly steady. Financial services activity strengthened modestly while nonfinancial services revenues rose slightly. Reports on natural resources were mixed. Labor demand
remained firm and reports of modest wage increases broadened. Price increases were up modestly, on balance.
Employment and Wages
slight decrease noted for Northern Appalachian coal.
Labor demand strengthened moderately in recent
weeks, and wage gains were more widespread. Contacts generally suggested that wage increases remained
modest, although some firms noted sharper increases
for high-skill workers who are in short supply. Employment agencies reported an increase in the number of
employed workers seeking different jobs, higher turnover
rates, and more wage pressures. A Virginia recruiter said
that he was encouraging clients to increase pay rates
and make quicker hiring decisions when they find the
right worker. Persistent shortages of skilled construction
workers adversely affected a larger number of builders,
and led one South Carolinian to get out of the business
after 25 years in it.
Manufacturing
Prices
Shipments through District ports were robust, on balance, and increased at a modest pace despite some
disruptions resulting from adverse weather events. Moreover, one official suggested that the typical January/
February slowdown did not occur this year as activity
remained elevated after the peak holiday season. Strong
import volumes persisted, and a few contacts noted that
exports had picked up. One executive said that machinery exports increased recently following a considerable
period of weakness.
Manufacturing activity increased as more firms reported
higher new orders and shipments. Manufacturers of
electrical equipment, semiconductors, computer products, autos, and fabricated steel noted stronger business
conditions in recent weeks. Expectations for the next six
months were positive, and small domestic manufacturers
were particularly optimistic. Despite that optimism, contacts suggested that persistent labor shortages had
pushed labor costs up beyond what could be recovered
through price increases, with the resulting squeeze on
margins leading to cutbacks in planned capital spending.
Ports and Transportation
Recent reports indicated a modest rise in prices. Manufacturers’ input prices increased moderately and slightly
outpaced finished goods price growth, according to our
most recent surveys. Specifically, prices rose for corrugated metal, plastic, and lumber. Meanwhile, services
prices continued to edge up while retail prices grew
robustly. House prices rose marginally on average;
however, some contacts reported stronger price growth
in areas with low inventories and a scarcity of buildable
lots. Crop prices varied, with increases noted for peanuts
and cotton while dairy and grain prices trended slightly
lower. Energy prices were stable, on balance, with a
Reports on truck transportation were mixed. One person,
whose company delivers directly to end users, reported
E-1
Federal Reserve Bank of Richmond
a slight acceleration in first quarter shipments from
healthy fourth quarter levels. In contrast, a nationwide
freight hauler described shipments as “ho-hum” and
noted that recent improvements in manufacturing indicators were not yet translating into increased truck freight.
lending demand softened somewhat. A South Carolina
lender noted particular strength in mortgage demand
coming from new homes. Commercial real estate loan
demand generally strengthened, but varied throughout
the District. Non-mortgage business lending rose marginally while auto lending remained fairly robust. Deposit
growth was mostly stable, but one lender in West Virginia noted a slight decline. Interest rates were unchanged
on balance; however, one lender said that pressure to
raise loan rates was building. Credit quality was generally cited to be good and improving slightly. Similarly,
credit standards remained constant even as competition
among banks remained high.
Retail, Travel, and Tourism
Retail sales continued to expand at a modest pace since
the last report. Hardware and gardening stores saw
brisker sales as homeowners took advantage of mild
temperatures. A sporting goods store manager reported
stagnant sales though he was optimistic about sales in
the coming weeks. A furniture retailer said that customers are building, renovating, and moving again, which
contributed to an increased pace of sales in the first
quarter. A large auto dealer reported sales trending up in
March for both new and used cars.
Non-Financial Services
Our most recent survey suggested that services firms
saw a slight increase in revenues. In general, services
related to home building, remodeling, and landscaping
reported the most robust activity. Accounting services
firms also noted stronger demand as the income tax
filing season was well underway. Meanwhile, a marketing firm indicated that increased business to new clients
more than offset a slight decline in demand from some
existing clients. A legal services contact in West Virginia
said that business was picking up, particularly from
clients in the construction, health care, manufacturing,
and mining industries.
Tourist activity picked up beyond normal seasonal trends
due to unusually warm weather. In the Outer Banks,
spending on home furnishings and restaurants increased
as vacation home owners returned to under-take remodeling projects. In western North Carolina, hotels saw
strong corporate bookings and leisure activity at normal
levels. Convention and tourist activity was at seasonal
levels in the nation’s capital.
Real Estate and Construction
Residential real estate sales increased moderately since
the previous report. Realtors reported increased buyer
traffic driven by the early spring weather. Inventories
remained low; however most realtors contacted said that
more homes came on the market, but those homes sold
quickly resulting in unchanged inventory levels. Residential builders reported that home starts and closings were
moderate and had increased somewhat.
Agriculture and Natural Resources
Energy reports varied in recent weeks. Coal production
was flat to marginally lower as prices were slightly down.
At the same time, natural gas production rose slightly
and the number of active rigs increased. Agriculture
conditions were also mixed. Poultry and farming operations picked up in Virginia and West Virginia. In South
Carolina, planting season was underway, having been
somewhat delayed by cold weather. Also, a late winter
freeze significantly damaged the state’s peach crop.
Investment in new farm equipment slowed slightly. ■
On balance, commercial real estate leasing rose moderately. Industrial and retail leasing and sales activity
remained very active throughout the District. Rental rates
varied across sub-market and property types, although
most contacts reported rent increases in the tighter retail
and office markets. Brokers noted an increase in tenant
improvement allowances, while free rent incentives
diminished. Commercial construction generally remained
steady at modest levels, and multifamily construction
continued at moderate levels. A broker in Charlotte,
North Carolina reported an increase in Class A office
space with new construction hitting the market.
Banking and Finance
In general, financial services activity strengthened moderately in recent weeks. Residential mortgage demand
picked up slightly in the District, with the majority of new
activity coming from the purchase side as refinance
For more information about District economic conditions visit:
www.richmondfed.org/research/regional_economy
E-2
Federal Reserve Bank of
Atlanta
The Beige Book ■ April 2017
Summary of Economic Activity
Sixth District business contacts indicated that economic conditions improved modestly from the previous report. The
majority of contacts remain optimistic in their outlook for growth over the next three to six months. The labor market
remained tight and wage growth remained stable. Firms characterized non-labor input costs as steady. Retail sales
softened since the previous report while automotive dealers remarked that sales of light trucks and large vehicles had
improved. Hospitality contacts noted solid domestic activity. Residential real estate builders and brokers indicated that
home sales were flat to slightly up. New home construction increased since the previous report. Demand for commercial
real estate continued to improve and construction increased from the year-ago level across most of the District. Manufacturers cited solid increases in new orders and production. Drought and cold weather caused agricultural conditions to
weaken.
Employment and Wages
Prices
Firms continued to struggle to find, hire, and hold onto
quality workers, particularly in skilled technical jobs, but
also in sales, finance, information technology, and compliance positions. Clerical and other entry-level jobs were
also reported as increasingly difficult to fill. Leisure and
hospitality contacts shared that they are exploring automation options for housekeeping and food preparation
services. Partnerships expanded with workforce development organizations and educational institutions to
develop custom training programs as a means to build
larger pipelines of talent. Additionally, firms continued to
increase investment in internal training programs in order
to develop otherwise unqualified workers. In spite of
these efforts, a number of contacts continued to express
that the inability to find labor was restraining growth.
Manufacturing, construction, and professional services
firms reported strong additions to employee headcount
levels. Reports of turnover increased since the previous
report, particularly for entry level positions. Businesses
continued to actively ramp up efforts to reduce turnover
by offering bonuses, increasing flexible time policies,
absorbing more healthcare costs, and offering other
benefits.
Non-labor input costs were stable and businesses reported pricing power was still constrained. According to
the Atlanta Fed’s Business Inflation Expectations survey,
year-over-year unit costs were up 1.7 percent in March.
Survey respondents indicated that they expect unit costs
to rise 2.1 percent over the next twelve months.
Consumer Spending and Tourism
Most District retail contacts reported that sales levels
were softer since the last report. They reported that the
delay in federal income tax refunds weighed down retail
spending in February. However, merchants expect a
boost to sales in March following tax disbursements at
the end of February. Auto dealers noted sales of light
trucks and large vehicles increased in February compared to a year ago.
On balance, reports from tourism and hospitality contacts across the District were cautiously optimistic. Contacts in Georgia, Louisiana, and Tennessee reported
strong tourism activity since the last report; while some
areas of Florida reported a slight decrease in the number
of international visitors during the same time period. With
the exception of South Florida, hotel occupancy and
revenue per available room were up year-over-year. The
outlook among most contacts for the second quarter of
the year remains upbeat.
Wage growth remained in the 2 to 3 percent range for
most job categories, with the exception of stronger wage
pressures for specialized positions in high demand.
F-1
Federal Reserve Bank of Atlanta
Construction and Real Estate
tainerized and break bulk cargo. A majority of contacts
anticipate activity to remain the same over the next three
to six months.
Reports from residential real estate contacts in the District continued to point to slow but steady growth in February. Most builders noted that construction activity was
up from the year-ago level. Builders and brokers indicated that home sales were flat to slightly up relative to one
year earlier. The majority of builder and broker contacts
noted that buyer traffic was equal to or higher than the
previous year’s level. Residential contacts reported that
inventory levels were similar to or down relative to the
year-ago level. Builders and brokers noted modest gains
in home prices. Home sales expectations improved in
February, with most brokers and builders anticipating
sales to increase slightly over the next three months
relative to the year-earlier level. Most builders expect
construction activity to hold steady at the current pace or
increase slightly over the next three months.
Banking and Finance
Credit remained readily available for most qualified borrowers, although some small businesses continued to
experience difficulty obtaining credit. For larger businesses, private equity sources remained a competitive
alternative to bank financing. Regulatory capital requirements constrained commercial and construction lending
at some banks. Some bank contacts reported increased
pricing pressure on deposits.
Energy
Reports from energy contacts noted that crude oil inventories remained at historically high levels due to weak
demand, oversupply, and continued production. Utility
industry contacts noted continued investments in renewable energy. Contacts cited robust construction on gas
liquefaction plants in southwest Louisiana, however,
skilled labor shortages were also noted. Operational
liquefied natural gas plants experienced steady export
activity.
Most commercial real estate contacts noted improvements in demand that continued to result in rent growth
and increased absorption, but cautioned that the rate of
improvement varies by metropolitan area, submarket,
and property type. Many 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 from District
contacts on the pace of multifamily construction continued to be mixed, with roughly half indicating that the
pace increased from the year-earlier level and the rest
suggesting that the pace leveled off or slowed. Looking
forward, the majority of District commercial real estate
contacts expect the pace of nonresidential and multifamily construction activity to increase slightly over the next
quarter.
Agriculture
Agriculture conditions across the District softened. By
late-March, drought conditions expanded in the District
with drought ratings ranging from dry to extreme. During
the same time period, parts of the District also experienced a cold snap that damaged some fruit and vegetable crops. There were limited reports of poultry that
tested positive for avian flu in Alabama, Georgia, and
Tennessee with stop movement orders, surveillance,
quarantine, and depopulation employed as containment
methods. The March forecast for Florida oranges was
down from February and last season. Some citrus contacts indicated that they are looking for alternative crops
in light of the chronic problems caused by citrus greening. Contacts continued to report farm consolidations. On
a year-over-year basis, prices paid to farmers in January
were up for cotton and soybeans, but down for corn, rice,
beef, broilers and eggs. ■
Manufacturing
District manufacturing contacts reported a solid increase
in overall business activity compared to the previous
report. New orders and production levels rose notably
and finished inventory levels were higher. Purchasing
managers also indicated that supply delivery times were
longer. The outlook for future production continued to be
optimistic, as nearly two-thirds of firms expect higher
production levels over the next six months.
Transportation
District transportation contacts continued to report varying levels of activity since the previous report. Railroad
contacts cited a slight uptick in total rail traffic, as large
increases in shipments of crushed stone, sand and
gravel, waste and nonferrous scrap metal, were mostly
offset by declines in petroleum and petroleum products,
and metallic ore loads. Ports cited robust growth in cargo
overall, led by significant increases in tonnage of con-
For more information about District economic conditions visit:
www.frbatlanta.org/economy-matters/regional-economics
F-2
Federal Reserve Bank of
Chicago
The Beige Book ■ April 2017
Summary of Economic Activity
Growth in economic activity in the Seventh District continued at a moderate pace in late February and March, and contacts expected activity to continue rising at a moderate pace over the next six to twelve months. Employment, wages,
and manufacturing production grew at moderate rates, while prices, business spending, and construction and real estate activity increased modestly. Consumer spending was flat, financial conditions were little changed, and lower crop
prices put further stress on the agricultural sector.
Employment and Wages
Consumer Spending
Employment growth continued at a moderate rate over
the reporting period, and contacts expected it to continue
to rise at a moderate rate over the next six to twelve
months. The labor market remained tight. Contacts
indicated that they were experiencing increased difficulty
filling low-skilled positions, though higher-skilled workers
were still in highest demand. Some contacts reported a
greater willingness to accept less-qualified applicants.
Staffing firms again reported little change in billable
hours and ongoing difficulty filling orders at the wages
employers were willing to pay. One staffing firm indicated
that they were no longer taking orders from clients in any
industry offering wages of less than $11 per hour. Wage
growth continued at a moderate pace. High-skilled occupations were more likely to be given wage increases,
though there were more reports of increases for production workers as well. A number of contacts reported a
rise in healthcare costs.
Consumer spending was flat in late February and March,
though contacts expected the pace of sales to pick up in
the second quarter of 2017. Contacts noted that aboveaverage temperatures benefitted sales of home improvement items and building materials at the expense of their
seasonal businesses. E-commerce activity continued to
grow strongly. Our District contacts reported a slightly
higher sales pace of new light vehicles despite less
generous incentives, with the sales mix continuing to
shift toward light trucks. Used vehicle sales also increased.
Business Spending
Growth in business spending slowed to a modest pace in
late February and March. Most retailers indicated that
inventories were at comfortable levels, though light vehicle inventories were slightly high. Manufacturing inventories were also at desired levels overall, with the exception of stocks at steel service centers, which continued to
be low. Growth in capital expenditures slowed to a modest pace, but contacts expected moderate growth over
the next six to twelve months. Outlays were primarily for
replacing industrial and IT equipment, though there was
an increase in the number of firms reporting spending on
structures.
Prices
Prices again rose modestly overall in late February and
March. Retail prices increased slightly, though one contact noted that higher freight costs have not yet been
passed on to consumers. Metals prices were little
changed overall.
G-1
Federal Reserve Bank of Chicago
Construction and Real Estate
Agriculture
Construction and real estate activity increased modestly
over the reporting period. Residential construction rose
moderately in recent weeks, and homebuilders also
noted that inquiries were up compared with this time last
year. Activity was the strongest in the single-family segment. Home sales increased slightly overall. Demand
varied by price range, with strong increases for homes
under $250,000, modest gains in the $250,000 to
$500,000 price range, and a modest decline in demand
for homes over $500,000. Demand for nonresidential
construction increased slightly, with growth concentrated
in the retail, industrial, and office sectors. The pace of
commercial real estate activity increased only a little
overall, and the gains were limited to the for-lease segment. That said, a number of contacts reported signs of
slowing activity, particularly in the retail segment. Commercial rents, availability of sublease space, and commercial vacancy rates were little changed.
Lower crop prices put further stress on the agricultural
sector. Prices of corn, soybean, and wheat all fell during
the reporting period. With profit margins looking to be
higher for soybeans than for corn, demand for soybean
seeds was high. Recent rains delayed the start of corn
planting in portions of the District. Additional delays
could hurt yields, and, because soybeans are planted
later in the season, could further shift the crop mix toward soybeans. Expectations of low incomes for 2017
led to lower farmland values and cash rents for cropland
compared with last year. However, land values for higher
quality ground and recreational tracts were steady on
balance. Milk and hog prices were lower, while egg and
cattle prices moved up. Expectations of falling milk prices and rising feed costs led more dairy operations to lock
in margins. ■
Manufacturing
Manufacturing production again grew at a moderate
pace in late February and March. Growth was widespread and conditions in some long-struggling sectors
improved again. Demand for steel increased to a moderate pace and was stronger than expected. Growth was
led by demand from the energy sector and steel service
centers, which were in the process of replenishing low
inventories. Specialty metals manufacturers also reported higher sales to the energy sector, though contacts
noted that efficiency gains in the sector over the last
couple of years have resulted in a notable decline in
sales volume per barrel of oil produced. Demand for
heavy trucks increased moderately. Manufacturers of
construction materials continued to report slow increases
in shipments, in line with the modest pace of improvement in construction. Activity in the auto and aerospace
sectors was unchanged, but remained at high levels.
Banking and Finance
Financial conditions were little changed on balance over
the reporting period. Market participants reported that
equity prices are high and that volatility remains low.
Business loan demand increased slightly, with growth
concentrated in the small business segment. Loan
standards were about the same and asset quality remained high. Consumer loan demand increased slightly.
Auto loan demand picked up some, but quality deteriorated slightly. Contacts also reported an increase in
credit card spending and that the pace of residential
mortgage originations 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 ■ April 2017
Summary of Economic Activity
Reports from contacts suggest that economic activity in the District has continued to increase at a modest pace since
our previous report. Overall employment growth was modest, while wage growth remains moderate. Overall inflationary
pressures remained modest. Reports on consumer spending suggest moderate growth since our previous report, with a
moderate uptick in auto sales toward the end of the first quarter. Real estate activity was little changed, while District
banks reported moderate growth in loan demand. Overall activity in agriculture and natural resources remains weak
because of low commodity prices; however, conditions remain generally unchanged since the previous report.
coal and rice have remained about the same, while
prices for corn, soybeans, sorghum, and wheat have
declined slightly.
Employment and Wages
Anecdotal evidence suggests modest employment
growth since the previous report. Several industries
continue to report shortages of available workers. Construction contacts in Memphis and Little Rock reported
shortages of workers, and manufacturing contacts reported difficulties in hiring and retaining experienced
employees. Contacts in transportation and manufacturing reported that growth has been restrained because of
difficulties hiring experienced workers.
Across the District, home prices continued to increase
moderately, with contacts in all areas reporting low inventory. Contacts in Memphis and Louisville reported
rents were modestly higher for Class A commercial
properties, particularly in some major markets. Price
pressures from construction materials were mixed. Contacts in Little Rock reported solid wood prices increased
modestly, while prices for pine saw timber, chips, and
pulpwood remained flat or decreased slightly since the
mild winter allowed for an increase in supply.
Contacts reported moderate wage growth since the
previous report. A manufacturing contact in Louisville
noted upward pressure on wages in the region, with
employers expecting to moderately increase wages.
Anecdotal evidence suggests that tightness in the labor
market has resulted in some employers increasing wages to attract employees.
Consumer Spending
Reports from general retailers, auto dealers, and hoteliers indicate consumer spending growth has been moderate since our previous report. Retail sales growth was
particularly strong in the Memphis area; accordingly, the
majority of households in west Tennessee continue to
hold an optimistic outlook for their financial situation for
2017. Furthermore, the northwest Arkansas region reported record sales tax revenue figures for March. Hospitality contacts in St. Louis and Louisville reported a
modest to moderate decline in occupancy rates. Reports
from auto dealers indicate that sales picked up after a
relatively slow January. Furthermore, multiple dealers in
the Memphis area noted a shift in demand toward used
vehicles.
Prices
Price pressures in the District remained modest. Business contacts did not report changes in overall prices
charged to customers. Low commodity prices continue to
put pressure on sectors dependent on the agricultural
sector. The most-expensive used farm equipment is
selling at deep discounts at auctions, while equipment
prices have remained stable or increased slightly for the
less-expensive equipment. Contacts in Memphis and
Little Rock reported feed prices have declined, given the
lower price of corn. Since the previous report, prices for
H-1
Federal Reserve Bank of St. Louis
Manufacturing
strong construction activity or an increase in the number
of projects undertaken. Contacts expect this trend to
continue through the year. New projects for various
property types were announced or broke ground, including several new hotels, multifamily structures, speculative industrial parks, and mixed-use projects.
Manufacturing activity has increased modestly since our
previous report. Manufacturing activity in March was
stronger than one month earlier in both Arkansas and
Missouri, although the pace of increase slowed slightly in
Missouri. Many companies reported capital expenditure
and facility expansion plans in the District, including firms
that manufacture medical devices, clothing, and chemical products. However, a number of firms announced
plans to close facilities, including manufacturers of machinery, food products, and primary metals.
Banking and Finance
Banking and credit conditions in the District have
strengthened at a moderate rate since the previous
report, with some signs of accelerating growth in lending.
Real estate loan volumes increased at a moderate pace
over the period with the rate of growth continuing to tick
upward. However, contacts report that high volume
lenders are shrinking market areas for multifamily properties due to softening demand. Meanwhile, commercial
and industrial lending among District banks rose at a
moderate to robust rate and markedly outpaced the
nation in terms of growth. Loans to individuals and
households continue to expand at a robust rate and
continue to account for an increasingly larger share of
outstanding loan portfolios.
Nonfinancial Services
Reports of plans in the District’s service sector have
been mixed since the previous report. In particular, several firms that provide transportation, warehousing, and
information services reported plans to build new facilities
or expand employment. Two trucking contacts reported
business is good enough to justify new equipment and
increased hiring. Reports from the professional business
services sector were mixed. Some existing employers
laid off workers but new companies opening in the District were hiring and building facilities. Reports from the
healthcare sector were mostly negative; layoffs were
announced in Louisville and Memphis; however,
healthcare facility expansions were announced in Little
Rock.
Agriculture and Natural Resources
Agricultural conditions were unchanged from the previous report and the same time last year. In March, farmers planned to plant about 20 percent more cotton than
last year, but 20 percent less rice. These movements
correspond to a continued increase in cotton fiber prices
and a continued decline in rice prices. With corn and
soybean prices remaining low, farmers planned to reduce corn acreage by 5 percent and increase soybean
acreage by roughly the same percentage. This planned
switch in the District’s two largest crops was largely
driven by the fact that soybeans, with much lower peracre costs, require much smaller operating loans.
Real Estate and Construction
Residential real estate activity has decreased slightly
since our previous report. Home sales declined in most
major metro areas. Local contacts continued to report a
shortage of inventory relative to strong current demand.
Concerns about rising mortgage rates were mixed, as
some contacts indicated that higher rates have had no
significant effect on the market.
Natural resource extraction conditions improved modestly from the previous report. District seasonally adjusted
coal production grew 4 percent from January to February
and was 10 percent higher than one year ago. ■
Residential construction activity has improved modestly
since the previous report. February construction starts
were generally flat while permit activity increased moderately. Some local builders reported that speculative
homes were selling before completion, indicating that
construction has continued to lag behind demand.
Commercial real estate activity has been flat since the
previous report. Local contacts indicated that demand
has remained steady for most property types. Contacts
noted some concerns that St. Louis office vacancy rates
will rise in the near future due to new construction combined with expiring leases of vacant properties.
Commercial construction activity was mixed. Nonresidential construction started to dip in February.
However, recent reports from local contacts were generally positive, with most seeing either a continuation of
For more information about District economic conditions, visit:
www.research.stlouisfed.org/regecon/
H-2
Federal Reserve Bank of
Minneapolis
The Beige Book ■ April 2017
Summary of Economic Activity
The Ninth District economy grew modestly overall since the last report. Employment grew moderately, wage pressures
picked up, and price pressures were modest overall. Activity increased in construction, manufacturing, energy, and
mining, while commercial real estate activity was flat at strong levels. Tourism activity was mixed, while consumer
spending and residential real estate were down, and agriculture remained weak.
that wages have increased by more than 3 percent from
a year ago; reports from staffing firms in Montana and
Wisconsin suggested even larger increases. A contact at
a South Dakota human resources firm said more
companies were asking for competitive wage analysis
and, as a result, compensation increases were “above
normal.” A manufacturing consultant said clients were
predicting “more aggressive” wage increases than in
past years. While wages in the Bakken oil region
remained below their peak, housing allowances and
daily stipends have come back after being eliminated
during the oil downturn, according to a source there.
Employment and Wages
Employment grew moderately since the last report,
checked by tight labor conditions. From February to midMarch, initial unemployment claims were 14 percent
lower relative to a comparable period a year earlier,
dropping in every state except South Dakota. Continuing
claims were also lower overall. A Minnesota staffing firm
contact said job orders for seasonal workers in
landscape and construction started rising due to the
relatively warmer weather. Firms catering to tourists in
the Black Hills region reported difficulty finding labor,
especially seasonal immigrant labor they have
traditionally used. A Montana source said many firms are
hiring, “but there’s not enough workforce for all of the
openings.” The oil-producing region of North Dakota saw
an increase in hiring, according to a state contact.
Employer booths at recent job fairs there were sold out
and had double the job openings of the previous year,
including one company looking to hire 200 to 300
certified drivers. There were some notable job losses,
including 55 at a Minnesota construction firm and 100 at
a South Dakota senior care organization, along with
those affected by numerous retail closures across the
District. But overall, said one source, “the good news
certainly seems to be outweighing the bad news right
now.” A survey of employers in District states found that
their second-quarter hiring outlook was solidly positive
and more optimistic than a similar, first-quarter survey.
Prices
Price pressures were modest overall since the last
report. A survey of commercial contractors indicated
acceleration in the price of building materials. A contact
at an electric utility reported that a proliferation of wind
energy developments put downward pressure on electric
rates. Most prices received by farmers decreased in
February from a year earlier, with the exception of
soybeans, milk, chickens, and hogs.
Consumer Spending
Consumer spending was down modestly since the last
report. A national department store chain closed 20
stores across states in the Ninth District. In Grand Forks,
N.D., alone, three mall-based department stores
closed—in one case, the closure was due to bankruptcy.
These and other retail store closures, referred to as a
“mall quake” by one industry expert in Minnesota,
Wage pressures were moderate to strong since the last
report. A staffing firm in Minneapolis-St. Paul reported
I-1
Federal Reserve Bank of Minneapolis
reflected the larger national trend of sales gravitating
away from brick-and-mortar stores to online sales. A
national food distributor based in Minneapolis-St. Paul
saw a 5 percent decline in sales in the most recent
quarter, and the third straight quarterly decline. In
contrast, craft breweries in Montana saw record revenue
increases in sales since the last report and were
characterized as an “economic engine” for the state.
Several new grocery stores opened in Minneapolis-St.
Paul as a new national chain has moved into vacant
retail locations.
recent years, office and industrial vacancy rates in Sioux
Falls, S.D., remained low, while apartment vacancies
have risen thanks to an influx of new units. Residential
real estate was lower overall. Some Montana regions
saw growth in home sales, but sales elsewhere in the
District were lower, the result of low inventories,
according to numerous sources, which were leading to
quicker sales and higher prices. In Rapid City, S.D., said
one source, sellers “can expect to get full market value.”
Services
Professional services activity was up modestly.
Information technology and software firms in Sioux Falls
indicated continued growth in sales since the last report.
Accounting firms across the Ninth District reported a
normal, seasonal uptick in activity given the tax season.
Several law firms in the Minneapolis-St. Paul region
experienced modest growth since the last report, and
one law firm is appealing to startup companies by
providing cut-rate legal advice to compete with online
legal tools. A public relations firm in Minnesota reported
“steady work,” as did an architectural firm in Fargo, N.D.
Tourism
Tourism conditions were mixed since the previous report
due to the range of weather conditions across the
District. Bountiful snowfalls in the mountains of Montana
extended the ski season for most resorts. However,
states bordering the Great Lakes experienced
unseasonably warm weather in February and early
March, shortening the winter tourism season by a month.
Small-town ice festivals and Nordic ski races in many
northern state communities lost weeks of anticipated
revenues. Hotel occupancy rates in Wisconsin have
slowed since the last report, according to state officials,
while in Minnesota, lodging revenue exceeded 6 percent
annual growth for the fourth consecutive year.
Manufacturing
District manufacturing activity increased moderately
since the last report. An index of manufacturing
conditions produced by Creighton University indicated
increased activity in March compared with a month
earlier in Minnesota and the Dakotas. A medical device
maker announced an expansion at a Minnesota facility.
A Michigan firm noted that recent orders were “almost
double” expectations. Several contacts across the
District reported increased capital expenditures by
manufacturers.
Construction and Real Estate
Construction activity was up modestly since the last
report. New construction projects out for bid over the
most recent six-week period (through late-March)
increased more than 10 percent over a similar period a
year earlier, according to an industry tracker. A second
industry database showed strong January-February
growth in heavy and other nonbuilding construction
sectors. “We’re anticipating quite a bit of business this
year,” said a construction material supplier in South
Dakota. However, commercial construction permitting
was lower in most District metros compared with the
same period a year earlier. Residential construction was
mixed. Many metros have seen fewer units permitted in
the first quarter compared with a year earlier, but
Minneapolis-St. Paul saw a strong increase in both
single- and multifamily units.
Agriculture, Energy, and Natural Resources
District agricultural conditions remained weak since the
previous report. Most of the District remained droughtfree heading into planting season. Activity in the energy
and mining sectors increased modestly since the last
report. District oil and gas drilling as of late March
increased from low levels a month earlier. Some
contacts in the oil-producing region of the District
expected an increase in activity in April. A copper mine
and a gold mine were slated for opening later this year in
Michigan’s Upper Peninsula. ■
Commercial real estate was flat, but remained solid by
most measures. Office vacancy rates in Minneapolis-St.
Paul have ticked higher after significant new office
development. There were reports of more preleasing
before new projects move into the construction phase.
A Minneapolis-St. Paul source noted that retail
vacancies had crept up to 6 percent, but that “is still
considered very low. Prime retail areas are very tight and
have high rents.” Despite significant new construction in
I-2
Federal Reserve Bank of
Kansas City
The Beige Book ■ April 2017
Summary of Economic Activity
Economic activity in the Tenth District increased moderately in late February and March, and most sectors expected
continued growth in future months. Manufacturing activity expanded at a strong pace, and real estate firms reported a
modest rise in sales. Consumer spending activity rose at a modest pace, and District energy activity continued to increase moderately. Professional and high-tech firms reported moderate sales increases, and bankers reported steadyto-increased loan demand, stable deposit levels, and unchanged loan quality. Transportation activity declined modestly
from the previous survey period, and agricultural credit conditions remained weak, with subdued farm income and continued low commodity prices. Employment and employee hours increased modestly, and wages rose modestly. In most
sectors, input and selling prices were up slightly over the previous survey period.
Employment and Wages
reported modestly higher prices for both input and selling
prices. Transportation input prices were up slightly, while
selling prices increased modestly after falling in the prior
survey period. Prices in the construction sector rose
moderately, with additional moderate increases expected
moving forward. Manufacturers reported slight growth in
finished goods prices, while raw material costs continued
to edge higher. Manufacturers expected a slight increase
in both finished goods and raw material prices over the
next few months.
Employment and employee hours increased modestly in
late February and March, and expectations were for a
continued increase in the months ahead. Contacts in the
manufacturing, energy, retail trade, wholesale trade,
professional and high-tech services, education, health
services, and tourism and hotels sectors reported an
increase in employment levels since the previous survey
period, while contacts in the auto, transportation, and
restaurant sectors noted a decline. All respondents
expected a rise in employment in the coming months.
Average employee hours rose modestly in the manufacturing, energy, and service sectors, and additional gains
were expected moving forward. Respondents noted a
shortage of commercial drivers, skilled technicians, and
service workers.
Consumer Spending
Consumer spending activity rose modestly in late February and March, while expectations for future growth
expanded markedly. Retail sales increased over the
previous survey period, and remained modestly above
year-ago levels. Several retailers noted an increase in
sales for outdoor and sale items, while luxury products
sold poorly. Contacts anticipated sales to rise rapidly in
the next few months, and inventory levels were expected
to increase. Auto sales continued to fall at a moderate
pace, and remained below year-ago levels. However,
dealer contacts anticipated a strong pickup in sales for
the months ahead. Auto inventories fell slightly but were
expected to remain stable in coming months. Restaurant
sales edged down modestly and were well below yearago levels. Contacts expected activity to pick up slightly
heading forward. District tourism activity increased mark-
Contacts in most sectors reported modest wage growth,
and expectations in the coming months were for moderate wage growth.
Prices
In most sectors, input and selling prices were up slightly
compared to the previous survey period. In the retail
sector, input prices rose moderately and selling prices
edged higher. Both input and selling prices were expected to grow moderately in the coming months in the
retail sector. Respondents in the restaurant industry
J-1
Federal Reserve Bank of Kansas City
edly in late February and March and was well above
year-ago levels. Tourism contacts expected strong activity heading into the spring months.
year ago. In addition, most respondents expected loan
quality to remain essentially the same over the next six
months. Credit standards remained largely unchanged in
most major loan categories, though almost a third of
banks indicated lending standards tightened for agricultural loans. Finally, a majority of respondents reported
stable deposit levels.
Manufacturing and Other Business Activity
Manufacturing activity expanded at a strong pace, and
most other business contacts reported increased sales.
Manufacturers reported a rapid expansion in production,
particularly for metals, electronics, and aircraft products.
Shipments, new orders, and order backlog all increased
over the previous survey, and activity was modestly
higher than a year ago. Manufacturers’ capital spending
plans expanded moderately, and firms’ expectations for
future activity were at their highest levels in over twenty
years.
Energy
District energy activity continued to expand moderately,
while expectations eased somewhat but remained solid.
The number of active oil and gas drilling rigs grew moderately, mainly in Oklahoma and New Mexico. Contacts
reported slight increases in oilfield service costs for
completions since last year, and some expected further
increases through the summer. Most respondents expected oil and gas prices to stay near current levels in
the coming months. For natural gas, the large supply in
the Marcellus formation was the main factor keeping
price expectations low. Some oil and gas firms also
reported having concerns about labor shortages affecting the near-term growth in activity.
Outside of manufacturing, professional, high-tech, and
wholesale trade firms reported moderate sales increases, while transportation contacts indicated a modest
decrease in activity. Wholesale trade firms expected a
strong increase in future sales, while professional, hightech, and transportation contacts anticipated a more
moderate sales improvement. Capital spending plans
were favorable among most firms.
Agriculture
Farm income remained subdued in the Tenth District as
most agricultural commodity prices stayed low. In the
crop sector, corn and wheat prices declined moderately
in March and were less than a year ago. Profit margins
were expected to remain weak for corn and wheat producers, although some input costs were expected to
moderate from last year. Soybean prices also decreased
in March but were slightly higher than a year ago. With
soybean prices somewhat more favorable, producers
were expected to plant more soybeans this year and less
corn and wheat. In the livestock sector, cattle prices
increased slightly in March and hog prices remained
higher than a year ago. Slightly higher prices and lower
input costs improved profit margins modestly for both
hog and cattle producers since the last reporting period.
■
Real Estate and Construction
Overall District real estate activity expanded modestly in
late February and March, and further gains were expected moving forward. Residential home sales rose
moderately since the previous survey period, but were
slightly below year-ago levels. Residential home inventories were strongly below year-ago levels. Moving forward, contacts projected a solid increase in residential
sales due to seasonal factors. Home prices continued to
increase strongly, and sales of low- and medium-priced
homes outpaced sales of higher-priced homes. Residential construction activity expanded modestly since the
previous survey, as construction supply sales, housing
starts, and traffic of potential buyers rose. Activity across
the commercial real estate sector activity continued to
rise at a modest pace as vacancy rates declined and
absorption, completions, construction underway, sales
and prices increased. A moderate expansion in the
commercial real estate sector was expected in the coming months.
Banking
Bankers were evenly split between increasing and
steady overall loan demand in late February and March.
Regarding specific types of loans, a majority of respondents indicated a steady demand for commercial and
industrial, commercial real estate, residential real estate,
agricultural and consumer installment loans. Most bankers indicated loan quality was unchanged compared to a
For more information about District economic conditions visit:
www.KansasCityFed.org/Research/RegionalEconomy
J-2
Federal Reserve Bank of
Dallas
The Beige Book ■ April 2017
Summary of Economic Activity
Economic activity in the Eleventh District expanded moderately over the past six weeks, with a slight acceleration from
the prior reporting period. Manufacturing output strengthened further, and activity among nonfinancial services firms
increased. Retail sales rose at a somewhat faster clip, including a pickup in auto sales. Home sales rose during the
reporting period, although apartment demand slowed slightly. Loan demand strengthened and the energy and agricultural sectors improved. Employment and wages increased moderately, as did prices. Outlooks generally improved, with
most contacts expecting 2017 to be stronger than 2016.
Employment and Wages
Construction contacts noted higher prices for lumber,
concrete, plumbing and framing. Oilfield services firms
increased prices over the past six weeks, with further
increases expected as demand picks up.
Overall employment rose moderately over the reporting
period. Manufacturers have added to payrolls so far this
year, in contrast with most of 2015 and 2016 when factory contacts noted employment declines on net. Hiring in
the services sector continued, including slight job gains
among retailers in March. In the energy sector, hiring
among oilfield services firms picked up notably in the first
quarter, while some exploration and production firms
continued to note layoffs. Several contacts speculated
that employment in the energy sector will not increase
proportionately with increases in drilling activity because
of improved production technology and efficiencies.
Labor market tightness has appeared throughout the oil
and gas supply chain, with several contacts specifically
mentioning shortages of truck drivers, and nearly all
sectors reported upward wage pressures. Some labor
shortages were also noted by manufacturers and certain
services contacts, including hospitality. Overall, upward
wage pressures were similar to the last reporting period.
Manufacturing
Expansion in the manufacturing sector picked up pace
somewhat over the past six weeks. Output growth remained slightly stronger for durable goods than nondurables, with a rebound seen in fabricated metals manufacturing. Exports remained a source of weakness for firms
that sell internationally. Overall, outlooks stayed positive.
A few manufacturing contacts noted considerable policy
uncertainty, especially regarding any changes that would
impact trade with Mexico.
Refinery utilization along the gulf coast was healthy.
Large inventories of product and expectations for softer
demand growth continue to put downward pressure on
expectations for refinery margins. Chemical producers
reported healthy domestic demand for a wide range of
products and remain optimistic for strong margins this
year. Comments on international chemical demand were
mixed, but generally positive.
Prices
Prices generally increased over the reporting period. An
exception was in retail where slight declines were seen,
partly due to price cuts for new automobiles. Upward
price pressures in manufacturing eased slightly, retreating to more normal levels after a few hot months.
K-1
Federal Reserve Bank of Dallas
Retail Sales
Financial Services
Retail sales continued to rise during the reporting period,
at a slightly faster pace than the prior period. Auto sales
increased, although a contact noted that demand in
Houston was weak. Other retail firms also noted slower
sales in Houston relative to other Texas metros. Contacts again mentioned that the depreciation of the peso
was harming overall retail sales along the border. Overall, outlooks among retailers remained fairly neutral, a
deterioration from the optimism noted in the prior reporting period.
Loan demand increased over the past six weeks. Total
loan volumes expanded, with lenders noting higher
balances on commercial and industrial loans, as well as
real estate (both commercial and residential) loans.
However, contacts reported decreased volumes of consumer loans. Contacts indicated improved loan performance and tightened lending standards. More than half
of lenders noted an increase in loan pricing over the past
six weeks. Contacts also noted an increase in interest
rates paid on deposits and rising deposit volumes. Outlooks were predominantly optimistic, with expectations
for stronger loan demand and business activity six
months from now.
Nonfinancial Services
Demand for nonfinancial services generally continued to
increase over the past six weeks, at roughly the same
pace as seen in the prior reporting period. Professional
and technical services firms noted particularly strong
revenue gains, and leisure and hospitality contacts cited
increased revenues in March after losses earlier this
year. Transportation services firms also noted revenue
gains, with rail contacts noting a strong increase in
crushed stone, which is used for frac sand. Airlines said
demand was stable over the past six weeks and up from
a year ago, led by a stronger domestic market. Staffing
services firms saw a pickup in demand, relative to the six
weeks prior as well as the same time last year. Demand
for placements remained particularly strong in Dallas,
especially in relation to Houston, where contacts noted
energy firms’ recoveries stalled a bit recently with depressed oil prices. Overall, most services firms noted
improved outlooks.
Energy
Demand for oilfield services improved substantially in the
district over the past six weeks. Oil and gas activity
surged, with firms noting a pickup in the Eagle Ford
Shale as well as the Permian Basin. Several contacts
mentioned that the accelerating pace may not be sustainable, expecting rig count growth to moderate midyear. Outlooks overall for 2017 were more positive than
in the prior reporting period, especially among oilfield
services firms, but most contacts noted concern over
expected volatility.
Agriculture
Moisture levels remained favorable across the district,
with ample rainfall received over the reporting period.
The winter wheat crop was in good shape, and row crop
planting continued. Cotton acreage is expected to be up
sharply in 2017, driven by expectations of higher cotton
prices this year. Grain prices remained weak and trended down over the past six weeks. The cattle industry
benefitted from strong pasture conditions and rising
cattle prices. ■
Construction and Real Estate
Home sales rose during the reporting period. Contacts
noted the spring selling season was generally off to a
good start, with year-to-date sales close to plan for several builders. However, buyers were price sensitive, and
incentives were being offered in some markets, squeezing builders’ margins. Housing affordability continued to
be a concern. Outlooks were positive, and overall sentiment in Houston was better than this time last year.
Apartment leasing activity slowed and occupancy fell in
the first quarter. Annual rent growth was solid in Dallas–
Fort Worth but moderated in Austin. Rents were flat to
down in Houston. Contacts generally expect slower rent
growth this year.
Demand for office space was healthy in Dallas–Fort
Worth, and office construction continued to be elevated
there. In Houston, office demand was mostly weak and
office construction tapered.
For more information about District economic conditions visit:
www.dallasfed.org/research/texas
K-2
Federal Reserve Bank of
San Francisco
The Beige Book ■ April 2017
Summary of Economic Activity
Economic activity in the Twelfth District continued to expand at a moderate pace during the reporting period of midFebruary through March. The labor market continued to tighten, wage pressures picked up further, and inflation
increased modestly. Sales of retail goods improved moderately, and growth in the consumer and business services
sectors remained strong. Manufacturing activity changed little on balance, and conditions in the agriculture sector
improved modestly. Contacts reported continued strong activity in residential real estate markets, while conditions in the
commercial sector slowed to a modest pace in some regions. Lending activity grew at a moderate pace.
modestly. Branded pharmaceutical price increases
remained subdued, while strong competition held down
prices for generic drugs. Improved economies of scale
reduced cloud computing costs, while prices for high-end
smartphones and tablets continued to trend downward.
Wholesale food retailers reported slight year-over-year
deflation.
Employment and Wages
The labor market continued to tighten, and wage pressures picked up further. Contacts reported record-high
demand, as well as wage increases, for engineers with
experience in cloud computing. Contacts also noted that
technology and non-technology sectors are increasingly
competing for workers with the same advanced skills. In
the financial services sector, wages for unskilled entrylevel positions increased markedly. Labor shortages in
the construction industry persisted, driving up wages for
skilled workers. Demand for labor in the agriculture
industry continued to outpace supply, putting upward
pressure on wages. One contact noted that growers
continue to automate production where possible. Contacts in the pharmaceutical manufacturing industry
reported relocating workers and operations to lower-cost
locales outside of the District.
Retail Trade and Services
Activity in the retail sector improved moderately over the
reporting period. Overall, retail sales experienced steady
growth, but consumer preferences continued to shift
from buying in-store to using e-commerce. Vehicle sales
rebounded strongly from a weak start to the year, and
dealers reported low inventories of used vehicles. Sales
of retail beverage products were stable, although an
unusually wet winter in the West somewhat slowed foot
traffic at many vendors. Optimism among grocery retailers boosted capital expenditures on store improvements
and new location openings.
Prices
Overall, inflation increased modestly over the reporting
period. Prices for construction materials continued to
climb as construction activity remained strong. Increasing wage costs pushed up hotel rates and prices for
associated services such as parking and food and beverage services. Shipping costs increased moderately.
Contacts in the retail food and beverage industry reported that increases in labor costs were passed through to
consumers. Prices of agricultural commodities picked up
Activity in the consumer and business services sector
remained strong. Shipping volumes continued to expand
at a solid pace, and contacts noted that volume growth
was particularly strong for lower-priced e-commerce
goods. Demand for business IT services strengthened,
driven by increased investments in cloud services, mobility, and big data solutions in the financial services,
manufacturing, and health-care sectors. Contacts in the
L-1
Federal Reserve Bank of San Francisco
hospitality industry reported that overall sales improved,
but mentioned that hotel stays were lower than expected
due to changes in immigration policy and increased
scrutiny of foreign arrivals. Demand for restaurant services remained sluggish, but the industry remains hopeful that the recent slump in sales is transitory and
expects sales to increase in the coming months as the
weather improves and consumers receive tax refunds.
Real Estate and Construction
Conditions in real estate markets remained stable, and
activity remained strong in most of the District. Demand
for residential real estate remained robust in most parts
of the District. Overall, contacts reported that construction activity was slowed only by a lack of available land,
labor, and materials. Sales of new and existing homes
were robust, and inventories remained low, with one
contact in Seattle reporting that new property listings
remained on the market for only a couple of days. A few
contacts outside of major metropolitan areas reported
that recent increases in mortgage rates had caused
demand to slow modestly, although it remained strong.
House prices and rents continued to increase, particularly in cities, where some contacts noted that both rose at
a faster pace than wages. In some regions, activity in the
commercial real estate sector slowed to a modest pace.
In Alaska, residential and commercial construction activity declined, as commercial investment stalled and overall
economic activity remained sluggish.
Manufacturing
Manufacturing activity was mixed across sectors but
largely flat on balance over the reporting period. Conditions in the semiconductor industry were healthy, and
consolidation in the industry picked up significantly.
Orders for new commercial aircraft were up over the
same period last year, while shipments remained stable.
On balance, exports of manufactured goods continued to
be held back by the strong dollar. However, demand for
domestic steel picked. Overall, contacts reported that
capacity utilization in the manufacturing sector remained
below long-run averages.
Financial Institutions
Agriculture and Resource-Related Industries
Lending activity grew at a moderate pace over the
reporting period. Loan demand continued to expand at a
moderate pace, and contacts reported that competition
on pricing and fees remained high. Deposits expanded
moderately and were sufficient to finance lending activities. On balance, credit quality remained strong, but one
contact pointed to some loosening of underwriting standards. Commercial banks’ net interest margins improved
modestly with recent increases in broad market rates.
One contact in the Pacific Northwest reported that the
continued growth of credit unions threatened smaller
community banks in their region. ■
Activity in the agriculture sector grew modestly over the
reporting period. Increased water availability in the West
boosted yields for some crops. A greater-thananticipated snow cover in parts of the West spurred
ranchers to increase herds’ food allowances, boosting
the demand for hay. Oil production remained stable in
Alaska, but relatively low oil prices have slowed investment substantially. The strong dollar held back exports
for some agricultural products. On balance, growers
anticipate that rising global economic activity will yield
additional demand for domestic exports this year.
L-2
Cite this document
Federal Reserve (2017, May 2). Beige Book. Beige Book, Federal Reserve. https://whenthefedspeaks.com/doc/beige_book_20170503
@misc{wtfs_beige_book_20170503,
author = {Federal Reserve},
title = {Beige Book},
year = {2017},
month = {May},
howpublished = {Beige Book, Federal Reserve},
url = {https://whenthefedspeaks.com/doc/beige_book_20170503},
note = {Retrieved via When the Fed Speaks corpus}
}