Beige Book
For use at 2:00 PM EDT
Wednesday
July 12, 2017
The Beige Book
Summary of Commentary on Current Economic Conditions
By Federal Reserve District
June 2017
Federal Reserve Districts
Minneapolis
Boston
Chicago
New York
Cleveland
Philadelphia
San Francisco
Kansas City
St. Louis
Richmond
Atlanta
Dallas
Alaska and Hawaii
are part of the
San Francisco District.
The System serves commonwealths and territories as follows: the New York Bank serves the Commonwealth of Puerto Rico and the U.S. Virgin
Islands; the San Francisco Bank serves American Samoa, Guam, and the Commonwealth of the Northern Mariana Islands.
National Summary
Boston
1
A-1
First District
New York
B-1
Second District
Philadelphia
C-1
Third District
Cleveland
D-1
Fourth District
Richmond
E-1
Fifth District
Atlanta
F-1
Sixth District
Chicago
G-1
Seventh District
St. Louis
H-1
Eighth District
Minneapolis
What is The Beige Book?
The Beige Book is a Federal Reserve System publication about current
economic conditions across the 12 Federal Reserve Districts. It characterizes regional economic conditions and prospects based on a variety
of mostly qualitative information, gathered directly from District
sources.
The qualitative nature of the Beige Book creates an opportunity to
characterize dynamics and identify emerging trends in the economy
that may not be readily apparent in the available economic data. Because this information is collected from a wide range of business and
community contacts through a variety of formal and informal methods,
the Beige Book can complement other forms of regional information
gathering.
How is the information collected?
Each Federal Reserve Bank gathers anecdotal information on current
economic conditions in its District through reports from Bank and
Branch directors, plus phone and in-person interviews with and online
questionnaires completed by businesses, community contacts, economists, market experts, and other sources.
How is the information used?
The anecdotal information collected in the Beige Book supplements the
data and analysis used by Federal Reserve economists and staff to
assess economic conditions in the Federal Reserve Districts. This
information enables comparison of economic conditions in different
parts of the country, which can be helpful for assessing the outlook for
the national economy. The Beige Book also serves as a regular summary of the Federal Reserve System’s efforts to listen to businesses
and community organizations.
I-1
Ninth District
Kansas City
J-1
Tenth District
Dallas
K-1
Eleventh District
San Francisco
Twelfth District
L-1
This report was prepared at the Federal Reserve Bank of Kansas City
based on information collected on or before June 30, 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 ■ June 2017
Overall Economic Activity
Economic activity expanded across all twelve Federal Reserve Districts in June, with the pace of growth ranging from
slight to moderate. In addition, the majority of Districts expected modest to moderate gains in the months ahead. Consumer spending appears to be rising across a majority of Districts, led by increases in nonauto retail sales and tourism.
However, many Districts noted some softening in consumer spending, particularly in auto sales which declined in half
of the Districts. Manufacturing and nonfinancial services activity continued to grow, with most Districts reporting modest
to moderate gains since the last report. Loan demand was steady to increasing in most Districts. Residential and nonresidential construction activity was flat to expanding in most Districts. Most Districts cited low home inventory levels in
certain market segments which were constraining home sales in many areas. Agricultural conditions were mixed
across the nation as moisture conditions varied considerably; several Districts continued to report weakness in dairy
and some crop sectors due to low prices. Energy activity generally improved since the last survey, particularly for oil
and natural gas. Coal production remained sluggish although higher than year-ago levels.
Employment and Wages
Employment across most of the nation maintained a modest to moderate pace of expansion, although the Atlanta and
St. Louis Districts noted flat employment levels. Labor markets tightened further for both low- and high-skilled positions,
particularly in the construction and IT sectors. Contacts across a broad range of industries reported a shortage of qualified workers which had limited hiring. Wages continued to grow at a modest to moderate pace in most Districts, and
many firms attributed these wage gains to tighter labor market conditions. Wage pressures generally trended with
employment conditions, and rising wage pressures were noted among both low- and high-skilled positions. A few Districts also reported rising costs of benefits and variable pay.
Prices
Prices continued to rise modestly in the majority of Districts, and a few Districts noted that price pressures had eased
slightly. Several Districts reported higher construction materials costs and freight prices, while gasoline prices fell.
Retail prices held steady or slightly increased, and the manufacturing sector noted steady to modestly rising input
costs. Low agricultural prices were causing stress for some farmers, although some food retailers reported improved
margins due to lower commodity prices. Home prices continued to increase in most Districts.
Highlights by Federal Reserve District
Boston
New York
Economic activity in the First District expanded at a
modest pace in recent weeks. Hiring activity was mixed,
proceeding at a moderate pace on average. Wage increases remained moderate with not much variation.
Prices were mostly stable with some noteworthy exceptions. Contacts were cautiously optimistic concerning
prospects for further growth.
Economic growth has picked up to a modest pace in
recent weeks. Labor markets have tightened further, as
hiring has picked up. Input cost pressures have become
somewhat less widespread, while selling prices continued to rise modestly. Housing markets have strengthened, whereas commercial real estate markets have
softened slightly.
1
National Summary
Philadelphia
St. Louis
Overall, economic activity appeared to slow to a slight
pace of growth, as consumer spending declined sharply
for apparel, and demand softened for autos, new home
construction, and nonresidential construction. Most other
sectors continued to grow at a modest pace. On balance, employment and wages continued to grow modestly, and prices grew only slightly.
Economic activity has slightly improved since our previous report. Employers reported minimal hiring due to
difficulties finding qualified candidates putting upward
pressure on both wages and benefits. There were positive developments on consumer spending as contacts
reported a rebound in sales after a string of weak reports.
Cleveland
Minneapolis
Reports from business contacts were somewhat less
positive, and the overall pace of growth was modest.
Price and cost pressures eased slightly. Labor markets
continued to tighten. Manufacturing activity increased,
but at a slower pace, especially for consumer packaged
products. Demand for IT services was particularly strong.
Ninth District economic activity increased modestly
during the reporting period. Professional services, commercial construction, manufacturing, energy, and mining
saw growth, while employment was held back by tight
labor availability. The already struggling agricultural
sector weakened as severe drought conditions spread
through the Dakotas and Montana.
Richmond
Kansas City
Economic activity expanded modestly, but at a somewhat faster pace. The manufacturing sector improved
further, which boosted the transportation sector as more
goods were moved through ports and around the country. Retail sales increased and tourism and travel reports
were mostly upbeat. Construction and real estate markets continued to improve modestly. Labor markets
remained tight, and price increases were modest.
Economic activity in the Tenth District expanded moderately in June, and most sectors expected additional
gains in the months ahead. Consumer spending, manufacturing, services, construction and energy activity
increased since the previous survey. The pace of growth
in the energy sector was anticipated to ease slightly. The
agriculture sector remained weak, with subdued farm
revenue and low commodity prices.
Atlanta
Dallas
Economic activity modestly expanded since the previous
report. Labor market tightness continued. On balance,
wage growth remained steady. Input costs were subdued. Consumer spending softened. Home sales increased and prices appreciated modestly. Nonresidential
construction increased; however, multifamily construction showed signs of slowing. Manufacturing activity
grew, albeit at a slower pace.
Economic activity grew moderately in the Eleventh District, and outlooks remained positive. Growth in retail
sales decelerated, but there were reports of sales improving in energy-related areas and in the border region.
Activity in the energy sector expanded further, partly
driving increased manufacturing production. Demand for
staffing services remained strong. Apartment demand
improved following a sluggish first-quarter.
Chicago
San Francisco
Growth picked up to a moderate pace and prices rose
modestly. Employment, business spending, and manufacturing grew at moderate rates, while consumer spending and construction and real estate activity increased
modestly. Conditions were little changed in the financial
and agricultural sectors.
Economic activity in the Twelfth District continued to
expand at a moderate pace. Overall price inflation was
flat, while upward wage pressures strengthened. Sales
of retail goods were modest, and growth in the consumer
and business services sectors remained strong. Conditions in the manufacturing sector improved. Activity in
the residential housing market was robust. Conditions in
the financial services sector remained solid.
2
Federal Reserve Bank of
Boston
The Beige Book ■ June 2017
Summary of Economic Activity
Business activity in the First District expanded at a modest pace on average, but reports were mixed across firms and
industries. Revenues are up by moderate margins on average among manufacturing and retail contacts, with year-overyear gains that varied from slight to robust. Software and information services firms reported year-over-year growth
figures that ranged from a modest decline in one case to double-digit gains. Commercial real estate activity was flat or
up slightly across the District, while residential real estate sales were held back by declining inventories despite robust
demand. Some firms planned to increase headcounts by moderate or even large margins, while others expect to hold
employment fixed. Planned wage increases remained moderate, and price increases were small to moderate, with
some exceptions. Contacts expect either flat activity moving forward or further growth consistent with their own recent
results.
Employment and Wages
Prices
Hiring plans among First District contacts ranged from
flat to robust, and planned wage increases were stable
at a slow-to-moderate pace. Some retail contacts found
it slightly harder to hire workers, but were not much
concerned by that fact. Employment was flat or increasing at manufacturing firms. A furniture manufacturer
reported difficulty in retaining production workers but not
salespeople. A manufacturer of cardboard boxes was
hiring additional workers without raising wages, but
noted that finding qualified workers was difficult because
production jobs increasingly involve using computers.
Manufacturing firms reported year-over-year wage
growth in the vicinity of 3 percent. A data storage firm
plans to make double-digit percentage increases in its
net headcount in 2017, while a healthcare IT firm expects a more modest 2 percent personnel increase. One
enterprise software firm is keeping its headcount flat, but
shifting its hiring focus to growth areas such as the internet of things. Another software firm is hiring at a moderate pace and has had to increase starting salaries for
engineers and sales positions. Firms are struggling to
hire engineers and fill technical positions in greater
Boston. On average, software and IT firms are budgeting
for moderate wage increases.
Reports on price movements were mixed. Most manufacturing contacts reported stable prices. However, a
cardboard box manufacturer increased its prices by 10
percent in response to a 10 percent increase in the price
of linerboard, a key input, and a frozen fish manufacturer
expects pollock prices to fall in the coming year. Retail
output prices saw very little movement, although some
retailers plan to post moderate price increases for premium fall merchandise and small price increases for basic
goods.
Retail and Tourism
Retail contacts reported that recent sales numbers reflect increases over one year ago ranging from roughly 2
percent to almost 10 percent, results that helped balance
lackluster sales in early 2017. All retail contacts feel that
the outlook rests on positive consumer sentiment translating into actual sales. One noted that the movement of
consumers away from in-store shopping and towards
online shopping is accelerating faster than anticipated.
For the first four months of 2017, the hotel occupancy
rate for the Boston area was up 0.9 percent from the
same period a year earlier, and the average room rate
was up 1 percent. However, not including activity at new
hotel rooms, the hotel occupancy rate for Boston was
effectively flat year-over-year, a marked contrast to the
robust annual increases seen over the last six years. At
A-1
Federal Reserve Bank of Boston
the same time, contacts perceive that, between mid-May
and late June, Boston experienced strong tourism activity. The recently concluded Sail Boston event boosted
area restaurants in particular. The midyear outlook is
that hotels will end 2017 with a net increase in annual
revenues, but may not achieve the 5 percent increase in
average room rates initially predicted for 2017.
dence, demand for industrial space exceeds the very
limited supply, but the impetus for new construction
remains low in light of high construction costs relative to
rents. In Connecticut, however, plans were announced
for construction of significant new warehouse space.
Also, a modestly-sized user-built office building is slated
for downtown Portland, and in and around Portland three
hotel projects are underway. Contacts expect stable (if
slow) leasing demand going forward, as well as ongoing
changes in the retail landscape favoring entertainment
and services over goods-selling businesses.
Manufacturing and Related Services
Of the 7 firms contacted, all but one reported higher
sales. The exception was a drug company, which attributed flat sales to increased competition. A cardboard
box manufacturer reported 10 percent year-over-year
growth resulting from increased e-commerce. A manufacturer of sensors reported strong sales growth largely
due to demand from the auto industry. A manufacturer of
power supply devices reported a major revision to capital
spending plans. After many years of reconfiguring existing plants to meet demand, the firm will build a new,
highly automated plant in New England, in order to save
on labor costs and bring engineers in close proximity to
production. The outlook among contacts remains positive but cautious. The drug manufacturer remained uncertain about the prospects for the health care industry,
and the sensor manufacturer expressed concerns about
slower growth moving forward in the auto industry.
Residential Real Estate
Residential real estate markets in the First District headed into the summer with continued upward pressure on
prices and depleted inventories. Four of the six First
District states reported year-over-year changes to May
2017, while Vermont and the Boston area reported yearover-year changes to April 2017. For single family
homes, closed sales were down by moderate margins on
average in four of the six states and in the Greater Boston area, but increased by moderate-to-robust margins in
Rhode Island and Connecticut. The lower sales numbers
were attributed to declines in inventories over the same
period rather than weak demand—inventories declined
year-over-year in all six states while median sale prices
increased by modest-to-robust margins in all states
except Vermont, which reported a moderate decline in
prices. Pending sales increased in every reporting state
but Rhode Island and the Greater Boston area. In Rhode
Island, single family home sales posted an all-time high
since the association began keeping records in 1998.
For condos, closed sales increased in every state but
Massachusetts and Maine. In a promising sign for inventories, Massachusetts experienced an increase in new
listings for the first time in over a year.
Software and Information Technology Services
Software and IT firms reported year-over-year revenue
growth ranging from -2 percent to 10 percent. A data
storage and security firm experienced strong revenue
growth, spurred by the high cyber-threat environment. A
healthcare software provider also had strong year-overyear revenue growth. A manufacturing enterprise software provider had flat revenue, but anticipates increased
demand moving forward. Data backup and healthcare IT
contacts were optimistic about future growth. Contacts
expressed concerns and doubts about the impact of
proposed national policy changes on business, and
uncertainty related to health care policy was seen as
putting a damper on business for health care IT firms.
Most contacts seemed optimistic about market activity
and continued strong buyer demand, despite the low
inventories. Many noted that low unemployment has
helped spur consumer confidence, which contributes to
demand for residential real estate. Despite the fact that
interest rates have increased, contacts noted that rates
are still relatively low and that prospective homeowners
are eager to buy now before they increase more. Some
expressed concern that continued upward pressure on
prices will price out first-time home buyers.■
Commercial Real Estate
Conditions in the First District’s commercial real estate
markets were mostly unchanged in recent weeks. Office
leasing activity remained very light in Hartford and lightto-moderate elsewhere in the District. In Boston, leasing
demand remains uneven across submarkets within the
city. Investment sales demand held steady across the
District, and Boston’s premier properties remain in favor
among foreign investors. In both Portland and Provi-
For more information about District economic conditions visit:
www.bostonfed.org/regional-economy
A-2
Federal Reserve Bank of
New York
The Beige Book ■ June 2017
Summary of Economic Activity
Economic activity in the Second District has expanded at a modest pace since the last report, while labor markets have
tightened further. Input price pressures have eased slightly, while selling prices have continued to rise modestly. Manufacturers noted a pickup in business activity, while the various service industries indicated mixed results. Consumer
spending has picked up a bit since the last report, and consumer confidence has remained close to a cyclical high.
Housing markets have strengthened, while commercial real estate markets were mixed but slightly softer. New residential construction activity has been steady at a subdued level, while commercial construction has picked up modestly.
Banks reported that loan demand was steady to softer, while delinquency rates continued to decline.
Employment and Wages
Prices
The labor market has continued to tighten since the last
report. Contacts at employment agencies noted that
hiring has picked up and that jobs have become harder
to fill. A major New York City employment agency noted
a pickup in hiring, especially from financial firms. In
upstate New York, there has been a pickup in demand
for both full-time and temporary workers—particularly for
administrative and customer-care workers. Contacts also
noted an ongoing shortage of software developers and
skilled workers more generally.
Businesses generally reported upward pressure on input
prices but to a lesser degree than in the last report, while
selling prices continued to rise modestly. Those in the
wholesale and transportation industries reported modest
increases in selling prices, on balance, while businesses
in other sectors indicated little change.
General merchandise retailers reported that prices have
been steady, while New York City hotels indicated that
room rates have slipped modestly. In contrast, Broadway
theaters noted rising ticket prices, with the average price
up 10-15 percent from a year earlier.
Manufacturers have continued to add jobs but at a
somewhat slower pace than in the last report. Businesses in the finance, wholesale trade, real estate and construction sectors report that they are hiring, on net, while
those in the restaurant & hotel industry indicated some
cutbacks in staffing levels. Businesses in manufacturing
and most service industries expected to add jobs, on net,
in the months ahead.
Consumer Spending
Retailers reported that sales have weakened, on balance, while they expect business to be generally steady
for the second half of the year. Retailers in upstate New
York reported that both shopper traffic and sales have
been flat at weak levels. A major retail chain noted that
sales were roughly on plan, though they weakened a bit
from May to June. Retail business in New York City,
which had been particularly soft, improved slightly. Inventories were generally at or below normal levels, while
prices were steady to up modestly.
Overall, wages are reported to have risen moderately,
though contacts in the transportation, warehousing,
wholesale trade, and leisure & hospitality industries
report more widespread increases in wages.
B-1
Federal Reserve Bank of New York
Auto dealers in upstate New York reported that sales of
new vehicles picked up in May and early June and were
up from a year ago. Vehicle inventory levels have crept
up, but dealers are generally optimistic about the outlook. One contact noted that used vehicle sales have
picked up, while another reports that they are steady.
Retail and wholesale credit conditions were characterized as favorable, but credit remains tight on sub-prime
auto loans.
A real estate contact in upstate New York State reported
continued escalation in home prices, with homes in more
sought-after areas often selling for above the list price.
Selling prices of both single-family homes and apartments have also picked up in and around New York City,
though prices of Manhattan condos and co-ops have
risen only marginally. New York City’s rental market has
remained mostly steady. Rents remain flat overall—
rising on smaller, less expensive units but declining on
larger and pricier apartments. Landlord concessions
have stopped rising but are more prevalent than usual.
Consumer confidence in the Middle Atlantic states (NY,
NJ, PA) edged down in June but remained near its cyclical high set in March.
Commercial real estate markets have been mixed but
slightly softer on balance. The market for office space
has been steady to slightly weaker: availability rates
edged up, while asking rents slipped in New York City
but were little changed elsewhere. However, the industrial market has strengthened further, with availability rates
declining and asking rents up roughly 10 percent over
the past year. In contrast, the market for retail space has
continued to slacken, with vacancy rates rising to multiyear highs and asking rents little changed.
Manufacturing and Distribution
Manufacturers reported that business activity has picked
up substantially since the last report. Businesses in the
wholesale trade and transportation industries, however,
continued to report subdued growth. Similarly, while
manufacturers remain broadly optimistic about the outlook for the second half of this year, those in transportation and wholesale trade remain only mildly upbeat.
Services
Both single-family and multi-family new home construction has been steady at a fairly subdued level, though
there is still a good deal of multi-family development
under construction. Commercial construction, on the
other hand, has picked up. New office construction has
expanded noticeably in northern New Jersey and New
York City’s outer boroughs but has been fairly restrained
in other parts of the District. Industrial construction has
picked up in northern New Jersey but has remained flat
and fairly subdued elsewhere.
Businesses in most service industries reported steady to
moderately growing business activity. Contacts in professional and business services noted a pickup in activity
and expressed widespread optimism about the nearterm outlook. Contacts in education & health services
noted a slowdown in growth, while information industry
contacts reported little change in activity.
The leisure & hospitality sector has been mixed. A number of contacts have reported a pullback in activity, coupled with increased pessimism about the outlook. While
tourism activity in New York City has remained fairly
buoyant, advanced travel bookings are reported to be
down, especially from abroad. In general, visitors are
reported to be spending less—partly reflecting a shift
toward more domestic and fewer international visitors.
On a more positive note, Broadway theater attendance
and revenues were reported to be fairly strong in May
and June. Tourism was described as strong in the Finger
Lakes region of upstate New York.
Banking and Finance
Small to medium sized banks reported weaker demand
for consumer loans, but no change in demand for residential mortgages, commercial mortgages, or commercial & industrial loans. Refinancing activity decreased for
all types of loans. Bankers reported slightly easier credit
standards for residential mortgages, and unchanged
standards in other loan categories. Bankers indicated
narrowing spreads of loan rates over cost of funds for all
types of loans. Respondents also noted an increase in
the average deposit rate. Banks reported lower delinquency rates across all loan categories—particularly on
consumer and residential mortgage loans. ■
Real Estate and Construction
Housing markets across the District have strengthened
somewhat. Sales volume has picked up throughout the
New York City area—particularly for moderately-priced,
single-family homes in outlying areas. In contrast, sales
activity has slowed a bit in parts of upstate New York,
restrained by a lack of homes on the market.
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 ■ June 2017
Summary of Economic Activity
Aggregate business activity in the Third District grew slightly over the current Beige Book reporting period — a retreat
from modest growth that had occurred during the prior period. Manufacturing continued at a moderate pace of growth,
while nonfinancial services, new home sales, and tourism continued to grow modestly. However, auto sales and construction activity exhibited essentially no growth, if not a slight decline, and nonauto retail sales declined modestly. On
balance, employment and wages continued to grow at a modest pace, while prices edged only slightly higher. Overall,
firms appear to have lowered their expectations somewhat to modest growth over the next six months.
Employment and Wages
Prices
Employment has continued at a modest pace of growth.
Manufacturing firms reported little change in employment
and in the average hours worked compared with the
prior period. Employment indicators from nonmanufacturing firms were mixed, as contacts noted more net
additions to full-time staff, fewer net additions to parttime staff, and a slight increase in hours.
On balance, price levels rose slightly as price pressures
appeared to have eased off a prior modest pace. Of
contacts responding, about two-thirds reported no
change at all in prices paid and prices received. Generally, prices have held firmer for raw inputs to and intermediate goods from manufacturers, while nonmanufacturing
contacts reported significant drops in prices paid for their
inputs and received for goods sold.
On balance, wage pressures continue to be muted; the
percentage of nonmanufacturing firms that noted rising
wage and benefit costs is as low as any time in the past
three years. Wage pressures continued to be greater in
those markets with low unemployment rates.
Retailers and food service providers noted that ongoing
low commodity prices have helped their margins, while
homebuilders are facing 20 percent higher lumber costs
caused by trade tariffs against Canada. Contacts noted
that the added cost can be more easily absorbed while
building high-end homes, but can make low-end homes
less viable to bring to market.
Pennsylvania staffing firms struggled to find qualified and
committed workers. Staffing contacts reported spending
more time and money on recruiting labor and refilling
positions after the initial hire quit, sometimes after just a
few days. Workers appear to have less loyalty to the job,
and more job-hopping is showing up on résumés. However, one large retailer reported having no difficulty
getting quality job candidates in locations throughout the
District after raising its base wage last year.
Manufacturing
On balance, manufacturing firms continued to report
moderate growth in general activity; however, the pace
eased off once more. During the prior period, the pace of
new orders lessened; this period, the pace of shipments
slowed. Still, the pace of activity appears somewhat
stronger than is typical of expansionary periods in the
Third District.
C-1
Federal Reserve Bank of Philadelphia
The makers of paper products, chemicals, fabricated
metal products, and industrial machinery continued to
note gains in activity; these were joined by gains reported by the makers of electronic products. Firms in the
primary metal sector appeared to be gloomier, noting
reductions of new orders and shipments.
positive with a little over 50 percent of the firms anticipating increased activity.
Financial Services
Financial firms reported slight growth of overall loan
volumes (excluding credit cards) — a bit slower than the
modest growth that had occurred during the prior Beige
Book period. Commercial real estate loans and auto
loans exhibited strong growth in loan volume; in contrast,
mortgages and home equity loan volumes were essentially flat, while commercial and industrial loan volumes
declined. Credit card volumes are highly seasonal but
have grown over the year at a modest rate and grew
during this Beige Book period at a robust pace similar to
the change observed over the same period last year.
Generally, manufacturing contacts continued to expect
growth over the next six months; however, the percentage of firms expecting future increases edged down
slightly for employment, capital expenditures, and general activity.
Consumer Spending
Nonauto retail contacts noted modest declines in sales
overall, as apparel sales “continued to be hammered.”
Operators of outlets and traditional malls have been
buffeted by a surge in retail bankruptcies. Even convenience store contacts noted that sales growth was below
expectations, as lower-income households have continued to reduce spending.
Banking contacts tended to describe the economy as
stable and their loan portfolios as healthy with low delinquencies and few areas of concern.
Real Estate and Construction
Homebuilders generally reported a slight decline in activity, following moderate growth in the prior period, although one builder noted a pick-up in mid-June. Contacts
reported ongoing difficulty in securing skilled labor but
stated that as long as overall demand for new construction remains soft, so too will the wage pressures.
On balance, auto dealers reported a slight decline in
year-over-year sales during the current period, with
Pennsylvania sales edging up and New Jersey sales
declining modestly relative to last year’s high levels.
Falling used car prices have been a contributing factor to
softer demand for new cars. Dealer profitability continued to be a struggle, and some dealers and analysts are
revising year-end sales totals downward.
Brokers in most major Third District housing markets
continued to report modest growth of existing home
sales, but no increase of inventories. In the Greater
Philadelphia area, pending sales of houses (under contract) dropped slightly. Overall, existing home prices
continued to edge up with some variance across markets
and price categories.
Tourism activity continued to grow at a modest pace,
according to several contacts. Delaware shore contacts
noted exceedingly heavy traffic on the roads and significant tourist spending, but that last-minute bookings had
not lifted hotel occupancies as much as expected. Still,
bookings remained ahead of last season. Atlantic City
casino revenues also remained up over the prior year.
Nonresidential real estate contacts reported essentially
no change in construction activity, which had grown
modestly last period, although individual markets do vary
by sector and geography. One contact noted that the
construction pipeline may have begun to diminish. Leasing activity continued to exhibit little change overall.
Rents were rising nearly everywhere for industrial/
warehouse space; contacts noted plenty of demand and
that new buildings continue to lease up before completion. However, rent concessions have emerged for multifamily units in the city of Philadelphia. ■
Nonfinancial Services
Service-sector firms continued to report modest growth
in general activity, with some notable improvement in
sales (or revenues) over the prior period. One large
service-sector firm noted that growth remained slow and
a bit below expectations, prompting the firm to institute
discretionary delays in filling vacant positions. An area
advertiser noted lower demand from local auto dealers,
but more demand from the health-care and financial
sectors.
For more information about District economic conditions visit:
www.philadelphiafed.org/research-and-data/regionaleconomy
Expectations about future growth have ebbed further
since the prior Beige Book period but have remained
C-2
Federal Reserve Bank of
Cleveland
The Beige Book ■ June 2017
Summary of Economic Activity
Growth in economic activity across the Fourth District slowed to a modest pace during the reporting period. Labor markets continued to expand, with wage pressures noted primarily for high-skilled workers. Upward pressures on prices
paid and received eased slightly. Contacts facing higher input prices experienced little pushback from customers when
raising their selling prices. Consumer spending at brick-and-mortar establishments remained stable, while new motor
vehicle sales rose. Production increased at manufacturing plants, although at a slower pace than in the previous reporting period. Nonfinancial services firms experienced moderate revenue growth overall, but demand was strong for IT and
management consulting. Housing market activity picked up as year-to-date unit sales remained above year-ago levels
and selling prices were higher. Activity in the commercial real estate market remains elevated. Lending pipelines were
satisfactory, but contacts noted softer loan demand in select categories.
Employment and Wages
Prices
District payrolls continued to expand, although at a
slightly slower pace than in the previous reporting period.
Increases were notable in the construction and nonfinancial services industries. Brick-and-mortar retailers again
noted decreases in staffing levels. Banking contacts
mentioned tight labor market conditions and wage pressures for skilled workers, including personnel in compliance and statistical modeling positions. Building contractors experienced difficulty hiring workers in skilled trades,
especially drywallers. Construction contacts also noted
increased hiring for management and office staff positions. Freight haulers mentioned difficulty recruiting
enough qualified drivers despite increasing driver wages
recently. Manufacturing contacts experienced little
change in hiring, which was mostly replacements or
normal turnover. Staffing firms noted an increase in the
number of listings for both temporary and permanent
positions, especially for occupations requiring specific
skills or advanced degrees, while workforce development officials observed rising job placements for workers
with less than four-year degrees.
Upward pressures on prices paid eased during the period. Some manufacturers remarked that changes in input
costs were modest. Construction contacts mentioned
higher prices for lumber and other materials such as
copper and steel, and several contacts saw rising construction subcontractor prices. Freight haulers saw rising
tire prices. Similar to observations made in the previous
period, contacts in the manufacturing and construction
sectors noticed they were able to pass on increased
costs to customers. Freight haulers reported improved
pricing ability, and some contacts cited rising rates because of tightening capacity. Retail contacts observed
little change in shelf prices except for some declines in
food items. Similarly, retailers saw little change in vendor
prices except for lower prices for some raw food ingredients.
Consumer Spending
Consumer spending at District brick-and-mortar retailers
remained largely unchanged from that of the previous
reporting period. Sales of fresh food items were doing
well, whereas electronics were selling poorly. Sales of
apparel items at large chain retailers were soft. Retail
D-1
Federal Reserve Bank of Cleveland
inventories were generally in good shape. Year-to-date
sales of new motor vehicles through May increased
more than 3 percent compared to those of the same
period a year ago. Dealers saw higher-than-usual inventories because of lower demand for passenger cars.
Financial Services
Bankers generally reported that loan demand for the first
half of 2017 is below expectations. Businesses and
consumers may be looking for more clarity on potential
changes to the tax code and regulatory reform before
proceeding with spending plans. While most lending
categories are slowing, CRE loans and residential purchase mortgages are performing relatively well. While
most contacts cited stable consumer loan demand, some
contacts noted softer demand, especially for credit
cards, and indicated that consumers are deleveraging.
Some contacts stated that credit standards for consumer
loans, including credit cards, have eased somewhat.
There has been some credit tightening for financing
multifamily and retail developments and for subprime
auto loans. Bankers noted generally improving loan
quality for both commercial and consumer loans.
Industrial Production
Manufacturing output grew at a slight pace during the
reporting period, somewhat slower than earlier. The
small pickup in demand from energy-related companies
was more than offset by a decline in the motor vehicle
and consumer packaged-product industries. Demand
from the construction sector remains strong. Year-to-date
production through May at District auto assembly plants
fell about 9 percent when compared to that of the same
time period during 2016. The large majority of manufacturing contacts were allocating capital spending budgets
toward maintenance, although some contacts were also
allocating monies toward new equipment and technology.
Nonfinancial Services
Activity in the nonfinancial services sector grew at a
moderate pace during the period. Strongest demand was
for IT, management consulting, and logistics services. IT
consulting contacts noticed opportunities among retailers
that are incorporating ecommerce into their business
models.
Reports through May indicate that the number of drilling
rigs operating in the District continued to increase compared with that of a year ago. A contact remarked that
investment in regional oil and gas is up, and both pipelines and mid-stream plants are being built. Contacts
credited increases in natural gas demand in part to additional demand in gas-fired power generation. Contacts
indicated that coal production declined during the reporting period because of reduced demand, but they anticipate higher output in the coming months.
The pickup in freight volume seen during the past few
months has diminished; however, the volume remains
above year-ago levels. Freight haulers saw increased
demand from oil and gas and strong demand from construction material producers. ■
Real Estate and Construction
Year-to-date unit sales through May of new and existing
single-family homes increased 2 percent compared to
those of a year earlier. The average sales price rose 5
percent. Homebuilders described the housing market as
improving at a steady pace, with higher unit sales compared to a year ago. One builder attributed strong sales
to a strengthening labor market. Another builder observed that although demand is quite adequate, it is
difficult to meet demand across price points because of
rising costs for land, lot development, and construction.
Nonresidential real estate activity remains strong at
elevated levels. Nonresidential contractors report strong
demand for education and healthcare related buildings
and for commercial buildings for ecommerce distribution.
In contrast, contacts noted low demand for retail space
in both enclosed malls and shopping centers. Contacts
reported little change in overall inquires and backlogs
from the previous reporting period.
D-2
Federal Reserve Bank of
Richmond
The Beige Book ■ June 2017
Summary of Economic Activity
The Fifth District economy expanded modestly, and at a somewhat faster pace since the last report. Labor demand
remained firm but hiring was constrained by worker shortages. Prices rose slightly, on balance. Manufacturers’ shipments increased but new orders softened due to a typical seasonal slowdown. The volume of freight moving through
district ports was robust and continued to increase, while trucking firms reported renewed momentum in shipments.
Retail sales increased and reports on tourism and travel spending were mostly upbeat. Home sales were up, despite
labor shortages in homebuilding and low existing home inventories. On balance, commercial construction and real
estate leasing picked up moderately. Loan demand increased, and while overall credit quality was said to be good,
some lenders expressed concern over lenient terms for auto loans and leases. Non-financial services firms saw modest
increases in revenues.
Employment and Wages
Manufacturing
Labor demand strengthened moderately in recent
weeks, and firms increased their focus on retaining and
recruiting qualified employees. Employment agencies
reported a moderate seasonal increase in new job openings across all sectors, but only a slight increase in
applicants. Wage increases remained modest for most
firms. Several transportation industry executives, however, noted recent moderate wage increases and stronger
wage pressures compared to the previous report. Employment agencies said that entry-level salary offers
increased at a higher rate across all job categories, since
the previous report.
Manufacturing firms reported modest increases in shipments, while new order volumes slowed somewhat due
to a typical summer slowdown. Machinery manufacturers
and producers of primary and fabricated metal noted
improved business conditions in recent weeks. Additionally, textile mills indicated higher production. A few firms
reported increased productivity resulting from recent new
equipment purchases, and they expected further efficiency gains once employees were trained on operating the
equipment. Most firms expect orders to increase in the
next six months.
Ports and Transportation
Prices
Since our last report, freight volumes through district
ports were very strong and continued to increase modestly, on balance. Moreover, the gains were reported to
be evident in imports and exports, and were widespread
across shipping categories. Meanwhile, momentum
appeared to be building in truck transportation as executives in the industry reported stronger than seasonal
increases in shipments during the second quarter. In
addition to being more robust, growth had also become
less volatile, with sequential increases in shipments in
the March through June timeframe, following a prolonged period during which freight was “up one month,
down the next.” While trucking firms expect some
In general, prices were little changed to up modestly
since our previous report. According to our most recent
manufacturing survey, input prices increased slightly,
and a little faster than final goods prices. Meanwhile, our
services survey showed slight price increases overall,
with the pace of growth in retail goods outpacing that in
non-retail services. However, transportation executives
noted that spot freight prices were rising, in some cases
significantly. Most agriculture and energy prices varied
slightly, with the notable exception of a moderate increase in metallurgical coal prices.
E-1
Federal Reserve Bank of Richmond
seasonal slowing in the third quarter, most executives
indicated that conditions feel better than they have in a
very long time.
new projects in urban areas with previous high levels of
multifamily development. Lastly, residential and commercial real estate prices continued to rise at a modest pace,
overall.
Retail, Travel, and Tourism
Banking and Finance
Retail sales increased in recent weeks, with somewhat
mixed results across segments. Hardware and home
improvement stores reported strong sales, including for
big-ticket and seasonal items. A home furnishings store
attributed an increase in sales to more people buying
and building homes. Auto sales were mixed, with a dealer in central Virginia reporting a pickup in new car sales
in June, while a dealer in western North Carolina saw a
decline over the month. Clothing and shoe sales were
said to be flat to down in recent weeks, despite a good
Father’s Day weekend.
On balance, loan demand continued to grow at a moderate pace. Residential mortgage demand remained solid
while refinance and home equity lending softened slightly. On the commercial side, loan demand continued to
grow moderately; however, multifamily lending slowed
slightly and a rising number of retail establishments were
reportedly seeking to lease rather than purchase. Auto
lending remained robust, but some bankers expressed
concerns over an industry-wide trend towards negative
equity financing and extended purchase and lease
terms. Competition among banks intensified slightly,
according to a contact in North Carolina, as credit unions
have begun competing for commercial deals in some
markets. Credit standards were generally unchanged
and credit quality remained strong. Short term interest
rates rose slightly but long term rates remained stable.
Tourism in coastal North Carolina was stronger in recent
weeks relative to the same time last year, prompting
higher retail sales and restaurant spending. Rental rates
remained flat, but included more offers of extra amenities. In western North Carolina, growth in tourist activity
had slowed relative to the fast-paced growth of prior
years, but room rates were holding steady as hotel supply continued to grow. An outdoor recreation facility in
western Virginia experienced increased bookings from
both leisure and business groups. In Washington, DC,
conference activity remained at normal seasonal levels,
while average daily rates on hotels increased.
Non-Financial Services
Services firms generally reported modest revenue
growth, according to our most recent survey. Specifically, engineering, architectural, accounting, and housing
related services such as landscaping, home improvement, and pest control reported revenue growth in recent
weeks. Demand for self-storage units rose moderately. A
few contacts in D.C. and Maryland cited concerns over
slowing federal procurement spending.
Real Estate and Construction
Residential real estate sales increased modestly since
the previous report. Generally, real estate agents reported that buyer traffic was down due to a typical seasonal
slowdown. Inventories remained low, and Realtors were
working harder to attract sellers into the market. Average
days on the market decreased modestly. Brokers reported that demand for lower to mid-range homes remained
strong, with multiple offers and rising selling prices.
Residential developers also noted that homes in the
$200,000 price range were in high demand. Homebuilders continued to report that new home starts were constrained by labor shortages.
Agriculture and Natural Resources
Reports on energy markets were somewhat positive.
Coal production was little changed in recent weeks but
rose moderately compared to the same time last year.
Exports remained elevated, particularly for thermal coal.
Meanwhile, agriculture conditions were unchanged as
the planting season got underway. ■
On balance, commercial real estate leasing and construction rose moderately. Industrial leasing transactions
and speculative construction picked up, while retail leasing and sales remained strong. Office leasing was still
constrained in most locations, with some agents reporting rising demand for Class A space. Rental rates increased modestly in most industrial, retail, and office
markets. Retail and mixed-use construction remained
strong. Multifamily construction continued at a moderate
pace, although a few contacts noted fewer announced
For more information about District economic conditions visit:
www.richmondfed.org/research/regional_economy
E-2
Federal Reserve Bank of
Atlanta
The Beige Book ■ June 2017
Summary of Economic Activity
On balance, reports from Sixth District business contacts indicated that economic activity continued to expand at a
modest pace from mid-May through June. The outlook among businesses remains positive as most expect an increase
in activity over the next year. District firms continued to report difficulties filling positions of all calibers. Wage growth,
aside from wages for jobs in high demand, remained steady. Businesses reported muted non-labor input costs. District
merchants noted sales activity softened since the previous reporting period. The pace of vehicle sales slowed from a
year ago. The tourism sector continued to report softness in activity in parts of the District. Reports from residential
brokers and builders indicated home sales increased from year earlier levels. Real estate contacts also noted that home
prices modestly appreciated. Commercial real estate contacts continued to cite improved demand for most property
types and construction increased from a year ago. Manufacturing activity grew, albeit at a slower pace than the previous
report. Bankers noted credit continued to be available for qualified borrowers.
Employment and Wages
Prices
Contacts continued to describe a tightening labor market
in which they struggled to find and hold onto quality
workers, a narrative that has broadened across job types
and skill levels, from construction, information technology (IT), finance, and transportation to low to mid-skill and
professional positions. Several contacts maintained that
labor market tightness was a major barrier to growth.
Some contacts reported that planned changes to immigration policy made it more difficult to hire and retain
high-skill immigrants, including engineers, technicians,
and IT workers. Firms continued to deploy various tactics
in an effort to find and develop pipelines of talent and
retain workers; for example, developing partnerships
with workforce development entities, schools, and military bases, expanding internal and external training and
apprenticeship programs, strengthening recruiting efforts, and seeking out retirees to return to work. Some
firms also enhanced compensation and benefits packages, particularly variable pay, healthcare contributions,
flexible work arrangement offerings, and added vacation
time. Additionally, firms continued to explore or deploy
technology as viable future replacements for labor, especially in hard-to-fill jobs. Contacts report that wage pressures remained mostly stable, however there were also
continued reports of rising starting salaries for lower-skill
entry-level positions and ongoing upward wage pressure
for some high-skill, low-supply positions.
In general, growth in input costs was restrained. Some
contacts reported ability to pass along commodity input
increases as they occurred. According to the Atlanta
Fed’s Business Inflation Expectations survey, year-overyear unit costs were up 1.9 percent in June. Survey
respondents indicated they expect unit costs to rise 2.0
percent over the next twelve months.
Consumer Spending and Tourism
District retail contacts reported that sales levels were
softer than expected in May. Retailers noted that overall
sales activity during Memorial Day weekend was at or
slightly below expectations and sales levels from international shoppers weakened since the last report. Automotive dealers reported a slow-down in the momentum of
auto sales from a year ago.
On balance, tourism and hospitality contacts across the
District reported slightly softer than expected activity
during the start of the summer season, which they attribute poor weather conditions. However, with the exception of South Florida, hotel occupancy and revenue per
available room were up year over year. Year-to-date
Mississippi casino gaming revenues decreased compared with the same time period last year. The outlook
among most contacts for the remainder of the summer
season remains optimistic.
F-1
Federal Reserve Bank of Atlanta
Construction and Real Estate
ued strength in shipments of automobiles and machinery, and record container volumes. Rail contacts reported a slight uptick in intermodal traffic; however, yearover- year rail traffic was relatively unchanged since the
previous report.
Reports on activity in May from District residential real
estate contacts continued to signal modest but steady
growth. Most builders said construction activity increased
from the year-ago level. Brokers and builders continued
to report that home sales were up relative to one year
earlier. The majority of builder and broker contacts noted
that buyer traffic was up from the previous year’s level.
Many residential contacts indicated that inventory levels
were down from the year-ago level. Both builders and
brokers reported modest gains in home prices. Home
sales expectations remained positive in May, with most
brokers and builders anticipating that sales would hold
steady or increase slightly over the next three months
compared to the year-earlier level. Most builders expect
construction activity to match or exceed the current pace
over the next three months.
Banking and Finance
Credit remained readily available for most qualified borrowers. Competition for loan customers increased
among financial institutions. Overall loan growth varied –
some institutions reported flat to slow growth while others indicated strong growth. Small business loans were
up year over year at some institutions. Credit card usage
increased yet delinquency levels remained stable. Deposit levels were up at many institutions.
Energy
Reports from energy contacts indicated that Tropical
Storm Cindy caused limited disruptions to oil and gas
operations in the Gulf of Mexico. Contacts noted that
trends in continued gains in energy efficiency has slowed
growth among residential and commercial gas customers. Reports indicated that natural gas demand was
below normal and inventories remained above average
levels. Contacts reported that Gulf Coast refineries ran at
record high levels and crude oil inventories remained
above average levels.
Many District commercial real estate contacts reported
improvements in demand that have resulted in rent
growth and increased absorption, but they continued to
caution that the rate of improvement varied by metropolitan area, submarket, and property type. The majority of
commercial contractors indicated that the pace of nonresidential construction activity had increased from one
year ago, with many reporting increasing backlogs.
While most reports indicated that the pace of multifamily
construction matched or exceeded the year-ago level, a
growing share of contacts are reporting that multifamily
construction is down. Looking forward, the majority of
District commercial construction contacts expect nonresidential construction activity to increase, while expectations for the pace of multifamily construction was mixed.
Agriculture
Agriculture conditions across the District were mixed. By
mid-June, rains had significantly improved drought conditions in much of the District. However, recent heavy
rainfall due to Tropical Storm Cindy exacerbated areas’
crop moisture conditions in much of the District that were
already categorized as abnormally moist to excessively
wet, and there were early indications of some crop damage. During the reporting period, the District’s cotton
crop was mostly on par with the five-year averages and
soybean planting in Louisiana, Mississippi, and Tennessee was ahead of their five-year averages. The June
forecast for Florida oranges was up slightly from May but
remained considerably lower than last season's production. On a year-over-year basis, prices paid to farmers in
April were up for cotton, soybeans, and broilers but
remained down for corn, rice, beef, and eggs. ■
Manufacturing
On balance, manufacturing contacts continued to report
growth in overall activity. New orders and production
levels continued to rise, but at a slower pace than the
previous reporting period. Purchasing agents indicated
that supply delivery times continued to get longer and
finished inventory levels increased slightly. The outlook
for future production decreased somewhat, with just
under half of firms expecting higher production levels
over the next six months.
Transportation
Most District transportation contacts reported an expansion of activity during the reporting period. Logistics
companies noted steady growth in ecommerce shipments, and trucking contacts reported notable increases
in freight volume and tonnage. District ports cited contin-
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 ■ June 2017
Summary of Economic Activity
Growth in economic activity in the Seventh District picked up to a moderate pace in late May and June and respondents’
outlooks for growth over the next 6 to 12 months also improved some. Prices rose modestly. Employment, business
spending, and manufacturing grew at moderate rates, while consumer spending and construction and real estate activity
increased modestly. Conditions were little changed in the financial and agricultural sectors.
Employment and Wages
Consumer Spending
Employment growth continued at a moderate rate over
the reporting period, and contacts expected it to continue
at that pace for the next 6 to 12 months. Contacts indicated that the labor market was tight and that it was
generally harder to fill high-skilled positions than lowskilled positions. Hiring was focused on professional and
technical, sales, and production workers, and there was
an increase in the number of contacts hiring sales workers. A staffing firm that primarily supplies manufacturers
with production workers reported a slight decline in
billable hours. Wage growth was modest overall, with
increases more likely for high-skilled occupations. A
number of contacts with union workers reported wage
increases that were well above inflation. Many contacts
said that the cost of benefits increased.
Consumer spending increased modestly over the reporting period. Non-auto retail sales were up modestly, with
growth in the building materials, gardening equipment,
food and beverage, and personal care segments. Tourism and entertainment contacts reported that the seasonal pickup in activity was proceeding as expected. The
pace of auto sales changed little on net, with reports of a
pickup in May followed by a slowdown in June. Usedvehicle sales were steady. Contacts indicated that low
fuel prices continued to shift the vehicle mix toward light
trucks and away from cars. Low fuel prices also helped
spur increased sales of recreational vehicles.
Business Spending
Growth in business spending remained at a moderate
pace in late May and June. Retail inventories generally
were at comfortable levels, although stocks appeared
high for certain models of autos. Manufacturing inventories were at comfortable levels overall, though inventories at steel service centers remained low. Growth in
capital spending continued at a moderate pace, and
contacts expected growth to continue at that pace for the
next 6 to 12 months. Outlays were primarily for replacing
Prices
Overall, prices again rose modestly in late May and
June. Retail prices increased slightly, with the exception
of gasoline and food prices, which declined a bit. Materials costs were little changed overall and freight costs
were up slightly.
G-1
Federal Reserve Bank of Chicago
Banking and Finance
industrial equipment, IT equipment, and renovating
structures, though there was an increase in the number
of contacts reporting spending for expansion. Demand
for electricity was little changed and shipping volumes
increased slightly.
Financial conditions were little changed on balance over
the reporting period. Financial market participants noted
that volatility continues to be low. Business loan demand
ticked up overall, and there was little change in loan
standards or quality. Contacts reported an increase in
demand for capital equipment and real estate loans.
Demand for consumer loans was little changed on balance. Home loan volume rose faster than the usual
spring seasonal pattern and pricing was little changed.
Home loan quality remained strong. Demand for auto
loans decreased slightly and there was no notable
change in quality.
Construction and Real Estate
Construction and real estate activity increased modestly
over the reporting period. Residential construction increased slightly across home types and locations. Home
sales increased a bit and house prices increased modestly on balance. Demand varied by price range, with
strong demand and tight inventories for homes under
$500,000 and modest demand and abundant inventories
for houses over $500,000. Nonresidential building
changed little. A highway construction contractor in
Illinois reported that they would stop work on all statefunded projects at the beginning of July because the
state does not have a budget and that they have already
laid off some workers who were preparing for new projects. The pace of commercial real estate activity remained strong and even picked up a bit, led by gains in
the industrial sector. Activity was especially strong in
West Michigan, and a contact there reported that activity
had increased moderately over the reporting period.
Commercial rents edged up, as vacancy rates and the
availability of sublease space decreased slightly.
Agriculture
The agricultural sector continued to operate under stress
in late May and June, with reports of some crop and
dairy operations exiting or filing for bankruptcy. Crop
conditions and maturity lagged that of last year’s bumper
crop, but the overall harvest is still expected to be
around trend. Contacts expected a smaller corn harvest
than last year, but there is a small chance that the soybean harvest will be larger because the wet spring led
some farmers to switch acreage from corn to soybeans.
Hog prices moved up, but cattle prices dropped. Milk
prices were lower, which contributed to mounting losses
for many dairy operations. ■
Manufacturing
Manufacturing production continued to grow at a moderate rate in late May and June. Growth in steel production
remained at a moderate pace, as increased demand
from the energy and machinery industries offset softer
demand from the auto industry. Heavy machinery manufacturers themselves reported increased demand, driven
by the energy and mining sectors, particularly from overseas customers. Heavy truck manufacturers also reported a pickup in demand. Sales for specialty metals manufacturers increased overall, with greater demand coming
from the aerospace, energy, and defense sectors. That
said, some contacts noted that recent growth had been
uneven, which raised concerns about future sales prospects. Production in the auto sector declined some, but
remained at a solid level.
For more information about District economic conditions visit:
www.chicagofed.org/publications/cfsbc
G-2
Federal Reserve Bank of
St. Louis
The Beige Book ■ June 2017
Summary of Economic Activity
Reports from contacts suggest economic conditions have slightly improved since our previous report. Employers reported little hiring and moderate wage pressures due to difficulties finding qualified candidates. Retailers indicated that
consumer spending modestly improved since our previous report. Manufacturing contacts continued to report modest
growth. Real estate contacts indicated that, while demand remained strong, residential activity continued to decline amid
supply constraints. Banking contacts indicate generally strong growth in loan demand from both businesses and households. Reports from the District’s agriculture sector suggest modest improvement after flooding last period, but that
generally conditions remain weak amid low prices.
Employment and Wages
Prices
Anecdotal evidence suggests employment is little
changed since the previous report. Many contacts reported a desire to hire, but they have been unable to find
suitable employees. Manufacturing contacts in Louisville
and Memphis reported difficulties finding experienced or
qualified employees, with some citing candidates' inability to pass drug tests or to consistently report to work.
Hospitality contacts in Louisville noted that both entrylevel and experienced workers have been challenging to
find, and skilled positions in technical fields such as
information technology and engineering remain difficult
to fill.
Price pressures in the District remained moderate. Low
commodity prices continue to put pressure on the agriculture sector. Since the previous report, cash prices of
wheat and sorghum have increased moderately and
prices of rice have increased slightly; there was no
change in the price of coal, and prices of soybeans,
corn, and cotton decreased modestly. A contact in Little
Rock reported farm equipment prices are down.
Across the District, home prices continued to increase
moderately. Contacts reported increased price pressures
on new homes from rising construction costs due to the
shortage in labor supply. Price changes of construction
materials were mixed. Contacts in the Little Rock area
reported solid wood prices decreased modestly due to
increased supply, whereas a contact in the Memphis
furniture industry reported higher wood and foam prices
were putting upward pressure on the price of their finished goods.
Contacts reported moderate growth in wages since the
previous report, as tightness in the labor market has
resulted in upward pressure on wages. In addition, several contacts reported enhancing benefits in an effort to
attract employees. However, some employers noted
factors holding back wage increases. A science and
technology contact reported that rising costs of benefits
have limited increases in wages, and a hospitality contact in Louisville noted that wages remain unchanged
because any increases would result in higher prices
charged to customers.
Consumer Spending
Reports from general retailers, auto dealers, and hoteliers indicate consumer spending has grown modestly
since our previous report. May sales tax collections in
Arkansas, Kentucky, Missouri, and Tennessee were
higher than one year ago. Multiple auto dealers reported
H-1
Federal Reserve Bank of St. Louis
an increase in sales, albeit at a slower pace relative to a
year ago. Furthermore, dealers in north Mississippi
reported a shift in demand toward used vehicles. Hospitality contacts in Missouri indicated that business activity
has increased since our previous report, while hotel
occupancy rates continue to decline in downtown Louisville.
Commercial real estate activity has remained flat since
the previous report. Demand for industrial properties
continued to be robust, and a Louisville contact reported
that there is essentially no warehouse space available in
the area. Multifamily demand remained stable, but some
contacts reported an increase in demand for senior living
facilities. Contacts reported that rising interest rates have
had very little impact on commercial real estate markets.
Manufacturing
Commercial construction activity continued to be strong.
Several Memphis contractors indicated that they are
optimistic about their future prospective projects. Industrial construction activity remained robust, particularly in
Louisville. Contacts across the District expressed concerns over the number of new hotels under construction.
Manufacturing activity has increased modestly since our
previous report. Manufacturing activity was stronger than
one month earlier in both Missouri and Arkansas, although the pace of growth slowed sharply in Missouri and
slowed slightly in Arkansas. In addition, contacts in the
furniture manufacturing industry reported a decrease in
orders. Several companies reported new capital expenditure and facility expansion plans in the District,
including firms that manufacture fabricated metal products, paper products, and plastic and rubber products. A
contact in the aluminum industry reported record high
capital expenditures.
Banking and Finance
Lending activity in the Eighth District has expanded at a
robust pace since the previous report and markedly
outpaced the nation. Commercial real estate loan volumes grew at a strong pace, rising by 14 percent on a
year-over-year basis. District bankers reported that
consumer loans—which comprise credit card, auto,
medical, and student loans—experienced robust growth
and have risen by 28 percent relative to year-ago levels.
Commercial and industrial lending exhibited moderate
growth over the period, though slightly softer than in
recent quarters. District bank deposits expanded at a
moderate pace and have been growing at roughly three
times the national rate over the past three years.
Nonfinancial Services
Reports of plans in the service sector have been positive, on balance, since the previous report. Firms that
provide transportation, warehousing, utilities, and information technology services reported plans to expand
facilities and hire employees. In the St. Louis area, reports from the education sector were negative, as two
major universities announced layoffs due to budget cuts
and declining enrollment. News from the healthcare
industry is mixed. Some providers are cutting costs,
leading to closures in healthcare-related businesses;
however, other providers continue to expand operations
in urban areas.
Agriculture and Natural Resources
Agricultural conditions improved modestly by the end of
June as row-crop farms recovered from flooding. Contacts reported a few Arkansas fields had still not dried up
enough to replant and many fields would be replanted
with soybeans because other crops’ planting windows
had passed. As of June, the percentages of District corn
and soybeans rated fair or better were below their 2016
values, but corn improved slightly from a month prior.
The percentage of rice rated fair or better was above the
year- and month-ago values, while the cotton percentage
was slightly better than a year prior and slightly worse
than a month prior.
Real Estate and Construction
Residential real estate activity has declined modestly
since the previous report. Seasonally adjusted home
sales for May decreased slightly from the previous
month in most of the District’s four major MSAs. Local
real estate contacts continued to report that significant
shortages in inventory have hindered sales while demand remains strong. Most contacts indicated that
changes in interest rates have had little to no impact on
the market.
Natural resource extraction conditions declined slightly
from April to May, with seasonally adjusted coal production decreasing 3 percent. However, production was still
7 percent higher than one year ago. ■
May permit activity in District MSAs declined slightly
relative to the previous month. A Memphis contact indicated that little new construction is occurring, while a
Little Rock contact noted that homebuilding in the region
is approaching levels consistent with fundamentals.
For more information about District economic conditions, visit:
www.research.stlouisfed.org/regecon/
H-2
Federal Reserve Bank of
Minneapolis
The Beige Book ■ June 2017
Summary of Economic Activity
Since the last reporting period, the Ninth District economy experienced modest growth. Employment grew modestly,
held back by poor labor availability. Wages grew moderately to strongly, while price pressures remained modest. The
District economy showed growth in professional services, residential construction, manufacturing, energy, and mining.
Commercial and residential real estate, along with commercial construction, were mixed. Tourism activity was flat overall, while consumer spending fell, and agricultural conditions weakened.
Employment and Wages
Wages grew moderately to strongly overall since the last
report. A central Minnesota contact said wage pressure
is “a big deal for companies with entry level jobs,” and a
regional survey there found that half of respondents
were increasing wages to deal with a tight labor market.
Average wages for 18 Minnesota construction unions
saw annual increases of between 3.3 percent and 5
percent in recent three-year contracts negotiated in May.
A Minnesota food processing company increased union
worker wages by close to 3 percent annually over four
years; a Montana natural resource company increased
wages by a total of 5 percent over a two-year period. In
North Dakota, state budget difficulties have resulted in a
freeze in salaries for many state and higher education
workers.
Employment grew modestly since the last report, held
back by poor labor availability. While total employment
grew across District states, it grew by less than normal
for this time of year. Job demand continued to be strong.
A Minnesota construction contact said, “Everyone is
hiring in all markets.” A Montana staffing contact said
second quarter orders overall were “stagnant,” but June
orders have seen an uptick. A staffing firm in
southeastern Minnesota said job openings over the
previous two months grew by 14 percent over the same
period a year earlier, and a general labor shortage had
clients “concerned that this was going to impact growth
of their business.” Tourism businesses across the
District reported difficulty finding workers; three
Minnesota resorts reported close to 200 unfilled
openings. Initial unemployment insurance claims over
the most recent six-week period dropped by 13 percent
in the District over the same period a year earlier, with
continuing claims dropping by 10 percent. An employer
survey in District states found a small increase in the
share of companies expecting to hire more staff in the
coming quarter compared with the current quarter; the
share of firms expecting to cut staff was low and roughly
unchanged. Job losses continued from large retailers,
and hiring in eastern North Dakota continued to be soft,
while employers in the western, oil-producing region of
the state were reportedly “hungry to hire,” according to a
regional source.
Prices
Price pressures remained modest since the last report.
Pressure on construction materials prices has eased,
according to industry contacts. Recent bids for a large
highway construction project in Minnesota came in 18
percent below expectations. Iron ore prices have fallen in
recent months, while scrap metal prices, by contrast,
have been on an upward trend since late last year. Retail
fuel prices in District states decreased slightly in June
compared with a month earlier. Most prices received by
farmers decreased in May from a year earlier, with the
exception of hay, milk, cattle, chickens, and eggs.
I-1
Federal Reserve Bank of Minneapolis
Consumer Spending and Tourism
Commercial real estate was mixed since the last report.
A contact in Rapid City, S.D., said transaction activity
there has been strong. “Apartment complexes get sold
within a week of listing.” Retail vacancy was described
as “pretty stable,” while office vacancy appeared to be
rising thanks to new space coming to the market. Retail
vacancy rates have continued to rise slowly in
Minneapolis-St. Paul, thanks to a significant amount of
space vacated by large retailers. However, another
source noted that retail space under construction was
lower than a year earlier and grocery expansion
continued to eat up available space. Despite strong
construction activity, multi-family vacancy rates remained
low in the region, and rents were rising. Residential real
estate was mixed. Closed sales rose in northern and
western Wisconsin counties located in the District
compared with a year earlier; sales also grew in Sioux
Falls, S.D. Sales were mixed in Montana—strong in the
Flathead region, flat in Missoula, but lower in Helena. In
Minneapolis-St. Paul, May sales fell by almost 2 percent,
while sales in the rest of the state were flat, attributed
largely to low inventories of homes for sale.
Consumer spending was down slightly since the last
report. May sales tax collections in South Dakota were
down 2 percent from a year earlier. Recent sales of
passenger vehicles decreased, according to auto dealer
contacts, while sales of trucks increased slightly. In
contrast, a contact at a North Dakota mall reported that
sales were up slightly. A regional big box retail chain and
a supermarket chain were planning to add stores.
Tourism activity was flat overall since the last report.
May visits to national parks in the District were down 2
percent from a year earlier. Demand for hotel lodging in
Minnesota was flat in May from a year earlier. In
contrast, gaming revenues in Deadwood, S.D.,
increased 8 percent in May.
Services
Activity in the professional services industry increased
moderately since the last report. According to preliminary
results from an annual survey of District services firms,
respondents reported that sales, productivity, and
employment all increased over the past year; firms
expected more growth over the coming year. An
accounting firm reported increased activity, even as the
busy tax season subsided. Contacts in the trucking
industry reported flat activity over recent months.
Manufacturing
District manufacturing activity increased moderately
since the last report. An index of manufacturing
conditions produced by Creighton University indicated
increased activity in May compared with a month earlier
in Minnesota and the Dakotas. Several contacts in the
metal-fabricating industry reported very strong recent
activity; one contact had record sales in May and was
expecting a similar level in June. A dealer of capital
equipment and services reported that orders were up. An
electronics producer announced a major new facility in
Minnesota.
Construction and Real Estate
Commercial construction was mixed since the last
report. According to industry figures, commercial building
and nonbuilding construction activity in May was lower
than a year earlier. A separate database of construction
projects out for bid across several District states through
mid-June was flat compared with a year earlier. But a
Minnesota industry association contact said most
members “seem to be having good years with full or
potentially full calendars of work.” Commercial permit
values in May grew considerably over a year earlier in
several larger cities in the Minneapolis-St. Paul region,
including the core cities; however, they were flat or lower
in a large majority of other larger cities in the District. In
Rochester, Minn., construction was described as “fairly
subdued,” but was expected to change. Residential
construction grew modestly. Single-family permits in May
rose in only a small majority of large District cities
compared with a year earlier. Multi-family construction
continued its strong activity, with more than 900 units
permitted in May across the Minneapolis-St. Paul metro,
the highest monthly figure in almost four years.
Agriculture, Energy and Natural Resources
District agricultural conditions weakened since the
previous report. Severe drought conditions affected the
Dakotas and parts of Montana, hampering crop progress
and triggering disaster relief payments to ranchers in
some areas. By contrast, crop conditions in the eastern
parts of the District were mostly good or excellent as of
late June. Activity in the energy and mining sectors
increased slightly since the last report. District oil and
gas exploration activity increased in late June from a
month earlier, even as crude prices fell. Recent
production at Minnesota iron ore mines has been
running well ahead of levels a year earlier. ■
I-2
Federal Reserve Bank of
Kansas City
The Beige Book ■ June 2017
Summary of Economic Activity
Economic activity in the Tenth District expanded moderately in June, and most sectors expected additional gains in the
months ahead. Consumer spending increased at a moderate pace, with retail, restaurant and tourism contacts reporting
stronger sales than the previous survey period. Manufacturing activity picked up moderately, and professional, hightech, and transportation contacts reported strong increases in sales. Capital expenditures were anticipated to rise in the
manufacturing, professional and high-tech industries, while wholesale trade and transportation firms expected a modest
decline. Residential and commercial construction activity rose in June, but home sales declined slightly as low inventories constrained sales. The number of active drilling rigs continued to increase, but the pace of growth was expected to
slow in coming months. District farm revenue remained subdued as most agricultural commodity prices remained low.
Employment and wages increased modestly since the previous survey period, and contacts expected moderate wage
growth in the coming months. Input prices were up modestly in most sectors, and selling prices were mixed.
Employment and Wages
in the transportation sector rose at a modest pace, while
selling prices increased slightly. Prices in the construction sector rose modestly, with slight increases anticipated in the coming months. Manufacturers reported slight
decreases in finished goods prices, while raw material
costs continued to edge higher. Manufacturers anticipated modest growth in both finished goods and raw material prices over the next few months.
District employment and employee hours continued to
increase modestly in June, and contacts expected additional gains in the months ahead. Contacts in the retail,
wholesale trade, professional and high-tech services,
tourism, health services and real estate sectors reported
a modest increase in employment since the previous
survey period, while employment held steady in auto
sales and restaurants. All sectors anticipated higher
employment levels in the coming months except for the
auto sector which expected a slight decrease. Average
employee hours rose since the previous survey in the
services and manufacturing sectors and were above
year-ago levels. Several contacts noted a shortage of
commercial drivers, salespeople, and service workers.
Consumer Spending
Consumer spending increased moderately, and additional moderate gains were expected in the months ahead.
Retail sales rose at a moderate pace and were well
above year-ago levels. Several retailers noted stronger
sales for lumber and building materials, while luxury and
higher-priced products sold poorly. Retail contacts anticipated sales to grow moderately in the next few months,
and inventory levels were expected to remain stable.
Auto sales stabilized in June after declining for several
months and were slightly above year-ago levels. Dealer
contacts anticipated a moderate increase in auto sales in
the months ahead. Restaurant sales picked up moderately since the previous survey, and modest gains were
expected in the coming months. District tourism activity
increased moderately and remained above year-ago
levels. Tourism contacts anticipated moderate increases
in activity during the summer months.
Wages rose modestly in most sectors in June, and moderate wage growth was anticipated in the coming
months.
Prices
Input prices were up modestly in most sectors compared
to the previous survey period, while selling prices were
mixed. In the retail sector, selling prices edged up, and
input prices continued to rise, but at a slower pace than
in the prior survey. Restaurant contacts reported slight
declines in both input and selling prices, but expected
both prices to pick up in the months ahead. Input prices
J-1
Federal Reserve Bank of Kansas City
Manufacturing and Other Business Activity
all major loan categories, and a majority of respondents
reported stable deposit levels.
Manufacturing activity continued to expand at a moderate pace in June, and most other business contacts
reported improved sales. Manufacturers reported moderate growth in production, particularly for aircraft, plastics,
and chemical products. Shipments and new orders expanded modestly, and activity was considerably higher
than a year ago. Manufacturers’ capital spending plans
were mostly positive, and firms’ expectations for future
activity remained strong.
Energy
Energy activity rose at a modest pace, while expectations eased slightly but remained positive. The number
of active oil and gas drilling rigs continued to increase
across the District, but respondents expected the pace of
growth to slow in the coming months due to flat prices
and the continued oversupply of oil. Contacts also reported a moderate decline in access to credit, particularly from banks, while private equity continued to be readily available. Expectations for future oil and gas prices
moderated somewhat as a result of the continued increase in U.S. oil production and ample natural gas
supply. Furthermore, contacts said that although the oil
and gas prices needed to increase drilling substantially
has continued to decline modestly, it remained above
their current one-year ahead price expectations.
Outside of manufacturing, professional, high-tech, and
transportation firms reported strong sales increases,
while wholesale trade contacts reported a more modest
growth in sales. Most firms expected a moderate improvement in sales in the next six months. Professional
and high-tech firms expected capital spending to increase moderately heading forward, while wholesale
trade and transportation firms anticipated a modest
decline in capital expenditures.
Agriculture
Real Estate and Construction
District farm revenue remained subdued since the previous reporting period as most agricultural commodity
prices remained low. Corn and wheat prices increased
slightly, but were lower than a year ago due to elevated
global supplies. Similar to last year, District contacts
reported that corn and wheat prices remained below
levels generally thought to be profitable and financial
stress continued to increase at a gradual pace for many
producers. Soybean prices declined slightly from the
previous reporting period and were also slightly less than
a year ago. Livestock operators were slightly more optimistic than earlier, as cattle prices increased modestly
from a year ago. Hog prices also increased modestly
from the previous reporting period as global demand for
meat products remained relatively strong. ■
District real estate activity expanded slightly since the
previous survey period, and respondents expected further gains moving forward. Residential home sales declined slightly from the previous month, with sales of lowand medium-priced homes outpacing sales of higherpriced homes. Residential home inventories moved
modestly lower from year-ago levels. Contacts expected
low inventories to constrain sales in the next few months
and anticipated sales would be flat. Residential construction activity grew slightly, as housing starts and traffic of
potential buyers rose, while construction supply sales
were stable. Respondents expected overall residential
construction activity to increase moderately in the
months ahead. Commercial real estate activity continued
to expand modestly as vacancy rates declined and absorption, completions, construction underway, sales,
prices and rents increased. A modest expansion in the
commercial real estate sector was anticipated in the
coming months.
Banking
A majority of banking respondents indicated stable demand for commercial and industrial, commercial real
estate, residential real estate, and consumer installment
loans. Demand for agricultural loans was mostly mixed in
June. Most bankers indicated loan quality was unchanged compared to a year ago, and expected loan
quality to remain essentially the same over the next six
months. Credit standards remained largely unchanged in
For more information about District economic conditions visit:
www.KansasCityFed.org/Research/RegionalEconomy
J-2
Federal Reserve Bank of
Dallas
The Beige Book ■ June 2017
Summary of Economic Activity
The Eleventh District economy continued to expand at a moderate pace over the past six weeks. Manufacturing output
rose, and activity in nonfinancial services increased. Growth in retail sales slowed, while auto sales dipped. Housing
demand grew, lending activity increased, and the energy sector saw continued improvement. Crop conditions were
mostly favorable. Employment and wages rose, as did prices. Outlooks remained positive, although some contacts
noted uncertainty regarding changes in trade and healthcare policy as well as tax reform.
Employment and Wages
Manufacturing
Overall employment rose moderately, and wage pressures were similar to the last report. Manufacturers
added to payrolls, with some noting that labor shortages
were pushing up wages. Hiring in the services sector,
including retail, continued. The construction labor market
remained tight, particularly in Dallas-Fort Worth and
Austin. Two staffing firms cited wage pressures across
most skill levels, while two reported that rising wage
pressures were limited to higher-skilled positions. Contacts noted labor market tightness throughout the oil and
gas supply chain and continued to cite upward wage
pressures particularly for experienced personnel and for
certain skills sets.
Expansion in the manufacturing sector slowed over the
past month. Among durables, output growth in primary
metals and machinery manufacturing strengthened, but
production was flat for fabricated metals and high-tech
manufacturing. Food manufacturers reported an increase in demand. There were reports of strength in
energy-related manufacturing activity, but exports remained a source of weakness for manufacturers who sell
internationally. Overall, outlooks stayed positive. A couple of contacts said they were uncertain about how long
the current strength in activity would last.
Refinery utilization rates along the Gulf Coast increased.
Refiner margins in 2017 will likely be lower than previously expected, reflecting large product inventories and
lower expectations of U.S. consumption growth. Chemical producers noted healthy global demand and good
margins.
Prices
Selling prices increased at a slightly slower pace than in
the prior report. Some oilfield services firms noted a
weaker outlook for margins as costs were rising at a
faster pace than selling prices. Accommodation and food
services contacts noted higher prices. Staffing firms saw
stable billing rates, while airlines noted higher fees and
ticket prices. Cotton prices slipped in June on rising
expectations of strong cotton production this year. Retail
gasoline and diesel prices fell over the reporting period
following the decline in oil prices.
Retail Sales
Retail sales continued to rise, although at a slower pace
than the prior period. Some contacts noted that in-store
sales continued to be weak. There were a few reports of
sales improving along the Texas-Mexico border and in
energy-related regions. Auto sales fell during the reporting period. Auto lenders have tightened credit amid rising
K-1
Federal Reserve Bank of Dallas
delinquencies. Outlooks among retailers generally improved compared with the prior report.
and contacts expected continued, gradual improvement
in Houston’s multifamily market. Transaction volume
appeared to have slowed for multifamily properties as
there was not much inventory on the market for sale.
Nonfinancial Services
Demand for nonfinancial services expanded moderately
over the past six weeks. Demand for staffing services
generally increased, with all contacts noting higher yearover-year activity. Placements of health care professionals generally remained high. Contacts saw a pickup in
orders for mining-related work in East Texas and cited
broad-based demand for white-collar workers in DallasFort Worth. A contact in Houston noted surprisingly
strong demand for entry- to mid-level placements from
oil and gas firms.
Office demand in Dallas-Fort Worth remained solid and
rent pressure persisted, although rental rates at the very
high end have been relatively flat. One contact expressed some concern about the elevated level of office
construction in the metroplex.
Financial Services
Loan demand increased over the past six weeks, although at a slightly slower pace than in the previous
reporting period. Growth in commercial real estate and
commercial and industrial loan volumes slowed. Residential real estate loan balances expanded at a faster
rate than in the previous reporting cycle, while consumer
lending declined slightly. Deposit volumes expanded,
and lenders cited higher net interest margins as well as
higher rates on loans. Contacts remained largely optimistic regarding future business activity and loan demand; however, several continued to express concern
about the regulatory environment.
Professional and technical service firms saw revenue
gains during the reporting period, with several firms
noting a pickup in activity. Accommodation and food
services contacts also noted slight increases in revenues, although there were some reports of persistent
weakness in demand. Airlines said passenger demand
held steady over the past six weeks. Domestic travel
remained stable, while activity along transatlantic and
South American routes increased.
Transportation and warehousing firms noted higher
revenues and an increase in cargo volumes since the
last report. Rail cargo rose, led by strong gains in shipments of fracking sand and grains, although shipments
of petroleum products and motor vehicles continued to
decline. Parcel shipments and seaport cargo increased,
while air and trucking freight volumes were flat. Outlooks
among nonfinancial services firms remained fairly optimistic, although some contacts expressed concern about
economic and political uncertainty.
Energy
Construction and Real Estate
Agriculture
Demand for oilfield services continued to improve, and
oilfield services firms noted increased utilization of their
equipment. Drilling activity rose further, and exploration
and production firms reported an increase in oil and gas
production. Several contacts said that the pace of increase in the rig count may not be sustainable and that
they expect it to taper off or even plateau past mid-2017.
Outlooks remained positive, although contacts were less
optimistic compared with the previous report.
Homes sales continued to trend upward during the reporting period. Contacts in Austin, Dallas-Fort Worth and
Houston noted that sales of low- to mid-priced homes
mostly remained strong, however, sales at the higherprice points varied by submarket. Home prices were flat
to up, and more builders were focusing on bringing moderately-priced products to the market.
Moisture levels remained favorable across the district,
boosting crop conditions. The wheat harvest was wrapping up, and production was down sharply from last year
because of lower yields and fewer acres planted. While
farmers were generally feeling positive about 2017 row
crop production, they remained concerned about low
crop prices and financial strain from not being able to
cover production costs. Export demand for U.S. cotton
will likely not be as strong this year due to average crop
quality and higher global supply. The cattle industry
continued to benefit from very strong beef demand, both
domestically and internationally. ■
Apartment demand improved and occupancy edged
higher in the second quarter, following a generally slow
first quarter. Leasing activity picked up in Houston where
overall market conditions were beginning to stabilize,
and landlords were able to reduce rent concessions on
select floorplans. Rental rates rose, with Dallas-Fort
Worth seeing the fastest growth. Outlooks were positive
For more information about District economic conditions visit:
www.dallasfed.org/research/texas
K-2
Federal Reserve Bank of
San Francisco
The Beige Book ■ June 2017
Summary of Economic Activity
Economic activity in the Twelfth District continued to expand at a moderate pace during the reporting period of mid-May
through June. Overall price inflation was flat, while upward wage pressures strengthened. Sales of retail goods were
modest, and growth in the consumer and business services sectors remained strong. Conditions in the manufacturing
sector improved, and activity in the agriculture sector picked up to a modest pace. Contacts reported robust activity in
residential real estate markets, and activity in the commercial sector picked up. Conditions in the financial services
sector remained solid.
Employment and Wages
Retail Trade and Services
On balance, wage pressures ticked up, and conditions
in the labor market tightened further during the reporting
period. Wage pressures for skilled software engineers
intensified further as competition for programmers with
experience in cybersecurity and cloud computing remained fierce. Demand for unskilled warehouse employees in the transportation and logistics services sector
increased. Contacts reported that they increasingly filled
job openings with older workers who were reportedly
seeking health-care benefits or supplemental income.
Shortages of labor and increasing wage costs fueled
investments in automation in the agriculture industry.
Sluggish sales growth and rising compensation costs
slowed the pace of hiring in the restaurant industry.
On balance, retail sales were modest over the reporting
period. Contacts reported that, while retail sales picked
up overall, the shift in consumer preferences toward
online purchases slowed sales at traditional brick-andmortar retailers. Declines in gasoline prices reportedly
boosted sales of light trucks. Inventories of automobiles
grew as demand softened further, and contacts expected sales to remain weak for some time.
Activity in the consumer and business services sector
generally grew at a strong pace. Business demand for
security, cloud, and analytic services continued to boost
sales in the technology industry. E-commerce sales
supported strong volume growth in the transportation
industry. Tourism demand remained strong, although
contacts noted that continued uncertainty surrounding
immigration policy slowed international bookings at
hotels in Southern California. Restaurant sales remained sluggish, and contacts expect the sluggishness
to continue through the end of the year.
Prices
Overall, price inflation was flat over the reporting period.
Prices of construction materials picked up. Hotel rates
firmed as tourism demand remained strong. Overall
prices for consumer electronics edged down slightly.
However, increased demand for computational memory
buttressed prices of some manufactured components.
Prices for cloud computing services declined as data
centers achieved greater economies of scale. Increased
capacity in renewable energy generation held down
energy price inflation. Overall, prices of agricultural
commodities slipped as the pace of supply growth outpaced that of demand.
Manufacturing
Conditions in the manufacturing sector improved somewhat, but uncertainty around fiscal, trade, and immigration policies tempered views on future growth. Increases in demand for memory on consumer devices boost-
L-1
Federal Reserve Bank of San Francisco
Real Estate and Construction
ed production of semiconductors, and contacts expect
double-digit growth through the end of the year. Demand
for primary and fabricated metals increased, buoyed by a
pickup of business investment and solid residential and
commercial construction. Production of manufactured
pharmaceuticals expanded moderately. Deliveries of
commercial aircraft slowed to a modest pace, but orders
rose from the same period last year. One contact reported that improved sales at some manufacturers boosted
their expected capital investments.
Real estate market activity picked up to a robust pace.
Residential construction activity continued to be strong in
much of the District, slowed only by a lack of available
land and labor. Inventories of new homes dropped further. One contact in California reported extremely high
presales in the residential market. Supply shortages
continued to fuel strong price increases, and affordability
remained a concern in most metropolitan areas. Commercial construction activity was solid. Contacts reported
an uptick in commercial investment aimed at remodeling
and repurposing large retail spaces for health-care and
entertainment services. Financing conditions for commercial projects tightened slightly.
Agriculture and Resource-Related Industries
Activity in the agriculture sector picked up to a modest
pace over the reporting period. In the Central Valley of
California, yields of nuts and row crops were up over the
previous growing season. Ample water supplies boosted
cherry harvests. On balance, improved global economic
conditions nudged up demand for some agriculture
products, particularly pork. Increased global production
pushed raisin inventories higher, reducing profitability for
some growers. Demand for electricity was flat, and persistent surpluses hampered profitability. Contacts reported that financial distress at many independent power
generators continued to propel industry consolidation.
Use of fossil fuels, particularly coal, in energy generation
continued to decline, while demand for renewables continued to be robust.
Financial Institutions
On balance, conditions in the financial services sector
remained solid. Loan demand softened slightly, although
contacts in the Pacific Northwest noted that, after a soft
first quarter, lending activity picked up briskly in that
region. Credit quality, while strong by historical standards, deteriorated slightly for commercial and industrial
and auto loans. Deposits continued to increase but at a
slower pace than in previous months. Asset quality remained solid, and capital levels were at all-time highs.
Net margins remained compressed, hindering bank
profitability, and contacts reported that community banks
continued to consolidate. ■
L-2
Cite this document
Federal Reserve (2017, July 25). Beige Book. Beige Book, Federal Reserve. https://whenthefedspeaks.com/doc/beige_book_20170726
@misc{wtfs_beige_book_20170726,
author = {Federal Reserve},
title = {Beige Book},
year = {2017},
month = {Jul},
howpublished = {Beige Book, Federal Reserve},
url = {https://whenthefedspeaks.com/doc/beige_book_20170726},
note = {Retrieved via When the Fed Speaks corpus}
}