Beige Book
For use at 2:00 PM EST
Wednesday
March 7, 2018
The Beige Book
Summary of Commentary on Current Economic Conditions
By Federal Reserve District
February 2018
Federal Reserve Districts
Minneapolis
Boston
Chicago
New York
Cleveland
Philadelphia
San Francisco
Kansas City
St. Louis
Richmond
Atlanta
Dallas
Alaska and Hawaii
are part of the
San Francisco District.
The System serves commonwealths and territories as follows: the New York Bank serves the Commonwealth of Puerto Rico and the U.S. Virgin
Islands; the San Francisco Bank serves American Samoa, Guam, and the Commonwealth of the Northern Mariana Islands.
National Summary
Boston
1
A-1
First District
New York
B-1
Second District
Philadelphia
C-1
Third District
Cleveland
D-1
E-1
Fifth District
Atlanta
F-1
Sixth District
Chicago
G-1
Seventh District
St. Louis
H-1
Eighth District
Minneapolis
The Beige Book is a Federal Reserve System publication about current
economic conditions across the 12 Federal Reserve Districts. It characterizes regional economic conditions and prospects based on a variety
of mostly qualitative information, gathered directly from District
sources.
The qualitative nature of the Beige Book creates an opportunity to
characterize dynamics and identify emerging trends in the economy
that may not be readily apparent in the available economic data. Because this information is collected from a wide range of business and
community contacts through a variety of formal and informal methods,
the Beige Book can complement other forms of regional information
gathering.
How is the information collected?
Fourth District
Richmond
What is The Beige Book?
Each Federal Reserve Bank gathers anecdotal information on current
economic conditions in its District through reports from Bank and
Branch directors, plus phone and in-person interviews with and online
questionnaires completed by businesses, community contacts, economists, market experts, and other sources.
How is the information used?
The anecdotal information collected in the Beige Book supplements the
data and analysis used by Federal Reserve economists and staff to
assess economic conditions in the Federal Reserve Districts. This
information enables comparison of economic conditions in different
parts of the country, which can be helpful for assessing the outlook for
the national economy. The Beige Book also serves as a regular summary of the Federal Reserve System’s efforts to listen to businesses
and community organizations.
I-1
Ninth District
Kansas City
J-1
Tenth District
Dallas
K-1
Eleventh District
San Francisco
Twelfth District
L-1
This report was prepared at the Federal Reserve Bank of San Francisco
based on information collected on or before February 26, 2018. 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 ■ February 2018
Overall Economic Activity
Economic activity expanded at a modest to moderate pace across the 12 Federal Reserve Districts in January and
February. Consumer spending was mixed, as non-auto retail sales increased in just over half of the Districts while auto
sales declined or were flat in every District. Tourism activity was broadly solid, with Atlanta and Richmond recording
robust growth in this sector. On balance, Districts reported modest growth in home sales and construction, with the
latter constrained by shortages of labor and materials. Conditions in the nonresidential real estate market improved
moderately since the previous report, with robust construction activity noted in three Districts. Commercial rents in and
around New York City were up significantly, according to contacts in the area. Increases in production were broad
based across manufacturing sectors, with all but one District noting at least modest growth in activity. Loan volumes
were generally flat, with a handful of Districts noting a modest decrease in delinquency rates. Among reporting Districts, agricultural sector activity was mixed but flat overall. Contacts in natural resource sectors saw modestly improving industry conditions, except in the Minneapolis District, where energy and mining activity was robust.
Employment and Wages
On balance, employment grew at a moderate pace since the previous report. Across the country, contacts observed
persistent labor market tightness and brisk demand for qualified workers, as well as increased activity at staffing placement services. Several Districts reported continued worker shortages across most sectors, with contacts often mentioning shortages in the construction, information technology, and manufacturing sectors. In many Districts, wage growth
picked up to a moderate pace. Most Districts saw employers raise wages and expand benefit packages in response to
tight labor market conditions. Contacts in a few Districts conveyed reports of modest increases in compensation following passage of the Tax Cuts and Jobs Act.
Prices
Prices increased in all Districts, and most reports noted moderate inflation. Four Districts saw a marked increase in
steel prices, due in part to a decline in foreign competition. Price growth for building materials such as lumber picked
up, stemming from an uptick in construction activity. Several Districts reported moderate increases in broad transportation costs, caused primarily by higher fuel costs that boosted freight rates. Home and commercial lease prices rose
across most of the country.
Highlights by Federal Reserve District
Boston
New York
Business contacts at manufacturing and retail firms
reported year-over-year revenue increases in recent
weeks. These employers and staffing firms said labor
markets were tight, and many cited potential wage increases. Price commentary was mixed, although no
contacts planned substantial price increases. The outlook remained positive.
Economic activity grew at a modest pace, while labor
markets have remained tight. Input price pressures have
intensified, while selling prices generally continued to
rise modestly. Housing markets and commercial real
estate markets have been mixed.
1
National Summary
Philadelphia
Minneapolis
Economic activity continued to grow at a modest pace, in
particular for nonauto retail sales, manufacturing, nonfinancial services, and tourism. Nonresidential leasing
improved to a modest pace, while auto sales continued a
modest decline. Construction and existing home sales
changed little. On balance, employment, wages, and
prices continued to grow modestly.
Ninth District economic activity grew moderately, and
labor markets remained tight. Consumer spending was
up modestly, while tourism got a boost from the Super
Bowl in Minneapolis and good snowfall elsewhere. Energy and mining activity increased briskly. Commercial
construction grew strongly, but residential construction
was mixed. Home sales were generally lower across the
District.
Cleveland
Kansas City
The District economy expanded at a moderate pace.
Labor markets tightened, with wage pressures noted
broadly. The Tax Cut and Jobs Act is reportedly enabling
firms to invest more and to increase worker pay. Stronger confidence in the economy supported rising demand
in manufacturing, retail, and nonfinancial services. Construction activity remained buoyant.
Economic activity continued to expand at a modest pace
in late January and February, with broad-based growth
across most District sectors. Consumer spending, real
estate and energy activity increased modestly, while
contacts in the manufacturing, transportation, wholesale
trade, and professional and high-tech sectors reported
moderate growth. Additional gains were expected in
most sectors in the months ahead.
Richmond
The regional economy expanded at moderate pace in
recent weeks. Manufacturing activity picked up, but
manufacturers faced longer vendor lead times due to
trucking delays. Exporting activity rose more quickly and,
for some ports, came more in line with imports. Labor
demand increased moderately and wage pressures
broadened. Prices continued to grow at a modest pace.
Dallas
Economic activity grew moderately, with sectors like
manufacturing and energy continuing their solid expansions while others cooled somewhat. Growth in nonfinancial services activity slowed slightly, as did loan
growth, and retail sales fell modestly. Hiring remained
solid despite a tight labor market, and wage and price
pressures remained elevated and in some cases
strengthened.
Atlanta
Economic conditions continued to improve modestly.
The labor market remained tight and wage growth was
balanced. Non-labor input costs edged up slightly. Retailers cited flat sales, while auto sales were sluggish.
Home prices increased modestly. Demand for commercial real estate continued to improve. Manufacturers
noted solid activity and steady production levels.
San Francisco
Economic activity in the Twelfth District continued to
expand at a moderate pace. Sales of retail goods picked
up slightly, and growth in the consumer and business
services sectors remained strong. Conditions in the
manufacturing sector continued to pick up. Activity in
residential real estate markets remained strong, and
conditions in the commercial real estate sector were
robust. Lending activity ticked up.
Chicago
Growth in economic activity remained at a moderate
pace. Employment and manufacturing production increased moderately, business spending rose modestly,
construction and real estate activity grew slightly, and
consumer spending was down slightly. Wages increased
modestly, prices rose slightly, and financial conditions
deteriorated some. Farmers continued to face challenging conditions.
St. Louis
Economic conditions have continued to improve at a
modest pace. District banking contacts reported stronger
demand for new loans. Overall price pressures strengthened. The outlook among firms surveyed in midFebruary was slightly more optimistic than the outlook in
our mid-November survey and generally unchanged
from one year ago.
2
Federal Reserve Bank of
Boston
The Beige Book ■ February 2018
Summary of Economic Activity
Economic activity expanded at a moderate pace in the First District, with almost all retail and manufacturing respondents citing sales and revenues in recent weeks ahead of year-earlier levels. By contrast, staffing firms reported yearover-year revenue declines, reflecting ongoing difficulty finding workers to fill openings. Commercial real estate contacts
offered generally upbeat reports. Residential real estate markets in the region saw sales declines and price increases,
which respondents attributed to very low inventories. Outlooks continued to be generally positive.
Employment and Wages
and drivers. In manufacturing, specific supply issues
have resulted in selective price increases. Otherwise,
manufacturing contacts reported no notable changes in
the pricing environment.
Most responding firms said labor markets were tight.
Retail contacts noted increased difficulty hiring workers
in some categories and said they expected the labor
market to tighten further over the coming year. Merit
raises for existing retail employees were in the range of
2.5 percent to 4.0 percent. One large retailer planned to
pass along half its savings from the corporate tax cut to
selected workers in the form of higher wages, while a
smaller retailer said it planned to raise salaries a bit to
match the wage increases announced by some prominent retail chains as a result of the tax cuts. A manufacturing contact with declining sales laid off temporary
workers but has, so far, avoided any layoffs of permanent workers. Otherwise, no manufacturing respondents
reported any major revisions to their hiring, although
several said the market was particularly tight for skilled
workers from machinists to electrical engineers. Manufacturing contacts reported higher starting salaries and
longer waits to fill open positions. Staffing firms noted
high labor demand from clients across the board, regardless of industry or occupation, paired with a dearth of
candidates to fill open slots. They reported that bill rates
and pay rates have risen, with some noting local minimum wage increases as a source of upward movement.
Retail and Tourism
First District retail respondents reported that from early
January through mid-February, year-over-year sales
results were positive, ranging from mid-single-digit to
double-digit increases. While two contacts cited high
demand for winter items, others believed the increases
represented a continuation of more buoyant consumer
sentiment that took hold in the second half of 2017.
Contacts said the US economy is expected to do well
overall in 2018, notwithstanding challenges facing some
retailers. Predictions regarding consumer sentiment
varied: One contact said that the cut in federal income
taxes and actual or expected wage gains augur well for
the retail sector. Others, including one citing recent stock
market volatility, opined that consumers were likely to be
cautious.
Boston-area hotels had their strongest December in five
years. Despite a slow start during the first half, the average room occupancy rate in 2017 was 82.2 percent, the
highest rate ever recorded and the fifth straight year
above the hotel industry “gold standard” of 80 percent.
Some in the tourism industry expressed concern that
foreign travel to the United States will decline in 2018.
Prices
Firms’ comments on pricing were mixed. Retail contacts
said wholesale prices were steady; one indicated they
will increase prices on most retail products by low singledigits in 2018, while another planned to raise retail prices
to cover higher labor costs. Another retail contact noted
higher shipping costs because of a shortage of trucks
Manufacturing and Related Services
Only one of the ten First District manufacturers contacted this cycle reported lower sales – a gun maker. Other-
A-1
Federal Reserve Bank of Boston
wise, all manufacturing contacts reported higher sales
than a year ago. Contacts in the semiconductor area
reported strong sales and new orders. Demand was
strong in other industries as well, including a manufacturer of membranes used in batteries and filters who reported December sales up 10 percent to 15 percent versus
the previous year.
activity, while leasing activity slowed across all sectors in
Connecticut. Construction activity remained robust in
Providence and Boston, but luxury multifamily construction continued to dominate in Boston where some contacts cited ongoing concerns about overbuilding in that
submarket.
Respondents across the First District voiced concerns
that commercial property values could fall in response to
rising yields on long-term Treasuries, and cited both
upside and downside risks related to recent changes in
federal tax laws and the recently signed federal budget.
A Connecticut contact said business sentiment remained
very weak, leading to a pessimistic outlook for commercial real estate activity. A Rhode Island contact expected
slower economic growth in the second half of 2018; by
contrast, Boston contacts forecasted stable or strengthening growth despite risks in some submarkets.
Several contacts reported constraints on the supply side.
Two said they faced shortages of electronic parts; one
attributed the shortages to new phones that “soaked up
world supply” for selected components. Another supply
issue was trucking. A contact said that companies now
have to plan well in advance to guarantee trucking capacity; finding it at short notice is either impossible or
very expensive – the main issue is a shortage of drivers.
Manufacturing respondents had a positive outlook. In
general, contacts were increasing capital expenditures,
although only one reported a major increase in spending
(to build a new plant in New Hampshire). Contacts said
that it was too soon to determine the effect of the new
tax code on capital spending.
Residential Real Estate
Residential real estate markets in the First District
showed declines in closed sales despite strong demand.
Closed sales for single-family homes decreased in four
out of the six reporting areas, while New Hampshire and
Maine reported moderate increases. For condos, sales
decreased in all reporting areas but Maine. (Three of the
six states, as well as the Greater Boston area, reported
data through December 2017; Maine, New Hampshire
and Vermont reported results to January 2018.)
Staffing Services
New England staffing firms have seen mostly negative
results over the last quarter of 2017 and the start of
2018, with the majority reporting revenue declines yearover-year. For most respondents, this reflects a low
unemployment environment that has slowed hiring volumes and increased competition for the remaining labor
supply. Some also remarked on the entry of new tech
firms specializing in job posting sites, which has made it
easier for companies to host job searches without using
intermediaries. This has sparked experimentation as
they look for ways to distinguish themselves through
advertising, branding, improving online reviews, and
increased attention to building relationships with potential talent. One respondent reported the temporary placement side of their business was the strongest, while
most noted that few workers want temporary positions in
the current labor market. All anticipate the continuation
of a robust economy and expect to continue to work
under the constraints of a tight labor market for the foreseeable future.
Median sales prices increased for both single-family
homes and condos, except in Vermont. Low inventory
continued to be a key constraint in the First District, with
all areas except Greater Boston reporting substantial
decreases in inventory.
Contacts expressed positive outlooks in terms of market
activity, citing strong buyer demand and the prospect of
rising mortgage rates as the reasons. A Boston contact
noted “Despite these drops in overall sales, activity has
remained strong and we’re seeing an eager buyer population .” ■
Commercial Real Estate
Contacts offered mostly upbeat reports on commercial
real estate activity in the First District. Office leasing
activity remained robust in greater Providence, driving
further increases in rents, although suburban office
locations remained less sought-after. Rhode Island’s
industrial property market continued to experience strong
demand. Boston posted an increase in office leasing
A-2
Federal Reserve Bank of
New York
The Beige Book ■ February 2018
Summary of Economic Activity
Economic activity in the Second District grew at a modest pace in the latest reporting period, while the labor market has
remained tight. Input price pressures intensified, while selling prices continued to rise modestly. Growth in the manufacturing and distribution industries slowed to a moderate pace, and activity declined in some service industries. Consumer
spending has weakened somewhat, though this was partially attributed to unseasonably harsh weather across much of
the District. Housing markets have been mixed, with the sales market a bit firmer but the rental market steady to softer,
especially at the high end. Commercial real estate markets were also mixed, with strength in the industrial segment but
some slackening in the office and retail markets. Industrial construction activity remained robust, while office construction remained sluggish and multi-family construction was mixed. Finally, banks reported slightly weaker loan demand
from the household sector, and steady to lower delinquency rates.
including the recent hike in New York State’s minimum
wage rates. Some businesses have refrained from raising wages that are already above the new minimum.
Employment and Wages
The labor market has remained tight, while hiring activity
has been steady. One employment agency in upstate
New York noted that hiring was sluggish in January but
picked up in February. A major New York City agency
indicated that labor demand has remained brisk, while
qualified candidates have been in increasingly short
supply—particularly for jobs requiring technical skills.
One contact noted that drug testing and background
checks have disqualified many job applicants.
Prices
Input prices have accelerated sharply, according to
contacts in most industry sectors, and a sizable number
of businesses foresee further hikes in the months ahead.
However, businesses generally report that they have
raised their selling prices only modestly. Looking ahead,
a growing proportion of businesses in retail and wholesale trade said that they planned to hike prices in the
coming months.
Business contacts in most industries indicated that they
are expanding staff modestly, with the exception of
retailers, who indicated that they have reduced staff
slightly. Hiring plans for the months ahead have remained fairly strong.
Consumer Spending
Retail contacts reported that sales have weakened in
early 2018, falling short of 2017 levels. Retailers in upstate New York indicated that customer traffic has been
fairly robust in recent weeks, despite unusually cold and
snowy weather, but that sales were down from a year
earlier. The trend toward online shopping has continued
to adversely affect many brick and mortar stores—
particularly small businesses—though jewelry stores,
nail salons, and other service providers have been less
affected. Inventories were generally reported to be at
satisfactory levels, and retailers were moderately optimistic about the near-term outlook.
Businesses in the service sector reported further acceleration in wages, and a sizable proportion of firms
across most industries indicated plans to raise wages in
the months ahead. A New York City agency reports that
most new hiring involves recruiting candidates who are
already employed, and that this has made businesses
increasingly negotiable on wages. A number of contacts
in industries such as health care, retail, and restaurants
noted they have been squeezed by wage pressures,
B-1
Federal Reserve Bank of New York
New vehicle sales in upstate New York were reported to
be steady to softer since the last report, while sales of
used cars were mixed. Vehicle inventories were said to
be in fairly good shape. Dealers continued to characterize retail and wholesale credit conditions as favorable.
the high end of the market. The inventory of homes on
the market was reported to be very thin throughout the
District, except in Manhattan where it has been steady at
a moderate level.
Rental markets have been mixed but, on balance, softer.
New York City’s rental market has weakened further,
particularly at the high end. Effective rents have trended
down, reflecting a combination of modestly declining
face rents and rising landlord concessions. While these
concessions have been common for high-end rentals for
some time, they have recently been used on lowerpriced units as well. However, rental markets in northern
New Jersey, upstate New York, and the suburbs around
New York City have held up better, with rents steady to
up modestly.
Consumer confidence in the Middle Atlantic states (NY,
NJ, PA) edged down but remained at a very high level in
January.
Manufacturing and Distribution
Manufacturers and wholesalers reported that growth
slowed to a moderate pace, while transportation firms
indicated that activity leveled off following robust growth
in late 2017. Looking ahead, manufacturers expressed
increasingly widespread optimism about the near-term
outlook and noted that they were planning on boosting
capital spending. Contacts in wholesale distribution and
transportation were moderately optimistic.
Commercial real estate markets have been mixed. Office
availability rates were steady to up slightly, while asking
rents were mostly flat. The retail market has slackened
more noticeably, especially in New York City, where
vacancy rates have climbed to multi-year highs. In northern New Jersey and upstate New York, retail vacancies
have been fairly stable. The industrial market, in contrast, has continued to strengthen, as availability rates
have continued to decline throughout the District. Industrial rents in and around New York City and northern
New Jersey have risen at more than a 10 percent pace,
while rents in upstate New York have been stable.
Services
Reports from service-sector firms were mixed. Businesses in the information and leisure & hospitality industries
reported that activity has declined, though part of this—
at least for the latter—may be weather-related. Contacts
in professional & business services and education &
health again reported modest growth in activity.
Still, service sector businesses were generally optimistic
about the near-term outlook, except in leisure & hospitality, where optimism was more subdued.
Multi-family construction activity has remained brisk in
northern New Jersey and has picked up across upstate
New York, but has slowed in New York City. Office construction has been subdued, but industrial construction
has been fairly robust.
Broadway theaters reported that business was brisk in
January, with attendance up more than 10 percent from
a year earlier and revenues up more than 20 percent.
However, both tapered off noticeably in February but
were still up moderately from a year ago.
Banking and Finance
Real Estate and Construction
Small to medium-sized banks in the District reported
mixed demand for loans overall. Demand declined by a
bit more than the seasonal norms for consumer loans
and for residential mortgages but increased modestly for
commercial mortgages. Refinancing activity also reportedly decreased. Bankers reported higher credit standards for C&I loans but unchanged standards for other
types of loans. Finally, bankers reported lower delinquency rates for residential mortgages and unchanged
delinquency rates across all other categories. ■
Housing markets across the District have been mixed,
with the sales market picking up slightly but the rental
market steady to softer. Real estate contacts in upstate
New York reported that sales activity slowed in January,
partly reflecting unseasonably harsh weather, though
buyer traffic and listings picked up in February. In northern New Jersey, prices have been essentially flat, while
sales volume declined slightly from a year ago. However,
in Long Island, the Mid-Hudson Valley, and southwestern Connecticut, home sales have been fairly brisk, and
prices have risen 3-5 percent.
For more information about District economic conditions visit:
www.newyorkfed.org/data-and-statistics/regional-datacenter/index.html
New York City’s co-op and condo market has also seen
fairly brisk activity, though apartment prices have been
flat overall—up modestly at the lower end but down at
B-2
Federal Reserve Bank of
Philadelphia
The Beige Book ■ February 2018
Summary of Economic Activity
Aggregate business activity in the Third District continued at a modest pace of growth during the current Beige Book
period. Nonauto retail sales, tourist activity, manufacturing, nonfinancial services, and nonresidential leasing markets
grew modestly, while little change was noted by contacts from new home construction, existing home sales, and nonresidential construction. Auto sales continued to decline modestly. On balance, employment, wages, and prices continued
to grow modestly. The percentage of firms anticipating continued growth over the next six months remained essentially
the same; however, the percentage fell somewhat among manufacturers and rose among nonmanufacturers. Several
contacts observed that sentiment appears to be running a bit hotter than tangible signs of production and investment.
Employment and Wages
and received. However, the percentage of manufacturing
firms reporting increases rose significantly for prices paid
and for prices received for their own goods. Among
nonmanufacturing firms, contacts reported little change
for prices paid and received.
Employment continued to grow at a modest pace during
the current Beige Book period. Manufacturing and nonmanufacturing firms reported ongoing net additions to
staff, while average hours worked edged higher over the
period for manufacturing firms but fell among nonmanufacturers.
Builders continued to note rising prices for construction
materials as well as labor, but no acceleration. Existing
home prices also continued to rise, as sellers have failed
to emerge in sufficient quantity to provide inventories
that meet the demand in most markets.
On balance, wage growth held steady at a modest pace;
the share of nonmanufacturing firms reporting increases
held steady at about one-third. Most banking contacts
noted the apparent disconnect between frequent talk of
labor shortages and the lack of evidence that wages are
rising significantly in response.
Looking ahead one year, manufacturing firms now anticipate receiving significantly higher prices for their own
goods and services than they expected one quarter
earlier. However, nonmanufacturing firms have lowered
their expectations slightly. Overall, firms also reported
somewhat higher expectations for annual consumer
inflation.
Staffing firms reported being busy in many of the District’s labor markets; wage pressures varied a bit more.
In two markets, wage rates were up about 3 percent,
while firms pushed back against 3 percent hikes in another market with mostly manufacturing clients. Staffing
contacts also noted healthy receivables and an absence
of any other signs of financial deterioration from clients.
Manufacturing
On balance, manufacturing activity continued at a modest pace of growth, with little change in shipments and in
general activity, although orders dipped somewhat.
Prices
On balance, prices modestly, although greater price
pressures began to emerge among manufacturers. Most
contacts continued to report no change in prices paid
The makers of chemicals, primary metal products, industrial machinery, and electronic equipment continued to
C-1
Federal Reserve Bank of Philadelphia
note gains in new orders and shipments; firms in the
lumber, paper, and fabricated metal sectors reported
more mixed results with some declines in activity.
ing. Home equity lines fell moderately, and auto loans
dropped slightly, while growth of other consumer loans
was strong.
Most manufacturing contacts continued to expect general activity to increase over the next six months; however, the percentage of firms expecting future increases did
retreat below 60 percent. By comparison, the percentage
of firms expecting increases in future capital expenditures and future employment held mostly steady at levels
just above 40 percent.
Credit card lending fell substantially as consumers paid
down holiday bills; however, the seasonal decline this
year matched the decline in the comparable prior-year
period. Also, over the entire year, credit card loan volumes and total lending in all the other categories combined have grown at a moderate pace.
Banking contacts continued to describe solid ongoing
economic growth in most parts of the District. Although
they described the confidence of consumers and businesses as running high, many noted that the sentiment
appears greater than the tangible evidence of new consumption and investment. Overall, contacts noted that
credit standards remain unchanged, credit quality remains very sound, and credit conditions were not expected to shift through the current year.
Consumer Spending
On balance, nonauto retail sales continued to grow
modestly. While the weather this year was generally
more inviting for shoppers than last year, one contact
noted that a snowstorm in January hurt sales when it
occurred and then again in February because several
school districts chose to make up that time on Presidents’ Day, thereby affecting the critical holiday sale.
Real Estate and Construction
Auto dealers continued to report modest declines in year
-over-year sales this period. Although sales remain at
high levels, dealers noted lower profitability and worries
about the future.
Homebuilders reported little overall change in activity.
Sales traffic was weak as the year began and was only
just beginning to pick up as February drew to a close.
Contacts mentioned several possible factors, including
higher interest rates and weekend distractions from the
Eagles’ playoff run.
Tourism contacts continued to report modest growth
overall. A Philadelphia contact noted that hotels benefited from several large conventions, Eagles’ home playoff
games, and the Super Bowl itself, which drew local fans
for downtown hotel stays in anticipation of the evening
celebration. A Delaware contact reported strong growth
from an inland hotel and heavy traffic, packed outlets,
and busy recreation venues at the shore, although shore
hotels did not benefit. Also, Atlantic City’s casino revenues returned to negative year-over-year comparisons.
Brokers in Third District housing markets reported mixed
results for existing homes sales, with slight increases in
the Lehigh Valley and the Greater Philadelphia area, but
a modest decrease at the Jersey Shore. Increasingly
lower inventories of houses continue to constrain sales
and place upward pressure on house prices.
Nonresidential real estate contacts reported little change
in the high levels of overall construction, although activity
may begin to wane a bit at year-end unless new projects
are forthcoming. Industrial/warehouse space continues
to be the most robust sector throughout much of the
District. Contacts have expressed more caution about
multifamily housing and office space projects, which
have tempered their pace. Neither real estate nor banking contacts have expressed concern about overbuilding
of commercial real estate. Leasing activity has picked up
a bit to a modest pace, mostly due to a growing cohort of
leases that are up for renewal. ■
Nonfinancial Services
On balance, service-sector firms have continued to
report modest growth in general activity since the prior
Beige Book period. The percentage of firms reporting an
increase in sales and the percentage of firms reporting
greater orders were essentially unchanged. However,
expectations about future growth were more widespread,
with nearly two-thirds of the firms anticipating increased
activity.
Financial Services
Financial firms reported little change in overall loan
volumes (excluding credit cards) after experiencing
modest growth in the prior Beige Book period. Volumes
did grow moderately in mortgages, commercial real
estate loans, and commercial and industrial (C&I) lend-
For more information about District economic conditions visit:
www.philadelphiafed.org/research-and-data/regionaleconomy
C-2
Federal Reserve Bank of
Cleveland
The Beige Book ■ February 2018
Summary of Economic Activity
Business activity in the Fourth District expanded at a moderate pace since our last report. Labor demand remains
strong, but worker shortages are limiting firms’ ability to hire. Competition for qualified workers has led employers to
raise wages. Some firms reported that the Tax Cut and Jobs Act is enabling them to increase investment and raise
worker pay. Upward pressure on input costs continued at the same pace as that seen during the past few reporting
cycles. Firms generally were able to increase their selling prices. Retailers reported a continued boost in sales going
into the first quarter, and they attributed this boost to stronger consumer confidence. Housing and commercial real
estate markets remained buoyant. Manufacturing output trended higher.
Employment and Wages
er, few contacts expect the tax cuts to lead to more
robust hiring. Rather, firms expect to maintain their recent hiring pace over the short term.
Labor markets in the Fourth District tightened during the
survey period as demand for talent exceeded the available supply. Hiring was strongest in manufacturing and
construction. Retailers pared their workforces, citing the
end of the holiday shopping season and a need to gain
efficiencies. Transportation firms trimmed payrolls because of lower seasonal demand and driver shortages
that prompted efforts to boost efficiency. Across industries, the majority of firms reported replacing staff or
making seasonal adjustments, though a sizeable share
said they had created positions. Overall, the market for
talent remains challenging. Turnover and an aging workforce were commonly cited as key challenges. Retirements are limiting the potential pool of workers. One
construction contact noted that he is expecting significant labor shortages this year. A steel producer observed that every time his firm gets close to having a full
staff, someone quits. The tough competition for workers
led employers to raise wages during the survey period,
especially for lower-wage jobs. Contacts speculated that
savings resulting from the Tax Cuts and Jobs Act (TCJA)
will, in part, support pay increases over the short to
medium terms. A few bankers expect to raise minimum
pay to $15 per hour within the next year or two. Howev-
Prices
Non-labor input costs rose for a majority of contacts, at a
pace similar to that of the previous survey period. A
combination of stronger demand, supply constraints, and
higher materials prices elevated non-labor costs, especially in the construction, manufacturing, and transportation industries. Steel producers reported raising selling
prices because of a decline in market share for foreign
steel and expectations about potential outcomes of
pending trade cases. Manufacturers further down the
supply chain reported sizeable increases in the price of
steel that they purchased. Firms’ ability to pass through
price increases to their customers was little changed
from the previous survey period, though there was considerable variation across industries. Transportation
companies across the board were able to raise freight
rates in response to higher fuel costs and capacity constraints. Similarly, construction firms were able to pass
along their higher input costs without much pushback.
Retailers, however, cited competition as a reason for
their holding or lowering their selling prices.
D-1
Federal Reserve Bank of Cleveland
Consumer Spending
creased. Some contacts specifically cited the Canadian
lumber tax as a source of increased materials costs. The
average sales price of new and existing single family
homes increased 5 percent during January compared to
those of a year ago. Homebuilders continued to raise
wages to decrease turnover rates and to attract the best
talent. Some homebuilders struggled to fill positions for
framers, bricklayers, and drywall hangers.
Retailers reported improving sales during the survey
period. Some retailers indicated that in early 2018 they
were still benefiting from the holiday season. Others
reported that rising consumer confidence could help
explain stronger customer demand that began in November 2017. Most retailers were optimistic that sales would
continue to increase during the remainder of the current
quarter and into the next. Auto dealers experienced more
challenges than their general retail counterparts at the
beginning of the year. Unit sales of new motor vehicles
declined about 7 percent in January compared to those
of a year ago. Contacts indicated that this was due in
part to poor weather conditions and higher interest rates.
One dealer reported that new motor vehicle sales were
beginning to slow after five to seven years of growth,
increasing dealer inventories, especially for new cars.
Pressure from OEMs to buy excess products also contributed to higher than normal inventory levels.
Nonresidential builders saw a boost in inquiries at the
beginning of 2018. Rising demand was attributed to
improving economic conditions and higher customer
confidence. Builders increased their billing rates because
of rising demand and materials costs, both of which are
expected to trend higher into the next quarter. Contacts
reported that some lenders remain cautious when considering project financing, especially for multifamily developments.
Financial Services
Demand increased for C&I loans and for commercial real
estate lending during the survey period. Bankers speculated that they are beginning to see an impact from the
TCJA, saying that at the beginning of the first quarter,
credit demand grew significantly because of pent-up
demand for capital and real estate. Business lending
was stronger on a year-over-year basis, with contacts
citing greater customer confidence, improving market
conditions, and expanding footprints. On the consumer
side, credit card usage was seasonally lower following
the holiday boom, while direct and indirect auto lending
increased. One banker noted that consumers have built
up home equity and that drawdowns on HELOCs are
expected to increase as the spring home improvement
season begins. Delinquency rates were stable. One
contact said that current lending standards are working
efficiently and that delinquency rates are quite low.
Manufacturing
Demand for manufactured goods increased during the
survey period and on a year-over-year basis for many of
our contacts. Strong customer confidence and seasonal
demand changes for industrial products contributed to
new manufacturing orders. One producer of residential
HVAC systems reported a large increase in output during
January compared with that of a year ago thanks to
stronger consumer confidence and rising liquidity. Manufacturers of material handling and construction equipment were optimistic in their outlook. Rising commodity
prices are encouraging demand for products from extractive and metal recycling equipment producers. Fabricated metals producers cited particularly strong growth
because of decreased competition from imports. Imports
have reportedly fallen because of stronger global demand and concerns about potential outcomes of pending
trade cases. Most contacts in the fabricated metals
industry reported that the TCJA and business-friendly
policies are encouraging capital expansions and increased investment. They expect strong demand growth
to continue with increased infrastructure spending. Contacts in the plastics industry relayed a mixed picture, with
some contacts reporting slowing demand along seasonal
trends and oversupply within the industry.
Nonfinancial Services
Activity in the nonfinancial services sector grew at a
moderate-to-strong pace. Rising freight volumes across
product segments were attributed primarily to solid economic growth. Freight haulers were concerned about
capacity constraints caused by labor shortages. This
situation is forcing freight customers to transition from
truck to rail carriers. Within the professional services
sector, contacts from engineering, software development, and accounting firms reported the strongest demand growth, which they said was due to passage of the
TCJA and confidence in the overall economy. ■
Real Estate and Construction
For most homebuilders, demand was stable or had
improved since December and on a year-over-year
basis. One contact reported that an improving labor
market was boosting demand. Almost all homebuilders
increased their base prices during the survey period as
demand rose and as materials and labor costs in-
D-2
Federal Reserve Bank of
Richmond
The Beige Book ■ February 2018
Summary of Economic Activity
The Fifth District economy expanded at a moderate pace since our previous report. Manufacturing activity increased
moderately but firms faced longer vendor lead times due, in part, to trucking delays. Trucking firms concurred, saying that
driver shortages kept them from meeting the high demand. District ports saw moderate growth, overall, as export activity
picked up and, at some ports, came more in line with imports. Retailers experienced a slight slowdown in recent weeks.
Tourism and travel remained robust despite a few disruptions from wintry weather. Reports on commercial real estate
conditions were mostly positive but varied by region. Likewise, lenders across the Fifth District gave somewhat mixed
reports on commercial loan demand. Nonfinancial services firms generally experienced a moderate rise in demand and
revenues, although there were some reports of profit margin compression. The demand for labor increased moderately
and many employers had challenges finding workers. Wage pressures broadened, and more firms were raising starting
wages and offering expanded benefits to attract new hires. Prices continued to grow at a modest pace, overall.
Employment and Wages
metallurgical coal but declined somewhat for thermal
coal. Meanwhile, natural gas prices declined modestly in
recent weeks.
The demand for labor rose moderately in recent weeks.
A staffing agent reported a modest increase in orders as
the lack of available workers to fill permanent positions
drove more employers to staffing firms for temporary
help, particularly in manufacturing, warehousing, and
distribution. Contacts also reported difficulty filling positions for IT professionals, engineers, accountants, health
care providers, and construction workers. Some employers said they were willing to train underqualified workers
but had trouble finding workers with soft skills and a
strong work ethic. Upward wage pressures continued to
broaden moderately. In addition to raising starting wages, there were some reports of employers looking to
attract workers with expanded benefit packages and
more flexible work schedules.
Manufacturing
Manufacturing activity grew moderately in recent weeks.
A South Carolina copper parts manufacturer noted increased sales in both foreign and domestic markets, and
an electronics manufacturer in Maryland reported an
increase in defense-related orders. A South Carolina
packaging manufacturer saw improved business conditions and began to increase capital investment in anticipation of higher interest rates. A Virginia wood-product
manufacturer reported unpredictable business from
week to week, as demand from restaurants increased
while demand from retailers slowed. Manufacturers
across the District continued to face supply chain disruptions resulting from delays in trucking.
Prices
Since our previous report, prices grew at a modest pace.
According to our most recent surveys, manufacturers
reported moderate increases in input costs, which outpaced growth in selling prices. Some of the largest raw
materials price increases were reported for lumber,
plastics, metals, and packaging materials. A food manufacturer saw prices rise for flour and sugar but decline
slightly for poultry, eggs, and beef. Service sector prices
grew modestly, overall. Export prices rose slightly for
Ports and Transportation
Port activity picked up moderately in recent weeks, with
increases in both imports and exports. Faster growth in
exports at some ports left them with a better balance in
volume growth. Recent increases in exports were largely
driven by automotive and commodities shipments. A
North Carolina port attributed much of its growth to exporting wood chips to the UK to be used as fuel. Howev-
E-1
Federal Reserve Bank of Richmond
er, a Maryland port continued to see more than twice as
many loaded import containers as loaded export containers.
In commercial real estate, traffic and sales increased
and prices were steady in recent weeks, although activity
varied by geographic area and industry segment. An
executive from Columbia, SC and another from Richmond, VA reported speculative construction in the industrial market. The Columbia report also noted strong
activity in retail, including construction of small retail
space. There was also steady demand for restaurant
space. There were a few reports of slowing office-related
activity. On the other hand, office activity expanded in
Virginia Beach and there was strong demand for Class A
urban office space and Class B suburban space in the
Charlotte, NC area.
Trucking companies saw sustained growth in recent
weeks, and many reported being unable to meet increased demand. A North Carolina company reported
demand of about two truckloads for every available
truck. Trucking companies have continued to turn away
business because of driver shortages and expect this
problem to worsen in coming months as shipments pick
up seasonally in the spring.
Retail, Travel, and Tourism
Retailers experienced somewhat sluggish sales in recent
weeks. Many firms noted a drop in revenues but remained optimistic that business would pick up in the near
future. District auto dealers were seeing low credit
scores prevent many customers from purchasing cars. A
Maryland plumbing supplier said business was at a
twelve-year high, and a Maryland hardware store saw an
uptick in sales resulting from snow storms as people
bought gear for removing snow and heating their homes.
A West Virginia sporting goods retailer said strong
wholesale demand made up for weak retail demand.
Banking and Finance
Since our previous report, loan demand increased slightly. Residential mortgage lending was flat to slightly lower, reflecting a typical seasonal slowdown, while refinance loan demand fell slightly. Interest rates edged
higher in recent weeks. A banker in West Virginia attributed the decline in mortgage refinancing to the rise in
interest rates. Deposits were up moderately, overall.
Reports on commercial loan demand varied. For example, lenders in Maryland and North Carolina saw modest
increases in commercial lending, while contacts in central Virginia and West Virginia reported flat to slightly
lower demand. Credit quality remained strong. Credit
standards declined slightly amidst reports of some higher
loan-to-value ratios being accepted.
Tourism remained robust in recent weeks. Hotel stays
around the District continued to increase; however, some
North Carolina hotels reported that their business was
suffering from increasing competition, despite strong
tourism. A Virginia outdoor center reported having to turn
away visitors as bookings increased. Tourism in D.C.
adjusted down to normal levels compared to abnormally
strong business last winter. Also, it did not suffer as
much from the federal government shutdown as in the
past because of its brevity. District ski resorts experienced a strong season, after a few weak years. However, winter weather hurt tourism elsewhere in the District,
particularly in South Carolina, where the Charleston
airport was shut down for four days.
Non-Financial Services
Demand for nonfinancial services rose moderately in
recent weeks. Professional and business services and
administrative support services were among the sectors
to report the strongest demand. An advertising and
marketing firm saw steady demand but noted that rising
input costs were compressing profit margins as they
were unable to raise prices for their services. ■
Real Estate and Construction
Most Fifth District residential real estate contacts reported increases in sales and buyer traffic, and decreased
inventories in the past few weeks. Although prices were
generally increasing, one report from Washington, D.C.
noted that the average price was lower due to higher
sales in the lower price ranges. Agents across the Fifth
District commented that lower priced inventory was
absorbed quickly and that homes at the higher price
points were slower to move. A few reports noted increased demand for large tracts of land for lot and house
development, but it would be some time before the construction activity translated into increased inventories.
For more information about District economic conditions visit:
www.richmondfed.org/research/regional_economy
E-2
Federal Reserve Bank of
Atlanta
The Beige Book ■ February 2018
Summary of Economic Activity
Business contacts indicated that economic activity in the Sixth District continued to expand, albeit modestly, from early
January through mid-February. The near-term outlook among District contacts remains positive. On balance, the labor
market remained tight and wage pressures were mild. Contacts indicated that non-labor input costs picked up slightly.
Retailers cited steady sales since the previous report; however, automobile dealers indicated sales were soft. Tourism
activity was robust across most of the District. Residential real estate builders and brokers indicated that home sales
and inventory levels were flat to slightly down compared with a year ago. Home prices continued to increase modestly.
Demand for commercial real estate continued to improve and commercial construction activity was flat or increased
slightly. Manufacturers noted solid activity.
Employment and Wages
months.
District contacts continued to report challenges filling
certain positions, particularly in information technology,
nursing, some skilled crafts, long-haul transportation,
manufacturing, accounting, and low-skill/entry-level
positions in many industries. Many employers noted that
they continued to broaden their geographical area
search for candidates, often pursuing workers from rural
areas or from abroad. Firms also resorted to workforce
training and education services to increase the pipeline
of qualified workers. Additionally, employers further
adopted strategies to improve worker satisfaction as an
important tool to help attract and retain workers.
Consumer Spending and Tourism
On balance, District retailers reported steady sales levels
since the last report. Recreation retailers noted an increase in sales levels during the first few weeks of the
year, while automotive dealers reported a slow start to
2018. The outlook among most retail contacts remains
positive.
Travel and tourism contacts across the District noted a
strong start to 2018 with growth in business and leisure
travel since the last report. Hotel demand was higher
than expected in the fourth quarter of 2017; a trend that
has carried over into the first quarter of 2018. Contacts in
Georgia and Florida cited an uptick in the number of
visitors and spending over the first six weeks of the year.
The outlook remains positive with healthy advanced
bookings across the District through the first quarter of
this year.
Broadly, contacts noted steady but modest wage growth;
however, an increasing number of contacts reported
either recently increasing wages or plans to do so in the
coming months. This narrative was apparent among
firms in the transportation, retail, finance, construction,
and professional and business services sectors.
Construction and Real Estate
Prices
Reports from District residential real estate contacts
signaled continued modest growth. Builder reports on
construction activity in January compared to one year
earlier were mixed. Builders and brokers indicated that
home sales activity was flat to slightly down from the
year-ago level. Many brokers reported buyer traffic was
flat to down slightly, while builder reports were mixed.
Most builders and brokers said inventory levels were
Businesses across the District reported a slight uptick in
non-labor input costs and some contacts indicated an
ability to pass along price increases. The Atlanta Fed’s
Business Inflation Expectations survey showed yearover-year unit costs were up 1.8 percent in February.
Looking ahead, survey respondents indicated that they
expect unit costs to rise 2.0 percent over the next twelve
F-1
Federal Reserve Bank of Atlanta
down from one year ago. Builders and brokers noted that
home prices increased in January. Looking ahead, brokers and builders expect home sales activity over the
next three months will hold steady or increase slightly
relative to the year-ago level. Many builders expect the
pace of construction activity over the next three months
to remain unchanged or to increase slightly.
Banking contacts noted healthy loan pipelines and community banks, in particular, reported good loan demand.
Some banks indicated more deposit pressure as shortterm interest rates increased.
Energy
Planning and build out of natural gas and crude oil pipelines continued along the Gulf Coast. Contacts indicated
that increased spending on pipeline infrastructure and
other oil and gas projects intensified labor constraints in
an already tight environment for certain skilled crafts.
Freezing conditions across the Gulf Coast led a number
of refineries to temporarily reduce or cease operations.
Some refineries experienced power outages and other
technical issues, however contacts indicated that the
impact to product supplies was not significant. Persistent
and unusual freezing temperatures across the region
also caused power consumption to surge, which led to a
brief spike in natural gas and heating oil pricing.
Many District commercial real estate contacts reported
improvements in demand that resulted in rent growth,
particularly in industrial and warehouse/distribution properties. However, contacts continued to caution that the
rate of improvement varies by metropolitan area, submarket, and property type. The majority of commercial
contractors indicated that the pace of nonresidential
construction activity was flat to slightly up relative to one
year ago. Most contacts indicated that they have a
healthy pipeline of activity, with the majority indicating
backlogs greater than or similar to the previous year’s
level. The majority of reports noted that the pace of
multifamily construction matched the year-ago level. The
outlook among commercial contacts for nonresidential
and multifamily construction remained positive, with the
majority anticipating activity to match or exceed the
current level.
Agriculture
Agriculture conditions across the District were mixed.
Drought conditions persisted in much of the District.
However, rain in February brought some relief. The
January forecast for Florida's orange crops was down
further from the previous report as the effects of the
Hurricane Irma continued to be felt. On a year-over-year
basis, prices paid to farmers in December were up for
cotton rice, beef, broilers, and eggs and down for corn
and soybeans. ■
Manufacturing
District manufacturers reported solid overall business
activity since the last reporting period. Although most
contacts indicated that production levels were holding
steady, demand for their products continued to be relatively strong. Firms said that employment levels were flat
to slightly up, and most contacts reported that they had
open positions they were finding difficult to fill. Firms
reported that input costs continued to rise, specifically
steel, brass, and copper. In general, contacts are optimistic about future demand, suggesting that they expect
sales levels to be up over the short to medium term.
Transportation
District transportation firms cited mixed results since the
previous report. Ports continued to see year-over-year
increases in container volumes and cargo tonnage. Year
-to-date total rail traffic was down by double digits compared with year-ago levels, impacted mostly by decreased shipments of grain, non-metallic minerals, iron
and steel scrap, and metallic ores. Intermodal traffic was
also down. Trucking firms reported some pricing power
amid strong demand and tight capacity.
Banking and Finance
District bankers indicated that credit remained readily
available for most qualified borrowers except for some
contacts in energy and commercial real estate industries.
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 ■ February 2018
Summary of Economic Activity
Growth in economic activity in the Seventh District remained at a moderate pace in January and early February, and
contacts expected growth to continue at that pace over the next 6 to 12 months. Employment and manufacturing production increased moderately, business spending rose modestly, construction and real estate activity grew slightly, and
consumer spending was down slightly. Wages increased modestly, prices rose slightly, and financial conditions deteriorated some, on balance. Expectations for overall farm income in 2018 improved somewhat, though farmers continued to
face challenging conditions.
Employment and Wages
Consumer Spending
Employment increased at a moderate pace over the
reporting period, and contacts expected gains to continue at this rate over the next 6 to 12 months. As they
have for some time, contacts indicated that the labor
market was tight and reported difficulties filling positions
at all skill levels. Hiring was focused on professional and
technical, production, and sales workers, though there
was a notable pickup in the number of firms looking to
hire administrative workers. In addition, a staffing firm
that primarily supplies manufacturers with production
workers reported an increase in billable hours. Wage
growth remained modest overall, though the number of
contacts who reported pay increases for management
and production workers was higher than a few months
ago. In addition, most firms reported increasing benefits
costs.
Consumer spending was down slightly over the reporting
period. Non-auto retail sales were flat on balance: gains
in the electronics and appliance, building and gardening,
entertainment, and health and personal care segments
were offset by declines in the furniture, apparel, and
grocery segments. Contacts continued to report strong e
-commerce growth. New light vehicle sales volumes
were down a bit, with flat sales in January and lower
sales in early February. A number of dealers suggested
that stock market volatility led potential customers to
delay vehicle purchases. Despite the slow start to the
year, contacts generally believed total light vehicle sales
for 2018 would be similar to those for 2017. Used vehicle
sales remained flat, and the vehicle mix for new and
used vehicles continued to shift from cars to light trucks.
Demand for residential energy increased moderately.
Prices
Business Spending
Overall, prices again rose slightly in January and early
February, though more contacts now expect the rate of
increase to pick up over the next 6 to 12 months. Retail
prices increased slightly overall. Producer prices also
rose slightly, reflecting in part the pass-through of higher
raw materials and freight costs. There was a decline in
the number of contacts reporting increased tax and
regulatory costs.
Business spending increased modestly in January and
early February. Retail and manufacturing contacts indicated that inventories were generally at comfortable
levels. Capital spending increased modestly, though
contacts expected moderate growth over the next 6 to 12
months. Outlays were primarily for replacing industrial
and IT equipment and for renovating structures. Demand
for commercial and industrial energy increased slightly,
and transportation demand increased moderately.
G-1
Federal Reserve Bank of Chicago
Construction and Real Estate
Agriculture
Construction and real estate activity ticked up over the
reporting period. Residential construction rose modestly,
and contacts expected activity to increase moderately
over the next 6 to 12 months. With rising costs squeezing margins, contacts noted that homebuilders were
focusing on the construction of high-price, high-margin
housing. Overall, home sales were up slightly: sales of
starter homes increased in spite of low inventories, while
sales of high-end homes were flat and inventories ample. Home prices rose slightly, with stronger increases in
the starter home segment. Nonresidential construction
edged lower on balance, though building is expected to
increase modestly going forward. Commercial real estate
activity increased slightly from an already strong level,
and contacts expected activity to increase slightly further
over the next 6 to 12 months. Commercial rents rose
slightly as vacancy rates decreased, and the availability
of sublease space was little changed.
Expectations for overall farm income in 2018 improved
somewhat in January and early February, though much
of the District’s farm sector remained under stress. There
were reports of more small tracts of ground being offered
for sale. Corn and soybean prices were up enough to
cover a slight rise in projected production costs for 2018.
Soybeans remained more profitable than corn for most
operations—one contact predicted that the split of corn
and soybean acres planted this spring will be close to
even (corn has consistently comprised the larger share).
Contacts noted that subsoil moisture was very depleted
in many areas because of drought conditions last year,
making timely spring and summer rains more important
for crop health this coming growing season. Hog, cattle,
and egg prices were higher, but dairy prices lagged,
leading to an increase in the number of liquidations of
diary operations. ■
Manufacturing
Growth in manufacturing production continued at a moderate rate in January and early February. Steel production increased at a moderate pace in response to solid
end-user demand and the rebuilding of inventories at
steel service centers. Demand for heavy machinery also
increased moderately as mining and construction activity
continued to grow. Demand for heavy trucks was strong.
Order books for specialty metals manufacturers increased moderately: growth was spread across a wide
variety of sectors, with particularly strong demand from
the oil and gas, aerospace, and transportation sectors.
Manufacturers of construction materials continued to
report slow but steady increases in shipments, in line
with the pace of improvement in construction. Auto production was flat, but remained at a solid level.
Banking and Finance
Financial conditions deteriorated some on balance over
the reporting period. Financial market participants noted
falling equity prices, rising interest rates, and an increase
in volatility. Small and medium business loan demand
increased slightly, with growth coming primarily from
small businesses. While competition remained strong,
contacts reported little change in lending standards or
loan quality. Consumer loan volume was little changed
overall, though one contact noted a significant increase
in demand for home equity loans since the start of the
year. Consumer loan quality and lending standards were
little changed.
For more information about District economic conditions visit:
chicagofed.org/cfsbc
G-2
Federal Reserve Bank of
St. Louis
The Beige Book ■ February 2018
Summary of Economic Activity
Economic conditions have improved at a modest pace since our previous report. Firms reported modest increases in
employment, despite continued difficulties finding workers. Wages continue to increase at a moderate pace, as do nonlabor costs. Price pressures strengthened, as contacts generally see a greater ability to increase selling prices. Reports
on consumer spending were generally mixed, with reports of bad weather reducing foot traffic and sales. Residential
real estate contacts continue to report sluggish sales due to low inventories, while commercial real estate activity was
slightly better. District banking contacts reported improving loan demand. Agricultural conditions also improved, thanks
to high yields giving a boost to profits. Overall, the outlook among contacts has improved. On net, 54 percent of contacts
expect conditions in 2018 to be better or somewhat better than in 2017.
increases accelerated somewhat in the second half of
2017, as contacts reported that their ability to raise prices has improved over the past three to six months. One
food product manufacturer reported increasing their
selling prices for the first time in 5 years.
Employment and Wages
Employment has increased modestly since the previous
report. Of the contacts surveyed in early February, on
net, 28 percent reported that first-quarter employment
was higher or slightly higher than a year ago. Anecdotal
evidence suggests that the labor market remained tight.
Construction contacts continued to report shortages in
qualified labor. Technology and manufacturing contacts
in St. Louis and Memphis, respectively, also reported
difficulties hiring suitable employees. Contacts in Louisville and Little Rock cited candidates’ inability to pass
drug tests as an impediment to hiring.
Non-labor input costs grew at a moderate pace. On net,
67 percent of contacts reported that costs were higher
than a year ago. Steel prices increased moderately
throughout the District, and contacts in Louisville and
Little Rock reported upticks in trucking freight rates.
Commodity prices generally rose throughout the District.
Wheat, sorghum, soybean meal, corn, and corn feed
increased moderately, soybeans increased modestly,
and coal prices increased slightly. Rice and corn meal
prices were flat while cotton prices fell modestly.
Contacts reported moderate wage growth since the
previous report. On net, about 70 percent of contacts
reported wages were higher or slightly higher than a year
ago, and a similar share reported increases in labor
costs. A construction contact in Louisville cited the need
for higher wages to attract and retain skilled labor, while
a contact in Little Rock reported that unskilled positions
remain unfilled because of low wages.
Consumer Spending
Reports from general retailers, auto dealers, and hoteliers portray a mixed picture of consumer spending activity. January real sales tax collections increased in Arkansas, Kentucky, and Missouri relative to a year ago and
slightly decreased in Tennessee. In addition, several
general retailers in St. Louis and Louisville indicated that
sales fell short of expectations, attributing the slowdown
to poor weather. Conversely, hospitality contacts in St.
Louis reported that sales exceeded expectations.
Prices
Price pressures have moderately strengthened since the
previous report. Firms reported modest growth in prices
charged to consumers: On net, 33 percent of contacts
reported that prices were higher than a year ago. Price
H-1
Federal Reserve Bank of St. Louis
Multiple auto dealers across the District reported a modest decline in sales, which have failed to meet their
expectations. St. Louis dealers indicated a shift in demand toward high-end vehicles.
Commercial construction activity improved modestly.
Local contacts reported increased demand for construction of all commercial property types. Over 80 percent of
contacts, on net, expressed an optimistic outlook for
2018, but many continued to report that a shortage of
labor is limiting construction activity.
Manufacturing
There has been little to no growth in manufacturing since
our previous report. A slight majority of contacts reported
that new orders and capacity utilization were lower in the
first quarter relative to one year ago, while production
remained at the same level. This marks the fourth consecutive quarter of a decline in the share of contacts
reporting growth in new orders and capacity utilization.
However, the outlook of contacts remains optimistic, with
most contacts expecting increases in production, new
orders, and capacity utilization in the next three months.
Banking and Finance
Lending conditions in the Eighth District have strengthened at a moderate rate since the previous report. Loan
demand increased moderately in year-over-year terms
and, according to District banking contacts, there were
some signs that the pace of overall loan growth may be
rising after slowing in 2017. Commercial and industrial
loan demand increased moderately after exhibiting flat
growth last quarter. Bankers reported demand for auto
credit remained unchanged after decreasing the previous two quarters. Credit standards for auto loans increased slightly. Overall, delinquencies continued declining, falling in every loan category except mortgages,
which increased modestly. District bankers expect delinquencies to continue decreasing next quarter across all
loan types, including mortgages.
Nonfinancial Services
Activity in the service sector has expanded moderately
since the previous report. Transportation industry contacts reported that the dollar-value of sales has been
higher in the first quarter compared with the same period
last year. Most contacts expect sales to remain higher in
the second quarter. While dollar sales are up, they have
largely met expectations: More than half of contacts
reported sales met expectations with remaining contacts
split between falling short and exceeding expectations.
Agriculture and Natural Resources
District agriculture conditions have improved slightly
since the previous reporting period. In spite of concerns
about low temperatures in early January, the percent of
District winter wheat rated fair or better ticked up about a
percentage point from the end of December to the end of
January. Contacts expressed optimism about near-term
farm income as area farmers were able to turn strong
yields into profits in 2017, although some expressed
concern about the downside risks of NAFTA renegotiations.
Real Estate and Construction
Residential real estate activity has declined slightly since
the previous report. Seasonally adjusted home sales
declined in January across the District’s four major
MSAs. Contacts continued to report that shortages in
inventory are hindering sales. On net, about half of the
respondents reported that first-quarter sales have fallen
short of expectations. However, demand remains strong
and a majority of contacts expect demand for singlefamily homes to increase over the next quarter.
Natural resource extraction conditions declined from
December to January, with seasonally adjusted coal
production falling 10 percent. January production was
also 11 percent down from a year ago. ■
Residential construction activity improved modestly.
There was a modest uptick in December’s permit activity
within the District compared with the previous month.
Two-thirds of local contacts reported that construction
activity increased compared with the previous year, and
the same fraction expects continued growth over the
next quarter.
Commercial real estate activity increased slightly. Demand for industrial and office properties increased relative to a year ago. However, contacts noted that demand
for retail properties fell while retail inventory increased.
Contacts expect these trends to continue into the second
quarter of 2018.
For more information about District economic conditions, visit:
https://research.stlouisfed.org/regecon/
H-2
Federal Reserve Bank of
Minneapolis
The Beige Book ■ February 2018
Summary of Economic Activity
The Ninth District economy grew moderately overall since the last report, with employment, wages, and prices all seeing
moderate growth. The District economy showed growth in consumer spending, tourism, commercial construction, manufacturing, real estate, energy, and mining. However, residential construction slowed, and agriculture remained weak.
Employment and Wages
contacts, including a Montana banker, also said raises
were more likely because tax reform “provides a way to
pay for increased wages” without increasing prices or
reducing profits. A Minnesota construction contractor
said wages “are going up because we are seeing an
increase in productivity.” A Montana ski resort contact
said that tax savings would allow the company to raise
wages, and a Montana construction contact believed tax
changes would provide a sizable, single-step increase in
wages. However, a number of public union contracts—
covering South Dakota county employees, Minnesota
and Wisconsin state employees, and higher education
service workers in Minnesota—all settled for increases of
2 percent or less.
Employment grew moderately since the last report, as
hiring demand appeared robust, but tight labor restrained
stronger hiring. An ad hoc survey of Minnesota staffing
firms found that hours booked in the first six weeks of
2018 rose for most firms over the same period a year
ago. Rural hiring sentiment increased notably over the
previous month in Minnesota and the Dakotas, according
to a February poll of rural bankers and other firms.
Online job openings in January increased slightly in
North Dakota over a year earlier; only the third increase
in the past 18 months, but the second increase in the
past four months. Tight labor markets, however, were
limiting hiring. The number of job seekers registered with
state workforce offices in January was 11 percent lower
in North Dakota and 29 percent lower in Montana
compared with a year earlier. Initial unemployment
claims in the District over the first five weeks of 2018 fell
almost 7 percent compared with a year earlier, though
Minnesota’s decline was less than 2 percent. Continuing
claims fell by 8 percent. A Montana contact said that
“many fear a better economy will exacerbate labor
problems.” There were several notable layoff events,
including one at a Minnesota manufacturer that cut 900
workers. But sources suggested that job opportunities
were available for those affected.
Prices
Price pressures were moderate since the last report.
About three-quarters of respondents to a January survey
of firms from around the District reported that they
expected the prices they charge for their products or
services to increase only slightly or not at all in the next
three months. Retail fuel prices in District states as of
late February were slightly higher than in the previous
reporting period. Building materials prices continued to
increase faster than overall prices. Prices received by
farmers for wheat, hay, hogs, cattle, chickens, and eggs
increased in December compared with a year earlier;
prices for corn, soybeans, milk, and turkeys decreased.
Wage pressures were moderate since the last report. A
number of one-time bonuses were reported, stemming
from recent changes in federal tax policy. Several
I-1
Federal Reserve Bank of Minneapolis
Consumer Spending and Tourism
due to a trend in smaller corporate footprints, but overall
vacancy has been mostly unchanged. Residential real
estate fell moderately. January home sales were lower
across most of the District, with the notable exception of
northern Wisconsin, where an 18-county rural region
posted a 6 percent increase in sales, continuing a
persistent growth trend there.
Consumer spending grew modestly since the last report.
Closures of big-box and other franchised retail stores
continued across the District. A large salon franchise
headquartered in Minnesota announced the closure of
600 locations across the country. However, consumer
spending has continued to grow. North Dakota sales tax
revenue in January rose by 14 percent over a year
earlier. Gross retail sales in South Dakota over the same
period grew by 2 percent, though overall gross sales
were much stronger, at 9 percent growth. Gross retail
sales in Wisconsin were slightly higher since the last
report.
Manufacturing
District manufacturing activity increased modestly since
the last report. An index of manufacturing conditions
indicated increased activity in January compared with a
month earlier in Minnesota and South Dakota; the index
for North Dakota indicated flat to slightly decreased
activity. A major fertilizer plant began operations in North
Dakota. A solar-panel producer announced an
expansion at a facility in Minnesota. An appliance
manufacturer announced that it will close a plant in
Minnesota.
Tourism saw moderate growth, boosted by activity from
the Super Bowl, hosted in Minneapolis in early February.
Retailers, especially those in or near downtown, reported
strong revenue, and hotels saw outsized gains for the
period. Elsewhere, Montana snow conditions were good,
and a resort said the number of skiers so far this season
was ahead of last year’s record pace. A source in the
Upper Peninsula of Michigan said that “things have been
going well” for winter tourism so far, and February snow
conditions in northern Wisconsin were reportedly
excellent for snowmobiling, downhill skiing, and crosscountry skiing.
Agriculture, Energy, and Natural Resources
District agricultural conditions were stable at low levels.
Respondents to the Minneapolis Fed’s fourth quarter
(January) survey of agricultural credit conditions
indicated that farm income and capital spending
decreased relative to a year earlier, with further declines
expected for the coming three months. Most of the
Dakotas and portions of Montana were experiencing
below average snowfall over the winter, with concerns
that drought conditions could persist into the spring
planting season.
Construction and Real Estate
Commercial construction saw strong growth since the
last report. An industry report on January construction
spending showed robust growth in District states
compared with a year earlier, and every District state
registered at least a small increase. Another industry
database showed strong growth in new projects and total
active projects over the first seven weeks of 2018
compared with the same period a year earlier.
Commercial permitting activity was higher in many of the
District’s largest cities and particularly so in Sioux Falls
and Rapid City, S.D. Residential construction was mixed;
permit values were down in Minneapolis-St. Paul and
Sioux Falls, but up in Billings, Mont., Rochester, Minn.,
and Rapid City. Total multifamily units permitted in
January were lower than a year earlier.
Energy and mining activity increased briskly from the
previous report. Oil and gas drilling in North Dakota and
Montana as of mid-February increased from a month
earlier, though cold weather slowed recent oil
production. Contacts at nonferrous mines had a positive
outlook, driven by increases in prices of gold, copper,
and molybdenum. Development continued at a new
copper mine in Michigan’s Upper Peninsula. Iron ore
mines in northern Minnesota were operating at high
capacity. Output from Wisconsin sand mines increased
in recent months, due to greater demand from hydraulic
fracturing. ■
Commercial real estate grew moderately, remaining at
strong levels in Minneapolis-St. Paul. Occupied retail
space continued to expand, with vacancy rates hitting
their low for the year in the fourth quarter, due in part to
the Super Bowl. Multifamily construction, unit sales, and
rent increases continued at a healthy pace in
Minneapolis-St. Paul, and an industry source said the
market “defies gravity.” Construction of new industrial
space also has been strong while vacancy rates
remained stable. The office market was somewhat softer
I-2
Federal Reserve Bank of
Kansas City
The Beige Book ■ February 2018
Summary of Economic Activity
Economic activity in the Tenth District continued to increase at a modest pace in late January and February, and a
faster pace of expansion was expected in the months ahead. Consumer spending picked up modestly, as growth in the
retail and tourism sectors more than offset a decline in restaurant and auto sales. Manufacturing contacts reported
moderate growth including an increase in production, shipments, new orders, order backlogs, and capital spending
plans. Sales rose moderately at transportation, wholesale trade, and professional and high-tech firms, and further gains
were anticipated in the months ahead. District real estate conditions expanded modestly as activity in both the residential and commercial sectors increased. Banking contacts reported steady loan demand, unchanged loan quality and
credit conditions, and steady-to-decreasing deposits. Energy activity continued to grow a modest pace as production
increased and the number of drilling rigs edged higher. Agricultural conditions across the District remained weak, and
farm income fell further. Employment and employee hours rose modestly compared to the previous survey period. Wages increased slightly in most sectors, and contacts expected stronger wage growth in the months ahead. Input and
selling prices rose moderately, with stronger price gains in the retail sector.
Employment and Wages
moderately higher input and selling prices and expected
continued moderate growth in the coming months. Construction prices rose moderately in late January and
February after declining in the prior survey period. Prices
for finished goods increased slightly and raw material
costs rose moderately in the manufacturing industry.
Manufacturers expected moderate price gains for both
finished goods and raw materials in the next few months.
District employment and employee hours rose modestly
in late January and February, and contacts expected
further gains in the months ahead. Respondents in the
retail trade, transportation, professional services, real
estate, restaurant, tourism, and manufacturing sectors
reported employment growth, while contacts in auto
sales, wholesale trade, and health services noted a
slight decline. However, employment exceeded year-ago
levels in all sectors. Employee hours increased in most
sectors, but declined modestly in the restaurant sector.
Labor shortages were reported in the services sector
including commercial drivers, skilled technicians, and
salespeople.
Consumer Spending
Consumer spending activity picked up modestly in late
January and February and was expected to increase
further in the coming months. Retail sales increased at a
moderate pace compared to the previous survey period
and remained well above year-ago levels. Several retailers noted an increase in sales for lower-priced items,
while higher-priced products sold poorly. Contacts anticipated retail sales to continue to rise in the next few
months, and inventory levels were expected to increase
moderately. Auto sales fell modestly but were slightly
above year-ago levels. Dealer contacts anticipated a
moderate pickup in sales in the months ahead, and auto
inventories were expected to increase heading forward.
Restaurant sales declined moderately but were well
above year-ago levels. Contacts expected a strong
pickup in restaurant activity in the months ahead. District
tourism activity increased moderately since the previous
survey and was similar to year-ago levels. Tourism con-
Wages picked up slightly in most sectors, and contacts
anticipated moderate wage growth in the coming
months.
Prices
Overall, input and selling prices increased moderately
compared to the prior survey period, and additional
moderate gains were expected in the months ahead.
Retail contacts reported strong growth in input and selling prices and anticipated moderate increases moving
forward. In the restaurant sector, input prices continued
to rise slightly, while selling prices edged up after falling
in the previous survey. Transportation contacts noted
J-1
Federal Reserve Bank of Kansas City
tacts expected a strong increase in activity heading
forward.
Energy
Energy activity continued to grow at a modest pace over
the last six weeks. The outlook remained positive and
somewhat cautious given the recent slight decline in
commodity prices. The number of active oil and gas rigs
continued to edge higher, primarily in New Mexico and
Wyoming. Oil and gas production also picked up in Colorado’s Niobrara basin, and growth was expected to be
driven by operators completing their drilled-butuncompleted (DUC) wells since the number of drilling
rigs in the region remained relatively flat. In Oklahoma,
natural gas activity continued to increase with the start of
construction of a natural gas gathering system in the
southeastern part of the state.
Manufacturing and Other Business Activity
Manufacturing and other business activity expanded at a
moderate pace in late January and February. Manufacturers reported sustained growth in production, particularly for metals, machinery, and plastics products. Shipments, new orders, and order backlogs grew at a modest
pace, and activity was higher than a year ago. Manufacturers’ capital spending plans rose moderately, and
firms’ expectations for future activity remained strong.
Outside of manufacturing, transportation, wholesale
trade, and professional and high-tech firms reported
moderate growth in sales. Heading forward, transportation and wholesale trade firms expected strong sales
growth, while professional and high-tech firms anticipated a moderate sales increase in the next six months. All
types of firms reported moderate growth in capital
spending plans.
Agriculture
The Tenth District farm economy remained weak, but
farm real estate values slowed their decline from the
previous months, providing some stability for farm finances. Farm income continued to decrease. Agricultural credit conditions weakened further against year-ago
levels, but at a more modest pace than in previous reporting periods. Although prices for most agricultural
commodities increased slightly in February, prices for
corn, soybeans and hogs were still lower than a year
ago. Alongside an increase in cattle, wheat and cotton
prices, farmland values declined only slightly and stabilized significantly in the western portion of the District.
Conditions in the farm economy in Oklahoma also improved notably due to an increase in cotton acreage and
a moderate increase in cotton revenues. ■
Real Estate and Construction
District real estate activity increased at a modest pace in
late January and February, and additional gains were
expected moving into the spring months. Residential
home sales and home prices rose moderately compared
to the previous survey period, and inventories declined
at a moderate pace. Sales of low- and medium-priced
homes continued to outpace sales of higher-priced
homes. Residential sales and home prices were anticipated to rise, while inventories were expected to fall
further in the months ahead. Residential construction
activity expanded slightly as home starts and traffic of
potential buyers rose, while construction supply sales
were flat. Commercial real estate activity increased
modestly as absorption, completions, construction underway, and sales increased, while vacancy rates declined. Activity in the commercial real estate sector was
expected to expand at a modest pace moving forward.
Banking
Bankers reported steady overall loan demand in late
January and February. A majority of respondents indicated stable demand for commercial and industrial, residential real estate, and consumer installment loans. Demand
for commercial real estate loans increased modestly,
while contacts reported mixed demand for agricultural
loans. Most bankers indicated loan quality was unchanged compared to a year ago and expected loan
quality to remain stable over the next six months. Credit
standards remained largely unchanged in all major loan
categories. Bankers reported steady-to-decreasing deposits.
For more information about District economic conditions visit:
www.KansasCityFed.org/Research/RegionalEconomy
J-2
Federal Reserve Bank of
Dallas
The Beige Book ■ February 2018
Summary of Economic Activity
The Eleventh District economy expanded at a moderate pace over the past six weeks. The manufacturing sector continued to expand robustly, energy activity increased, and home sales continued to rise. Growth slowed slightly in financial
and nonfinancial services, while retail sales declined modestly. Hiring was strong across most sectors. Widespread
reports of labor market tightness and difficulty finding qualified workers continued, and more firms responded by raising
wages than in prior reporting periods. Price pressures remained elevated, and in some cases intensified. Outlooks
remained broadly optimistic, although some uncertainty persisted.
Employment and Wages
ployment over the next six to twelve months, up roughly
five percentage points from a year ago.
Overall employment growth remained solid, and upward
wage pressure increased somewhat. Hiring continued at
a robust pace in manufacturing, services, and retail.
Hiring in the energy sector has expanded so far in 2018,
although numerous contacts noted a severe shortage of
workers in West Texas, particularly for skilled positions.
A lack of qualified candidates continued to challenge
businesses in other sectors as well, with several reports
that this lack of workers was inhibiting growth. Several
contacts in construction-related industries noted further
tightening in labor markets due to hurricane-related
rebuilding. More firms said they raised wages to retain
and/or attract workers than in the prior reporting period,
particularly in the manufacturing, retail, and hospitality
sectors. Energy contacts also noted an increase in wage
pressure, for upstream jobs as well as for downstream
construction labor. Also, a staffing firm noted that pay
increases were fairly widespread among workers earning
about $9 per hour.
Prices
Price pressures remained elevated over the past six
weeks, and a slightly faster pickup was seen in input
prices. Transportation firms noted an increase in fuel
costs, manufacturers noted increases in steel and petroleum product prices, and homebuilders said the price of
some raw materials like lumber and concrete had risen.
Selling prices increased at about the same pace as in
the prior reporting period, although there was acceleration in manufacturing finished goods prices.
The average natural gas price over the reporting period
was largely unchanged from the prior period despite
some brief cold-weather-related increases, while the
average WTI oil price was the highest it’s been since
December 2014. The price of energy services continued
to rise as drilling and well completion activity grew.
Manufacturing
Looking ahead, firms were quite bullish on their hiring
plans. More than half of the 362 firms responding to
supplemental questions in the February Texas Business
Outlook Surveys said they expect to increase their em-
Robust expansion in the manufacturing sector continued
through February. Demand and output growth persisted,
with a pickup in nondurables. Contacts noted strength in
chemicals manufacturing in particular. One machinery
manufacturer said business has been trending up over
K-1
Federal Reserve Bank of Dallas
the past few months, with demand from the oil and gas
sector playing a bigger role, and another said growth this
year has been the best in the past five years. Outlooks
overall remained highly positive, with contacts citing tax
reform and a lower dollar as tailwinds, and rising interest
rates and inflation as potential headwinds.
to be weak. Industrial availability generally remained
tight across major metropolitan areas.
Financial Services
Retail sales fell slightly over the past six weeks, led by a
decline in auto sales. Several contacts attributed some
of the weakness to poor weather. One auto dealer noted
that after several years of increases in sales volumes, a
slight decrease is to be expected. For retailers more
broadly, contacts noted a continued increase in internet
sales. One wholesaler noted that their decrease in brick
and mortar sales was offset by an increase in internet
sales. Outlooks among retailers in general remained
positive but were less optimistic than the prior reporting
period.
Loan volumes and demand increased over the past six
weeks, but at a slower pace compared to the previous
reporting period. Volume growth was strongest for residential real estate loans and weakest for consumer
loans. Interest rates charged on loans picked up, with
more than 40 percent of bankers surveyed noting an
increase over the past six weeks. Two-thirds of bankers
reported an increase in cost of funds, up from the prior
reporting period when half noted an increase. The volume of core deposits continued to rise, albeit at a significantly slower pace than in the past several months.
Credit standards and terms continued to tighten. Banking
contacts remained optimistic, generally expecting stronger loan demand and increased business activity six
months from now.
Nonfinancial Services
Energy
Retail Sales
The nonfinancial services sector continued to grow but at
a slightly slower pace. The professional and business
services industry was a bright spot, with revenue growth
accelerating so far in 2018. Demand for staffing services
generally increased and was broad-based, especially in
Dallas and Houston. Transportation services also remained strong—rail cargo volumes continued to increase, and airline demand held steady at robust levels.
Weakness was largely concentrated in leisure and hospitality, although several contacts said the softness was
largely due to colder-than-usual weather. Contacts in
tourism areas along the Gulf Coast said business continues to struggle after the devastation of Hurricane Harvey. Overall, outlooks remained optimistic, although
there was continued caution among transportation services firms and others concerned about the outcome of
international trade negotiations.
Energy activity was up from six weeks ago, as the rig
count increased. New well completions also picked up,
particularly in the Permian Basin. An oilfield services firm
expects a further pickup in activity in the second quarter.
Company outlooks remain relatively optimistic for 2018,
with current oil prices at levels favorable for increasing
production and employment.
Agriculture
Agricultural producers were concerned about worsening
drought conditions. As of February 20, 70 percent of
Texas was experiencing at least moderate drought, with
some extreme drought in the High Plains and Panhandle. However, rainstorms late in the reporting period
likely alleviated the dry conditions in parts of the state.
The cattle sector remained solid with strong demand for
beef, both domestic and international, and rising cattle
prices. However, the dairy industry continued to struggle
with declining prices. Cotton acreage will likely be up in
Texas this year, and there was excitement among producers about cotton provisions being added back into
the Farm Bill legislation. Financial concerns continued
among grain farmers as they prepared for planting, with
crop prices remaining low and some inflation seen in fuel
and fertilizer costs. NAFTA renegotiations also remained
a source of concern and uncertainty. ■
Construction and Real Estate
Home sales rose over the reporting period, with contacts
noting a good start to 2018. Home prices remained
elevated, although contacts said it continued to be difficult to pass through further increases. Outlooks were
positive, but there was concern among builders about
margin compression and the potential impact of rising
mortgage rates.
The Dallas-Fort Worth office market remained in good
shape. Contacts noted a decline in sublease space in
Houston, but overall office market conditions continued
For more information about District economic conditions visit:
www.dallasfed.org/research/texas
K-2
Federal Reserve Bank of
San Francisco
The Beige Book ■ February 2018
Summary of Economic Activity
Economic activity in the Twelfth District continued to expand at a moderate pace during the reporting period of midJanuary through late February. Conditions in the labor market remained tight, and upward wage pressures increased.
Overall price inflation increased moderately. Sales of retail goods picked up slightly, and growth in consumer and business services remained solid. Activity in the manufacturing sector continued to pick up, and conditions in the agriculture
sector deteriorated modestly. Contacts reported that residential real estate market activity continued at a strong pace,
and conditions in the commercial real estate sector were robust. Lending activity ticked up.
were able to pass on increased shipping costs to customers. Declines in input costs put downward pressure
on electricity prices. Agricultural commodity prices decreased moderately due to excess supply.
Employment and Wages
Conditions in the labor market remained tight, and upward wage pressures increased over the reporting period. Contacts noted labor shortages in various sectors,
especially for high-skilled positions. Across the District,
contacts reported difficulty finding workers experienced
in information technology, accounting, and finance. To
attract stronger job candidates, some contacts in Seattle
and the Mountain West increased nonwage compensation, including vacation time and stock grants. A banking
contact observed moderate wage growth for entry-level
positions to increase retention. Contacts in the health
insurance sector increased their use of offshore labor
and automation in response to tight labor market conditions. Minimum wage laws continued to put upward
pressure on labor costs generally. A utility provider in
Southern California reported flat employment growth in
the industry because of muted sales activity.
Retail Trade and Services
Sales of retail goods picked up slightly over the reporting
period. Contacts in the Mountain West saw stronger-than
-expected sales in furniture and home entertainment
equipment. A contact in the food and beverage industry
reported solid sales. While automotive sales remained
elevated, growth over the reporting period was flat. Unseasonably warm weather throughout the District restrained winter clothing and equipment sales.
Activity in the consumer and business services sector
remained solid. A major health insurance provider in
Utah reported an uptick in enrollment and ample capacity for further growth. Demand for health-care services
increased slightly. Demand for business services in
California’s entertainment sector increased due to favorable state tax incentives. Restaurants continued to experience a decline in foot traffic.
Prices
Overall price inflation increased moderately around the
District. Continued strength in construction activity drove
an increase in price growth for various building materials.
A health-care provider in the Mountain West reported a
jump in insurance premiums, partly due to a reduction in
federal subsidies for low-income families. Decreased
competition from abroad and solid domestic and international demand sustained elevated steel prices. Contacts
in Idaho noted that animal health product businesses
Manufacturing
Activity in the manufacturing sector continued to pick up.
A contact in the Mountain West noted that strong demand for microchips boosted production and caused
some longer wait times for deliveries. Capacity utilization
in the steel sector grew at a solid pace, driven by re-
L-1
Federal Reserve Bank of San Francisco
duced overseas competition. Contacts in Washington
noted that new orders for commercial aircraft were
steady. Profitability in the aerospace sector increased,
partly due to a pickup in sales of military aircraft and
systems.
jects were scaled back as prices for building materials
increased. In Idaho, construction of residential properties
grew at a fast pace. Throughout the District, low construction starts and resale volumes kept residential prices elevated over the reporting period. Contacts in Northern California reported rising home prices stemming from
strengthening demand. Brisk demand from out-of-state
buyers drove price increases in Oregon. Commercial
real estate activity also continued at a strong pace.
Large transportation infrastructure projects drove construction activity in Southern California. In Eastern Oregon, demand for warehouse and distribution sites was
robust. Contacts in Washington noted an increase in the
demand for warehouse space due to the expanding
marijuana industry, which drove up industrial rents.
Agriculture and Resource-Related Industries
On balance, conditions in the agriculture sector deteriorated modestly. Low snow and rainfall over the reporting
period limited new planting in Central California and
resulted in weak crop yields. Contacts in Idaho noted
that excess supply drove a decline in dairy sector profits
to breakeven levels, with smaller producers being hit
particularly hard. Grain inventories in the Mountain West
were at record levels. Conditions in the swine industry
continued to improve on a year-over-year basis. Increased global demand for beef products boosted feedlot utilization.
Financial Institutions
Lending activity ticked up over the reporting period. Loan
demand was mixed but increased slightly overall. Contacts in Oregon noted that increased commercial real
estate development drove growth in loan demand. In
Central California, however, loan demand slowed modestly, leading to a slight loosening of lending standards.
Across the District, interest margins widened slightly,
though they remained narrow due in part to robust competition. In Eastern Washington, venture capital lending
registered a slight pickup. ■
Real Estate and Construction
Activity in real estate markets continued at a strong
pace. Construction activity in the residential market
moderated slightly, limited by persistent labor shortages
and increasing material costs. Contacts in Eastern
Washington observed a notable decline in permits and
starts for single-family and duplex dwellings. In Hawaii,
housing development starts declined, and several pro-
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Cite this document
Federal Reserve (2018, March 20). Beige Book. Beige Book, Federal Reserve. https://whenthefedspeaks.com/doc/beige_book_20180321
@misc{wtfs_beige_book_20180321,
author = {Federal Reserve},
title = {Beige Book},
year = {2018},
month = {Mar},
howpublished = {Beige Book, Federal Reserve},
url = {https://whenthefedspeaks.com/doc/beige_book_20180321},
note = {Retrieved via When the Fed Speaks corpus}
}