Beige Book
For use at 2:00 PM EST
Wednesday
December 5, 2018
The Beige Book
Summary of Commentary on Current Economic Conditions
By Federal Reserve District
November 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
Fourth District
Richmond
E-1
Fifth District
Atlanta
F-1
Sixth District
Chicago
G-1
Seventh District
St. Louis
H-1
Eighth District
Minneapolis
What is The Beige Book?
The Beige Book is a Federal Reserve System publication about current
economic conditions across the 12 Federal Reserve Districts. It characterizes regional economic conditions and prospects based on a variety
of mostly qualitative information, gathered directly from District
sources.
The qualitative nature of the Beige Book creates an opportunity to
characterize dynamics and identify emerging trends in the economy
that may not be readily apparent in the available economic data. Because this information is collected from a wide range of business and
community contacts through a variety of formal and informal methods,
the Beige Book can complement other forms of regional information
gathering.
How is the information collected?
Each Federal Reserve Bank gathers anecdotal information on current
economic conditions in its District through reports from Bank and
Branch directors, plus phone and in-person interviews with and online
questionnaires completed by businesses, community contacts, economists, market experts, and other sources.
How is the information used?
The anecdotal information collected in the Beige Book supplements the
data and analysis used by Federal Reserve economists and staff to
assess economic conditions in the Federal Reserve Districts. This
information enables comparison of economic conditions in different
parts of the country, which can be helpful for assessing the outlook for
the national economy. The Beige Book also serves as a regular summary of the Federal Reserve System’s efforts to listen to businesses
and community organizations.
I-1
Ninth District
Kansas City
J-1
Tenth District
Dallas
K-1
Eleventh District
San Francisco
Twelfth District
L-1
This report was prepared at the Federal Reserve Bank of Philadelphia
based on information collected on or before November 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 ■ November 2018
Overall Economic Activity
Most of the twelve Federal Reserve Districts reported that their economies expanded at a modest or moderate pace
from mid-October through late November, though both Dallas and Philadelphia noted slower growth compared with the
prior Beige Book period. St. Louis and Kansas City noted just slight growth. On balance, consumer spending held
steady – District reports on growth of nonauto retail sales appeared somewhat weaker while auto sales tended to improve, particularly for used cars. Tourism reports varied but generally kept pace with the economy. Tariffs remained a
concern for manufacturers, but a majority of Districts continued to report moderate growth in the sector. All Districts
reported growth in nonfinancial services – ranging from slight to strong. New home construction and existing home
sales tended to decline or hold steady, while construction and leasing of nonresidential structures tended to rise or
remain flat. Overall, lending volumes grew modestly, although a few Districts noted some slowing. Agricultural conditions and farm incomes were mixed; some Districts noted impacts from excessive rainfall and from tariffs, which have
constrained demand. Most energy sectors saw little change or modest growth. Most Districts reported that firms remained positive; however, optimism has waned in some as contacts cited increased uncertainty from impacts of tariffs,
rising interest rates, and labor market constraints.
Employment and Wages
Labor markets tightened further across a broad range of occupations. Over half of the Districts cited firms for which
employment, production, and sometimes capacity expansion had been constrained by an inability to attract and retain
qualified workers. In fact, several Chicago firms reported that some employees have simply quit – with no notice nor
means of contact. Partly as a consequence of labor shortages, most Districts reported that employment growth leaned
to the slower side of a modest to moderate pace. Conversely, most Districts reported that wage growth tended to the
higher side of a modest to moderate pace. In addition to raising wages, most Districts noted examples of firms enhancing nonwage benefits, including health benefits, profit-sharing, bonuses, and paid vacation days.
Prices
On balance, prices rose at a modest pace in most Districts, although a few noted moderate increases. Nearly all reported that input costs rose faster than final goods prices. Reports of tariff-induced cost increases have spread more
broadly from manufacturers and contractors to retailers and restaurants. Local growing conditions caused prices to
vary across farm products and among Districts, but reported soybean prices were typically lower. Several Districts
noted falling oil and fuel prices, as well as rising freight costs. House prices continued to rise in a majority of markets.
Highlights by Federal Reserve District
Boston
New York
Activity continued expanding at a moderate pace according to business contacts across most sectors. Staffing
firms said labor markets were very tight across industries
and occupations, while retailers and manufacturers cited
shortages only for selected jobs. Increases in selling and
input prices were reported to be modest.
The regional economy expanded at a modest pace in the
latest reporting period, while labor markets remained
exceptionally tight. Widespread escalation in firms’ input
prices have continued, but wages and selling prices
have increased more moderately. Tourism has picked
up, while housing markets have softened somewhat.
Banks noted widespread improvement in delinquencies.
1
National Summary
Philadelphia
St. Louis
Economic activity continued to expand at a modest pace,
although it appears to have eased a bit, with downshifts
(or declines) in five distinct sectors. Lack of qualified
labor has constrained hiring and raised wage pressure.
Price increases remained modest. Nevertheless, firms
remain generally positive about the six-month outlook.
Economic conditions have slightly improved since our
previous report. Labor market conditions remain tight,
and many firms report raising wages and salaries to
attract new workers. The outlook among firms surveyed
in mid-November was slightly optimistic, although weaker than the outlook one year ago.
Cleveland
Minneapolis
The District economy grew modestly. Demand was
strong in banking, manufacturing, and nonfinancial services. Consumer demand improved slightly, but housing
demand softened. Staff levels rose moderately, and
wage pressures were widespread. Input costs rose
strongly in all industries. Contacts noted that tariffs were
lifting prices further down the supply chain. Selling prices
rose with less intensity than they did for input costs.
The Ninth District economy grew moderately. Hiring
demand was robust, but a tight labor supply was restraining employment growth. Nevertheless, wage pressures were moderate overall, with exceptions. Some
firms reported paying a greater share of workers’ health
insurance premium costs to attract and retain employees. Price growth was generally modest, though input
prices saw more pressure.
Richmond
Kansas City
The regional economy continued to grow at a moderate
rate since our previous report. Labor demand strengthened further while wage growth remained modest. Price
growth increased slightly but remained moderate, overall. Manufacturing and services firms saw a sharp increase in input prices, which were attributed to tariffs,
shipping costs, and some higher business-to-business
and recruitment costs.
Economic activity expanded slightly since the previous
survey and remained modestly above year-ago levels.
Employment and wages rose further, and about half of
respondents expected to increase employment in the
next twelve months. Manufacturing, wholesale trade,
transportation, energy, and professional and high-tech
sectors reported the strongest growth in the District,
while the agriculture sector remained weak.
Atlanta
Dallas
Economic conditions moderately improved. Tightness in
the labor market persisted and more firms reported
increasing wages. Nonlabor costs continued to rise.
Retail sales increased across most of the District. Tourism activity was positive. Residential real estate market
activity was restrained, and commercial real estate activity remained solid. Manufacturers indicated that activity
increased. Credit conditions were stable.
Growth in economic activity slowed to a moderate pace.
A broad-based softening was seen in manufacturing,
retail, and housing. Drilling activity increased. Hiring
continued, and widespread labor shortages pushed up
wages. Price pressures eased but remained elevated in
part due to the tariffs, and outlooks were less optimistic
than the previous report.
Chicago
Economic activity in the Twelfth District continued to
expand at a moderate pace. Labor market conditions
tightened further, and price inflation increased moderately. Sales of retail goods expanded somewhat, and activity in the consumer and business services sectors was
solid. Conditions in the manufacturing sector strengthened. Activity in real estate markets was solid on balance. Lending activity ticked down modestly.
San Francisco
Growth in economic activity was modest. Manufacturing
production grew moderately; employment, consumer
spending, and business spending increased modestly;
and construction and real estate activity decreased
slightly. Wages and prices rose modestly and financial
conditions were little changed. Large yields led agricultural conditions to improve some.
2
Federal Reserve Bank of
Boston
The Beige Book ■ November 2018
Summary of Economic Activity
First District economic activity in most sectors continued to expand at a moderate pace since the last report. Retailers
reported moderate year-over-year sales growth, while Massachusetts restaurant sales rose modestly from a year earlier. Manufacturing firms saw revenues rise from a year ago, but at a somewhat disappointing pace. Most staffing firms
reported modest to moderate year-over-year revenue growth, with some signs that the pace of growth slowed recently.
Sales of single-family homes and condos declined from a year earlier in most New England reporting areas, while median sales prices continued to rise. Activity in commercial real estate markets remained mixed within the region, at a
moderate level on average. Labor markets remained tight and wage increases continued at a moderate pace. Notwithstanding labor-related costs, upward pressure on prices was said to be very modest. Most contacts continued to report
a positive outlook, although some cited increased uncertainty or risks.
with recent reports when many noted high costs. Two
retail contacts noted that wholesale prices have risen
only modestly and that food prices were down about 0.4
percent. Looking ahead to 2019, retailers expressed
significant uncertainty about the impact that tariff increases will have on prices—beyond some point, they
will pass the increases on to consumers. One retailer
said they will not be the first mover on raising prices but
will watch to see what their competitors do. Massachusetts restaurant menu prices were up 2.6 percent from a
year ago.
Employment and Wages
Labor markets continued to be tight, although many firms
said they are able to hire as needed. Two-thirds of manufacturing contacts expected flat employment at their
firm and one-third expected growth. Manufacturers did
not report any unusual difficulty finding qualified employees although an industrial distributor said that it had
become increasingly difficult to find technical salespeople. Retailers said they have not had problems filling
open positions, except for jobs specializing in information
technology. Massachusetts restaurants continued to
note acute labor shortages and higher labor costs, citing
the Commonwealth’s recently implemented Employer
Medical Assistance Contribution (EMAC) and scheduled
hikes in the minimum wage. Staffing industry respondents reported that continued low unemployment made
recruiting very challenging. Most staffing firms reported
increases in bill and pay rates, ranging from low singledigit increases to 10 percent; one cited high-level IT jobs
as a driving factor in increased bill rates.
Retail and Tourism
Retail contacts reported comparable-store year-overyear sales increases ranging from low single-digit to low
double-digit percentages. All respondents remarked that
consumer sentiment was strong and that they expected
the fiscal year to end with low single-digit comparablestore revenue increases. Capital spending plans for
2019 were said to match or exceed investment in 2018.
A contact in the Massachusetts restaurant industry reported that revenues were up about 2 percent year-overyear through September, but cautioned that this result
was largely driven by newly opened units, as sales at
existing locations ranged from flat to up or down 1 percent year-over-year. Anecdotally, restaurant sales were
down year-over-year in October as “people stayed home
to watch the World Series.” As noted earlier this year,
Prices
Price increases were said to be modest. Manufacturing
firms did not report strong pricing pressure either from
customers or suppliers. An industrial distributor said they
expected tariffs to contribute 50 to 100 basis points to
price increases for their products. Only one manufacturer
complained about high transportation costs, in contrast
A-1
Federal Reserve Bank of Boston
the cost challenges confronting the restaurant industry
are expected to thin out the ranks; very recently, two
iconic Massachusetts restaurant chains have closed
units, as have some high-end Boston-area restaurants.
dence, demand for industrial space—whether for lease
or purchase—strengthened further. Following recent
declines, office vacancy rates were described as historically low in Boston and very low in both Portland and
Providence.
Manufacturing and Related Services
All manufacturing contacts this cycle reported higher
sales year-on-year. However, two-thirds of the six respondents said the pace of growth was a little disappointing. A furniture maker said sales growth had slowed
relative to earlier in the year. Two semiconductor-related
firms reported year-over-year sales growth had slowed
to 12 percent and 10 percent; one attributed the slower
growth to smartphones and the other to slowing demand
for consumer devices more broadly. A defense contractor said they were having unusual difficulty with permits
to sell to foreign customers. No contacts reported significant revisions to their capital expenditure plans.
Construction activity was also mixed, with negligible
activity in Connecticut, moderate activity in Rhode Island, and robust activity in the Portland and Boston
areas. One Boston contact said that planned construction could yield a large quantity of new office space in
the downtown area over the next five years, although
rising construction costs—up some 15 percent in the
past six months due to increases in both labor and materials costs—may crimp some projects. The outlook
dimmed further in Connecticut and remained largely
favorable elsewhere for the near term; some contacts
cited increasing risks and uncertainty for late 2019.
Contacts were generally optimistic, even the ones with
disappointing sales growth. One contact in industrial
distribution said that there was industry chatter about a
recession in the second half of 2019 but he saw no signs
of that. A contact in the semiconductor industry said that
people were concerned about the semiconductor industry cycle but continued to expect growth in 2019.
Residential Real Estate
Most residential real estate markets in New England saw
year-over-year sales declines in recent months. For
single-family homes, closed sales decreased from September 2017 to September 2018 in Rhode Island, Massachusetts, Boston, and New Hampshire, while increasing slightly from October to October in Maine. Median
sales prices increased over the year in all reporting
areas. For condos, sales decreased in Massachusetts,
Boston, and New Hampshire, stayed flat in Maine, and
increased in Rhode Island. Condo prices increased in
Boston and Maine but decreased slightly in Rhode Island, Massachusetts, and New Hampshire. Vermont
experienced an over-the-year decrease in sales for
single-family homes and condos combined.
Staffing Services
New England staffing firms reported mostly positive year
-over-year revenue growth, notwithstanding low or negative quarter-over-quarter growth rates. All firms noted
labor supply shortages, regardless of the job’s industry,
occupation, or placement type, while commenting on the
high and healthy demand from clients. One company
stated that they were hesitant to take on new clients
because they could not fulfill orders from existing ones.
Most respondents devoted additional resources to improve recruitment: hiring more employees, investing in
technology and social media, building relationships with
local community groups, and increasing advertising. A
few firms noted concerns about potential increases in
health care costs and local minimum wages. Overall,
staffing firms expressed optimism and expected tight
labor market conditions to continue into 2019.
Contacts cited lack of inventory, rising prices and interest
rates, and market normalization as possible reasons
behind the declining sales. A contact from Rhode Island
noted that the cooling in housing suggested a more
balanced and healthy market, “buyers … will likely have
more properties to choose from in the year ahead.” A
Massachusetts representative, by contrast, attributed the
dwindling sales mainly to ongoing inventory shortages.
Looking forward, residential real estate contacts across
the region expressed optimistic views about the closing
months of 2018. ■
Commercial Real Estate
Commercial real estate markets remained mixed across
the First District, with moderate activity on average.
Leasing activity held steady at a slow pace in Connecticut and picked up to a moderate pace in Rhode Island.
In greater Portland, leasing demand remained strong, on
average, despite having softened a bit in the industrial
and retail markets. Boston-area contacts described office
leasing activity as very robust. In both Boston and Provi-
For more information about District economic conditions visit:
www.bostonfed.org/regional-economy
A-2
Federal Reserve Bank of
New York
The Beige Book ■ November 2018
Summary of Economic Activity
Economic activity in the Second District has grown modestly in the latest reporting period. The labor market has remained exceptionally tight, and wage growth has remained moderate. Businesses noted continued widespread escalation in input costs but moderate increases in their own selling prices. Prices of final goods and services have generally
held steady. Manufacturing and distribution activity continued to grow briskly, while growth in most service industries
has been more subdued, though there has been a pickup in the leisure & hospitality industry—particularly tourism.
Consumer spending has remained mostly steady in recent weeks. Housing markets have softened further, while commercial real estate markets have been mixed. Finally, banks reported a pickup in loan demand from the business sector
and a decline in delinquency rates across the board.
Employment and Wages
increased use of non-wage benefits to attract and retain
staff, such as increased health benefits and profitsharing. A number of business contacts in New York
State, mostly manufacturers, expressed concern about
the upcoming minimum wage hike. One contact expressed concern about an upcoming jump in New York’s
threshold for counting workers as exempt from overtime.
The labor market has remained exceptionally tight
across the District. A broad swath of businesses continued to note problems finding qualified workers. Turnover
has reportedly increased, and a few contacts cited instances where new hires left for another job soon after or
even before their start date. A couple contacts lost existing and prospective skilled workers due to immigration
restrictions, including H-1B visas not being renewed.
Prices
Businesses reported continued widespread escalation in
input prices but moderate hikes in selling prices. Input
price pressures were particularly widespread in manufacturing, leisure & hospitality, and finance. Contacts
across all industry sectors reported steady to moderately
rising selling prices. A sizable proportion of businesses
in leisure & hospitality, wholesale trade, and finance said
they plan to hike prices in the months ahead.
Businesses reported steady to modestly rising employment, on balance. Firms in manufacturing, transportation, and information reported a modest pickup in hiring
activity, and most retailers noted a typical seasonal
pickup. Contacts in education & health, leisure & hospitality, finance, and wholesale again reported moderate
net hiring. A large retail chain hired about the same
number of holiday-season workers as in 2017, but the
mix shifted a bit from in-store to supporting on-line sales.
An upstate New York employment agency noted that
clients are increasingly interested in direct hires versus
contract workers.
Retailers generally indicated that selling prices, as well
as the degree of discounting, have remained stable.
Similarly, prices for New York City hotel rooms and
Broadway theater tickets have been fairly stable in recent months.
Wage pressures remained widespread, though contacts
in most industries noted that overall wage growth has
been moderate. One contact did note a spike in salaries
of college grads in tech fields. A few contacts noted
Consumer Spending
Retail sales were generally reported to be mixed but, on
balance, steady in recent weeks. A major retail chain
B-1
Federal Reserve Bank of New York
bidding wars, though the dearth of inventory has continued to boost selling prices. In New York City, sales of
both existing co-ops and condos continued to weaken,
while selling prices were flat to up slightly. The new
development market has been very slack with sales and
prices down noticeably. In Long Island, both home sales
and prices have continued to rise but the pace has
slowed. The inventory of unsold homes continued to rise
in both New York City and Long Island, but it is still at a
very low level. Much of the softening in and around New
York City is attributed to a combination of increased
financing costs, volatility in the financial markets, a drop
in foreign purchasers, and changes in federal tax law
that limit deductibility of homeowner costs. New York
City’s apartment rental market has been mixed: vacancy
rates edged down in response to increased landlord
concessions—particularly in new developments—while
effective rents have been flat to down slightly.
noted that November sales were on plan and up modestly from last year, helped by a strong Thanksgiving weekend. Retailers in upstate New York reported that sales
have been lackluster in November, with discounters outperforming other stores. One contact attributed sluggish
store sales to the ongoing shift to on-line shopping.
Inventories were generally said to be in good shape.
New vehicle sales were mostly flat in October and early
November, according to dealers across upstate New
York, but down from a year earlier—partly reflecting
further reductions in incentives. New vehicle inventories
were a bit on the high side. Sales of used vehicles, on
the other hand, have been robust, with selling prices a
bit higher than anticipated. Dealers indicated that credit
conditions remained in good shape, though floor-plan
credit has become a bit more expensive.
Consumer confidence in the Middle Atlantic states (NY,
NJ, PA) retreated in October but remained near a cyclical high, based on the Conference Board’s monthly
survey.
Commercial real estate markets have been mixed but
mostly steady. Office availability rates were steady to up
slightly, while asking rents were up modestly, on average. Retail markets were increasingly slack across most
of the District, and there is concern that this trend will
accelerate after the holiday season. In contrast, industrial markets have remained solid, with availability rates
steady at or near multi-year lows and rents rising briskly
across the New York City metropolitan region.
Manufacturing and Distribution
Manufacturers and wholesale distributors noted ongoing
brisk growth in activity in the latest reporting period,
while transportation firms indicated steady activity. Looking to the months ahead, manufacturers continued to
express fairly widespread optimism, while contacts in the
wholesale trade and transportation industries were more
guarded in their optimism. A few contacts continued to
express concern about tariffs and recent and potential
changes in trade policy.
New multi-family construction has been mixed but generally sluggish, though a substantial volume of residential
development is currently under construction. New commercial construction starts—office, industrial, hospitality,
and especially retail—have been very subdued, though
there remains a good deal of office and industrial space
under construction in and around New York City.
Services
Growth has remained subdued in the latest reporting
period. Contacts in professional & business services
noted a pause in growth, while businesses engaged in
the education & health, leisure & hospitality, and information industries noted a pickup in growth. In one sign of
a pickup in tourism, Broadway theaters reported strong
gains in both attendance and revenues, both of which
have been running 15-20 percent ahead of this time last
year. Looking ahead, contacts in education & health and
professional & business services were fairly optimistic
about the near-term outlook, while leisure & hospitality
firms expect business to be flat.
Banking and Finance
Small to medium-sized banks in the District reported
lower demand for consumer loans but stronger loan
demand from the business sector. Bankers also reported
a decrease in refinancing activity. Credit standards were
unchanged across all categories. Bankers reported lower
loan spreads for residential mortgages, commercial
mortgages, and C&I loans, and unchanged loan spreads
for consumer loans. Contacts also reported an increase
in the average deposit rate. Finally, bankers indicated
that delinquency rates declined across all loan categories. ■
Real Estate and Construction
Housing markets across the District have softened further, on balance, since the last report. In upstate New
York, sales have slowed, and there have been fewer
For more information about District economic conditions visit:
www.newyorkfed.org/data-and-statistics/regional-datacenter/index.html
B-2
Federal Reserve Bank of
Philadelphia
The Beige Book ■ November 2018
Summary of Economic Activity
On balance, aggregate business activity in the Third District continued at a modest pace of growth during the current
Beige Book period, although the pace appears to have eased somewhat. The labor market has tightened further, which
continues to constrain hiring at a modest pace and to apply moderate upward wage pressures. Price pressures remained modest. Nonfinancial services maintained a moderate pace of growth, while manufacturing eased back to a
modest pace. Nonauto retail sales continued at a modest pace, and auto sales remained flat; however, tourism activity
appeared to slow to a slight pace of growth. Construction activity appeared to be flat for residential homes and slightly
declining for commercial sectors, while modest declines in existing home sales deteriorated to a moderate drop. Commercial leasing maintained modest growth. The growth outlook over the next six months remained positive, with twothirds of the nonmanufacturing firms and over 40 percent of the manufacturers anticipating increases in general activity.
Employment and Wages
Prices
The pace of employment growth appears to have slowed
somewhat during the current Beige Book period but
remained modest overall. The share of nonmanufacturing firms reporting an increase in full-time staff fell by half
to less than one-fifth, while the share of manufacturing
firms reporting an increase in net employment remained
near one-fourth. However, average hours worked appeared to fall for more manufacturing firms, while remaining about the same for nonmanufacturers.
Price increases remained modest for most firms, with
little change from the prior period. On balance, about
one-fourth of the nonmanufacturing firms continued to
report increases for prices paid and for prices received,
and one-fourth of the manufacturing firms also reported
increases for prices received. The share of manufacturing firms reporting increases in prices paid remained just
above 40 percent.
One firm reported that it has passed along its costs from
10 percent steel tariffs but that it expects customers to
push back if the tariffs increase to 25 percent. Another
firm had absorbed the 10 percent tariffs but is slowly
raising prices now in anticipation of higher tariffs.
Numerous contacts from many sectors noted that jobs
were going unfilled for a lack of qualified labor and that
employee retention was a growing problem. One staffing
firm noted that its roster of qualified job candidates is
essentially tapped out – it has become very difficult to
find qualified applicants to replenish its candidate pool.
Looking ahead six months, manufacturing firms continued to anticipate higher prices, with nearly 60 percent of
the firms expecting increases in prices paid and in prices
received for their own goods.
On balance, wage growth continued at a moderate pace.
Various firm contacts speak of annual wage increases of
around 3 percent. In fact, the percentage of the nonmanufacturing contacts who reported increases in wage and
benefit costs fell to just over one-third from nearly half in
the prior period. However, staffing firms in markets with
lower unemployment rates report that their average
wage is up as high as 6.5 percent over the prior year.
Manufacturing
Manufacturing activity eased back to a modest pace of
growth – close to its nonrecession average. Likewise,
the firms reported a decrease in new orders, while shipments increased relative to the prior period.
C-1
Federal Reserve Bank of Philadelphia
The makers of chemicals and of primary and fabricated
metal products tended to note gains in new orders and
shipments; the makers of paper products and of industrial and electronic equipment reported mixed results.
Tariffs remained a major concern for many producers.
Still, several firms reported that they were adding capacity, while others noted that operating capacity was constrained by shortages of qualified labor. However, a
transportation analyst cautioned that new truck orders
are at record levels and could be canceled if clear signs
of a downturn emerge.
percent, and the percentage reporting increased new
orders remained close to 33 percent. A media firm noted
recent gains from election advertising but a “tepid” auto
sector. Expectations of future growth held steady, with
two-thirds of the firms anticipating increased activity.
Financial Services
Financial firms continued to report modest growth on a
year-over-year basis in credit card lending and in overall
loan volumes (excluding credit cards). However, during
the current period, credit card lending (reported without
seasonal adjustments) grew moderately compared with
modest growth during the same period last year, while
loan volumes (excluding credit cards) grew at a moderate pace compared with slight growth.
On balance, manufacturers continued to expect general
activity to increase over the next six months; however,
expectations eased a bit – slightly below the nonrecession average. Expectations of future increases in new
orders, shipments, and employment remained nearly the
same as the prior period and at high levels. Furthermore,
expectations of future capital expenditures rose to nearly
double the indicator’s nonrecession average.
During the current period, volumes grew moderately in
mortgages and in commercial and industrial lending;
grew modestly in commercial real estate and in home
equity lines; and declined slightly in autos and in other
consumer loans (not elsewhere classified).
Consumer Spending
Bankers continued to note rising deposit rate pressure
and strong competition for quality loans. They continued
to cite concerns that credit standards were slipping but
noted few signs of credit quality deterioration.
Nonauto retailers continued to report modest growth.
Mall sales remained relatively strong, and contacts noted
successful, innovative replacements for anchor stores
that were closed because of bankruptcies. Convenience
store sales continued to incrementally improve.
Real Estate and Construction
According to homebuilders, activity appears relatively flat
overall; a central Pennsylvania builder noted that traffic
and sales disappeared during October and November,
while a South Jersey builder noted moderate gains. Both
builders said that construction activity had peaked or
was peaking and that contractors were beginning to look
for work. Existing home sales declined moderately
across most local markets. “Inventory is hitting rock
bottom,” according to one large Philadelphia broker.
On balance, auto sales remained flat compared with high
2017 levels. According to dealers, October year-overyear auto sales rose slightly – Pennsylvania dealers
noted growth, while New Jersey sales were flat. However, early estimates of New Jersey’s November sales
suggest a decline, and dealers are now less optimistic
for year-end sales.
According to tourism contacts, activity appeared to grow
at a slight pace overall – a bit slower than in the prior
period. A Philadelphia analyst expects 2018 to be another record year yet noted a somewhat slower growth rate
in October and expectations for a slower fourth quarter.
In Atlantic City, sports betting and online gambling continued to boost the total casino take in September and
October; however, the take for the traditional casino slots
and table games fell to single-digit growth. Moreover,
after excluding the two new casinos, the casinos’ traditional take declined by more than 10 percent.
On balance, market analysts reported that construction
of new commercial real estate may have declined a bit –
apartment and warehouse projects remained steady,
while office and retail projects began to wind down. One
developer reported that its 2019 plan assumes that
demand for warehouse space continues to outstrip supply but noted that warning signs were rising, including
additional retail bankruptcies, rising interest rates, and
lower housing starts. Analysts reported that effective
rents rose for apartments and warehouse space but
edged up, at best, for office and retail space. ■
Nonfinancial Services
On balance, service-sector firms continued to report
moderate growth in general activity. The percentage of
firms reporting increased sales edged up to near 60
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 ■ November 2018
Summary of Economic Activity
Business activity in the Fourth District grew modestly during the survey period, with a majority of firms reporting stable
customer demand. Demand was strong in banking, manufacturing, and nonfinancial services, whereas retail demand
improved slightly, and housing demand softened. On balance, employers increased staff levels moderately to meet
demand, though wage pressures were strong and widespread. Contacts in every industry noted that increased competition for labor was requiring them to boost compensation to retain workers. Nonlabor input costs rose strongly in all industries, led by metals, fuel, and transportation costs. Some contacts noticed that import tariffs were boosting prices
further down the supply chain. Selling prices rose with less intensity than they did for input costs.
Employment and Wages
remarked that his firm preferred to use recruitment and
retention bonuses rather than wage increases. One
clothing retailer noted that his firm felt pressure to raise
its wages as other large retailers boosted their pay.
On balance, contacts reported moderate increases to
their staff levels. Hiring activity was very strong in professional and business services, in which three-quarters of
contacts reported adding workers. Skilled services aside,
employers in many sectors gave mixed reports. Retail
contacts noted that the increase in temporary employment for the holiday shopping season this year was
comparable to holiday season increases in recent years.
Many manufacturers increased headcounts to keep up
with demand, but there was an uptick in reports of firms’
reducing headcounts. Finally, transportation firms pared
their workforces because of lower seasonal demand and
to gain efficiencies. Staff levels at construction firms
were stable.
Prices
Nonlabor input costs rose strongly in all industries. Higher metals prices because of import tariffs continue to be
a pain point for manufacturers and construction firms,
although an increasing number of contacts in these
industries have been reporting stable prices in recent
survey rounds. There were a number of reports of tariffs
leading to higher prices further down the supply chain.
One transportation contact reported that domestically
produced maintenance parts were becoming more expensive because some components are imported from
China. One retailer noted that her suppliers were increasing their prices because of the tariffs. In addition to
higher metals prices, contacts noted fuel, transportation,
food, and polyresin cost increases.
Wage pressures were widespread. In every industry,
contacts noted that increased competition for labor was
requiring their firms to boost compensation in a variety of
ways to retain workers. A number of manufacturers
noted they increased wages between 0.5 percentage
points and 1.0 percentage points over the rate of inflation. One construction contact reported that starting
salaries for new graduates was significantly higher this
year than it was last year. One transportation employer
Final selling prices rose with slightly less intensity than
they did for input costs. The majority of manufacturers
held their prices, unlike during the previous five survey
rounds, when a majority had raised selling prices. The
manufacturers that raised their prices did not, for the
D-1
Federal Reserve Bank of Cleveland
most part, report getting pushback from their customers.
Some nonresidential builders were able to raise prices
enough to increase their margins. One homebuilder
noted, however, that his firm held its sticker prices but
lowered effective prices by offering incentives on almost
every deal. Nearly all nondurable-goods retailers held
their prices, while auto dealers all reported higher prices.
The majority of transportation firms found success raising their prices. One contact said he managed to raise
his fees by 4 percent to 6 percent. Another transportation
contact said he noticed that while shippers can secure
higher rates, shipping customers were being more selective about nonprice factors, such as service and how the
shipper handles its loads.
tial construction firms. Both private- and public-sector
demand improved recently, with particular strength coming from industrial and education customers. Backlogs
remained strong and trended upward. Real estate developers were split about their characterizations of market
conditions. Developers that experienced weaker market
conditions cited closures of retail stores as leading to
weaker demand. However, other developers noted stable or even slightly better demand because of strong
business confidence.
Financial Services
Banking conditions were strong and steady. Demand for
credit remained robust and came from both commercial
and consumer segments. However, mortgage demand
showed some signs of slowing and was held down by
lack of housing inventory and by worries about rising
interest rates. Most contacts reported that core deposits
rose in response to higher interest rates, although some
seasonal factors were at play as the holiday season
approached. One contact noted that commercial deposits declined because clients invested cash in operations
or equity markets rather than holding reserves.
Consumer Spending
Consumer demand improved slightly. Auto sales edged
higher thanks to increased sales of used cars. Demand
for new cars fell, however, as higher metals prices and
rising interest rates eroded affordability. Auto dealers
reported that trucks, SUVs, and crossovers continued to
gain market share of passenger vehicles. Demand for
nondurable goods ticked higher. Retailers with broad
footprints noted that sales within the Fourth District were
roughly in line with national sales. Inventories were at
desired levels, but profit margins for nondurable goods
narrowed modestly.
Nonfinancial Services
Nonfinancial services firms reported strong growth in
business activity. Contacts cited strong business confidence, driven by continued US economic growth, as
underpinning their clients’ willingness to spend on business advisory services. Contacts were split evenly between those that expected business conditions to improve in the near future and those that expected them to
be stable. In the transportation sector, demand increased from an already high level. One railroad contact
remarked that demand for her firm’s intermodal services
was strong and that this was a sign that capacity was a
constraint for trucking companies. There was some
concern that seasonal patterns may be unusual this year
as firms try to import goods before additional tariffs on
Chinese goods take effect on January 1. Expectations
for near-term business conditions in the transportation
sector were stable. ■
Manufacturing
Business conditions in manufacturing remained solid,
although producers struggled with capacity constraints
and input price increases. Demand was strong, but some
contacts indicated that this demand was due to inventory
stockpiling as fixed-price contracts approached renewal
and as price increases were imminent. Import tariffs
have had mixed effects: some manufacturers reported
higher demand as import competition subsided, but
others reported that tariffs led to input cost increases and
supply chain gaps. The competition for skilled labor
remained stiff, and two contacts reported off-schedule
capital investments in labor-saving technologies to be
able to keep up with strong demand without the need for
additional personnel.
Real Estate and Construction
Homebuilders reported that demand fell moderately and
that they expect housing demand to soften in the near
future. Homebuilders note that decreasing home affordability, because of rising construction costs and rising
interest rates, drove this decrease in demand. Lowerpriced homes continued to outsell higher-priced homes.
Real estate agents reported stable housing inventories.
For more information about District economic conditions visit:
www.clevelandfed.org/region/
Business conditions improved modestly for nonresiden-
D-2
Federal Reserve Bank of
Richmond
The Beige Book ■ November 2018
Summary of Economic Activity
The Fifth District economy expanded at a moderate rate, overall. Manufacturers gave mixed reports as some firms reported solid growth while others experienced lower demand and higher raw materials prices due to tariffs and some had
lingering negative effects from the recent hurricanes. District ports saw robust activity, particularly for imports; however,
officials were concerned that the threat of new tariffs boosted imports temporarily and volumes could drop off in the near
future. Trucking demand slowed slightly but remained robust. Retail, travel, and tourism rose moderately as customer
traffic and hotel bookings picked up in advance of the holiday season. Residential home sales increased modestly overall
but varied considerably across markets. Real estate agents reported a decline in buyer traffic and a slight decline in
prices for higher-priced homes. Commercial real estate leasing rose moderately for office, retail, and industrial markets.
Lenders saw a modest increase in residential mortgage demand and stronger growth for commercial real estate loans.
The demand for labor strengthened moderately, and wage increases remained modest across sectors. Price growth
remained moderate, overall. However, input prices rose sharply and compressed firms’ profit margins.
Employment and Wages
received but a sharp increase in prices paid. Wholesale
and retail services saw higher prices for goods affected
by tariffs while businesses reported paying higher prices
for business-to-business services and recruitment. Manufacturers and services firms saw higher shipping costs,
as well.
Labor demand continued to strengthen moderately in
recent weeks. Employment agencies noted an increase
in seasonal hiring and expected to post more job openings throughout the holiday season. One staffing agency
reported strong demand for all positions and skill levels
and stated that ‘recruitment is the hardest it has ever
been.’ Staffing firms saw more companies offering permanent positions to temporary employees. Meanwhile,
business owners had difficulty filling positions for IT
professionals, accountants, technicians, construction
workers, and front-line manufacturing workers. In addition, some firms said that the lack of qualified talent was
becoming a constraint on their business. Wage increases remained modest across sectors.
Manufacturing
Since our last report, Fifth District manufacturers gave
mixed reports on demand. Tariffs were a significant
concern noted by manufacturers, as they were believed
to raise costs of raw materials, thereby raising prices and
lowering demand. However, a cabinet manufacturer
reported an uptick in business in recent weeks, as customers rushed orders in anticipation of higher tariffs in
the new year. Meanwhile, a Virginia food manufacturer
reported higher-than-anticipated growth that left the
company struggling to meet demand. Many manufacturers continued to face high transportation costs. In addition, effects of Hurricanes Florence and Michael lingered, as production had been shut down in places.
Prices
Since our previous Beige Book report, price growth
increased but remained moderate, overall. According to
our most recent surveys, manufacturer’s selling prices
rose at a moderate rate while input prices rose sharply.
Several firms commented that the strong dollar and
tariffs continued to affect the availability and prices of
raw materials. Service sector firms reported similar
margin compression with moderate growth in prices
Ports and Transportation
Fifth District ports saw robust business conditions. Export volume softened somewhat, but imports were strong
across the District. One port handled record-breaking
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Federal Reserve Bank of Richmond
volumes in October. Port contacts stated that import
growth was largely driven by retail, particularly auto.
Some expressed concerns that the growth was the
result of companies trying to order before another round
of tariffs, which could lead to weak activity in the coming
months. The softening in exports was partially attributed
to agricultural goods, which were reduced by hurricane
damage and tariffs. A District airport saw strong growth
in imports and exports and was increasing capacity.
reported fewer new home sales at two residential developments and stated that the builder added incentives on
existing inventory to help increase sales.
Commercial real estate leasing rose moderately in recent weeks as brokers reported strong demand across
office, retail, and industrial markets. Vacancy rates remained low across markets, while rental rates were
reportedly stable to increasing modestly. Commercial
sales rose modestly, according to a few brokers, with
industrial and retail building sites representing the majority of transactions. A broker in Charlotte, North Carolina,
said that the number of office building sales had increased in recent weeks for both urban and suburban
markets. Commercial construction increased modestly in
some regions, which was mainly attributed to strong
demand for warehouse and industrial space. Multifamily
leasing remained healthy in most markets.
Demand for trucking remained strong, although firms
noted a slight slowing of demand compared to the extraordinarily high levels seen in the last year. Trucking
firms saw improvements in hiring that allowed them to
keep their trucks moving but were hesitant to invest in
new trucks and equipment because of concerns about
demand in the next year .
Retail, Travel, and Tourism
Banking and Finance
Travel and tourism grew moderately since our last report. Hotel occupancy and room rates remained strong
and bookings were picking up going into the holiday
season. However, rainy weather suppressed tourism
somewhat by preventing outdoor activities and made
travel more difficult. Labor issues were reported by
some businesses, such as a Virginia resort that had to
cut back on scheduled ski lessons because of a lack of
instructors while other businesses reported shrinking
profit margins as a result of wage increases.
Since our previous Beige Book, loan demand grew modestly. Overall, bankers said that demand for commercial
real estate loans strengthened, while business and auto
loan demand was unchanged. Meanwhile, residential
mortgage demand grew at a modest pace. Deposit rates
increased, and bank executives reported that competition for deposits remained aggressive. Credit quality
remained stable and credit standards were generally
unchanged. Interest rates for residential and commercial
loans rose slightly in recent weeks.
Fifth District retailers reported moderate growth, on
balance, with strong demand and high customer traffic.
A Virginia sporting goods store reported its best business in several years. Meanwhile, a North Carolina auto
dealer reported steady business overall but noted a
slowdown in new car sales as customers chose low-cost
used cars instead. Several retailers reported narrowing
profit margins as cost of goods increased as a result of
tariffs, and transportation costs remained high. Some
retailers in the Carolinas have not made up business
lost because of the hurricanes. And a Virginia produce
retailer reported losing crops to the storms.
Nonfinancial Services
Demand for nonfinancial services was little changed in
recent weeks. Professional and business services firms
gave mixed reports; some said that demand increased
while others commented that labor constraints were
holding back growth. Enrollments at community colleges
fell due to a strong labor market. Meanwhile, accounting
and legal services firms experienced moderate growth. ■
Real Estate and Construction
Home sales increased modestly, overall, but the market
was a little less consistent and buyer traffic slowed in
recent weeks. Realtors attributed some of the slowdown
to rising interest rates. Single-family home inventory
remained low while average days on the market edged
up in some locations. District home prices were reportedly stable to increasing modestly. Meanwhile, new
home construction slowed slightly. A Virginia Realtor
For more information about District economic conditions visit:
www.richmondfed.org/research/regional_economy
E-2
Federal Reserve Bank of
Atlanta
The Beige Book ■ November 2018
Summary of Economic Activity
Reports from Sixth District business contacts described economic conditions as expanding at a moderate pace since
the previous report. The majority of contacts are optimistic and expect the pace to continue for the remainder of the
year. The labor market remained tight amid increasing reports of wage pressures. Firms continued to note rising nonlabor costs, and several contacts indicated having the ability to pass along the increases. Retailers, including automobile
dealers, cited slightly higher sales over the reporting period. Reports from the hospitality sector were positive across
most parts of the District. Contacts reported that residential real estate market activity was subdued, though commercial
real estate activity remained robust. Manufacturers reported robust levels of new orders and production. Bankers cited
that financial conditions were steady since the previous report.
Employment and Wages
ers. Several contacts pointed out that overall compensation costs were expected to increase at a slightly faster
pace in 2019.
Broadly, employee retention efforts remained a dominant
labor market theme among business contacts. Firms
continued to engage in internal programs and marketing
initiatives to promote culture, build loyalty, and create a
positive environment for workers. Several business
contacts, especially those searching for truck drivers,
construction laborers, low-skill workers, and information
technology professionals, continued to report that labor
market tightening impeded their ability to grow. Contacts
shared that driver shortages caused supply chain delays
and negatively affected their ability to meet customers’
demands. Employers encountered some tightening for
other positions and business areas, however some
contacts expressed a willingness to wait for the right
person rather than pay more, since they do not believe
that higher pay will guarantee a higher quality worker.
Hurricane Michael reduced employment among firms in
northwest Florida, and several businesses have not
returned to pre-hurricane employment levels.
Prices
Nonlabor costs continued to rise, according to reports
from businesses across the District. Similar to the previous report, some price increases were noted as being
passed along with no significant protest. Some contacts
reported rising trucking rates and expressed concern
that continued price escalations related to tariffs could
impact future demand. The Atlanta Fed’s Business Inflation Expectations survey showed year-over-year unit
costs were up 2.2 percent in October. Survey respondents indicated they expect unit costs to rise 2.3 percent
over the next twelve months.
Consumer Spending and Tourism
Since the previous report, District retailers indicated that
sales levels rose slightly. The outlook among retailers
regarding the upcoming holiday season was optimistic
with contacts expecting higher sales levels than last
year. Automobile dealers noted a slight increase in the
momentum of auto sales.
Overall, employers shared that wage increases rose at
either the same or an increased pace compared with the
previous year, around 3-4 percent on average. A number
of contacts mentioned that recent announcements from
large national firms to increase starting wages for workers at the lower end of the pay scale have created broad
pressures to raise pay for these workers across the
region, particularly among hospitality and retail employ-
District tourism and hospitality contacts reported that
domestic travel was strong while the pace of growth in
group and convention travel softened since the last
report. On balance, demand for hotel rooms in the District remained robust while room rates decreased. Con-
F-1
Federal Reserve Bank of Atlanta
tacts were optimistic about demand in 2019 although
they anticipate the pace of growth to slow.
Banking and Finance
Conditions at financial institutions were stable. Earnings
improved, driven by higher interest rates that enhanced
the net interest margin at most institutions. Credit quality
generally remained positive, however some District
institutions experienced an increase in bankcard delinquencies. Financial institutions continued to loosen
underwriting standards due to slowing demand for credit
and increased competition, particularly in the residential
mortgage and the commercial lending portfolios.
Construction and Real Estate
On balance, housing activity continued to grow, albeit at
a measured pace. Year-over-year new home sales in
many District markets were up slightly, and existing
home sales either moderated or declined as interest
rates rose and inventory levels remained low. Upward
pressure on home prices persisted but at a moderate
pace. New home construction throughout the District
continued to lag behind housing demand and was concentrated in higher price points within prime/high demand submarkets. Homebuilders indicated that rising
land, labor, and material costs continued to push new
home prices higher.
Energy
Overall, activity in the District’s energy sector picked up
since the previous reporting period. Oil and gas production continued to increase. Expenditures on power generation projects across the District continued to rise,
largely attributed to increased industrial demand. Contacts reported several recently initiated, approved, or
planned capital projects across the region to expand
capacity among chemical producers and power plants,
and to construct oil and gas storage terminals and pipelines for takeaway capacity to and from the Gulf Coast of
Louisiana. Gulf of Mexico drilling rig shut-ins due to
Hurricane Michael were described as minimal; contacts
estimated the loss of crude oil production at approximately two million barrels or about $140 million.
District commercial real estate activity remained strong
across most of the region during the reporting period.
Vacancy rates continued to decline modestly, though
contacts reported some slower-paced leasing dynamics
at some suburban retail properties. Industrial leasing
was especially robust and generally was greater than the
heightened amount of new construction completions
across the District. Multifamily occupancy rates rose as
demand outpaced supply.
Manufacturing
Agriculture
Manufacturing contacts continued to report solid demand
and healthy overall business conditions since the previous reporting period. New orders and production levels
remained robust at most firms, with the exception of
those along the Gulf Coast that were affected by Hurricane Michael. Supply delivery times were reported to be
getting slightly shorter, while input prices continued to
rise. Expectations for future production levels increased
from the previous period, with almost half of contacts
expecting higher production over the next six months.
Agriculture conditions across the District softened. In
early October, Hurricane Michael caused significant wind
and rain damage to agriculture production in the Florida
panhandle, south Alabama, and south Georgia. Products
affected included cotton, pecans, peanuts, fruit and
specialty crops, timber, livestock, poultry, and greenhouse and nursery products. In spite of Hurricane Michael, cotton harvesting in Alabama and Georgia progressed close to their five-year averages, but with significant deterioration in conditions, especially in Georgia.
The District’s soybean and peanut harvests were ahead
of their five-year averages. Year-over-year prices paid to
farmers in September were up for corn, cotton, rice, and
beef, while soybean, eggs, and broiler prices were
down.■
Transportation
District transportation contacts indicated that demand
was generally consistent with the previous reporting
period. Total rail traffic, including intermodal, was up
marginally over year earlier levels. Trucking and logistics
contacts reported continued growth in e-commerce
shipments. District ports noted a strengthening in container activity related to inventory building for the peak
buying season, along with increases in breakbulk, automotive, and heavy equipment cargo. While one District
port in the path of Hurricane Michael experienced some
operational disruptions, most transportation firms noted
little to no negative impact on the movement of cargo
due to the storm.
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 ■ November 2018
Summary of Economic Activity
Economic activity in the Seventh District grew at a modest pace in October and early November, and contacts expected
it to continue at that pace over the next 6 to 12 months. Manufacturing production grew moderately; employment, consumer spending, and business spending increased modestly; and construction and real estate activity decreased slightly. Wages and prices rose modestly and financial conditions were little changed. Large corn and soybean yields led to
some improvements in crop producers’ incomes.
Employment and Wages
Consumer Spending
Employment growth slowed to a modest pace over the
reporting period, and contacts expected job gains to
continue at that rate over the next 6 to 12 months. Hiring
was focused on production, sales, and professional and
technical workers, though there was a decline in the
number of contacts planning to hire sales workers. As
they have for some time, contacts indicated that the
labor market was tight and that they had difficulty filling
positions at all skill levels. A number of contacts said that
they had been “ghosted,” a situation in which a worker
stops coming to work without notice and then is impossible to contact. Wage growth picked up some but remained modest overall. More contacts reported that they
were increasing wages for select employees as opposed
to raising wages across the board. Contacts were most
likely to report wage increases for managerial, professional and technical, administrative, and production
workers. Many firms reported rising benefits costs.
Consumer spending picked up some over the reporting
period, but growth remained modest on balance. Nonauto retail sales rose modestly, with gains in the home
improvement, hardware, lawn and garden, furniture and
appliance, and apparel sectors. Contacts expected good
holiday sales this year. Light vehicle sales rose moderately, with gains for both new and used vehicles. Some
dealers indicated that generous discounts had noticeably
boosted business fleet sales.
Business Spending
Business spending increased modestly in October and
early November. Retail contacts said that inventories
were generally at comfortable levels. One contact noted
that retailers were expecting good holiday sales and had
increased inventories accordingly. Contacts also indicated that retailers were building up stock in anticipation of
higher tariffs on Chinese imports that are set to take
effect in 2019. Most manufacturing contacts also reported stocks were at comfortable levels, though some indicated that inventories were too low because of longer
lead times for materials. Capital spending increased
modestly, and contacts expected growth to continue at
that pace over the next 6 to 12 months. Outlays were
primarily for replacing industrial and IT equipment and
for renovating structures. There was also a notable
increase in contacts reporting spending for M&A. Demand for energy from commercial and industrial users
Prices
Prices rose modestly in October and early November,
and contacts expected prices to continue to increase at
that rate over the next 6 to 12 months. Retail prices
increased slightly overall. Producer prices again rose
moderately, reflecting in part the pass-through of higher
labor, materials, and freight costs. Energy costs declined
some.
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Federal Reserve Bank of Chicago
increased modestly, with growth in manufacturing
(particularly from steel producers) offsetting a slight
decline in the commercial sector. Demand for transportation services was little changed, but remained at a strong
level.
Agriculture
Although the harvest took longer than normal, corn and
soybean yields were quite large. And, in spite of low
prices, crop producers’ incomes were better than what
had been expected earlier this year. However, crop sales
were lower than normal, and a record amount of the
harvest was put into storage. This reflected in part higher
prices for delivery in later months compared to prices for
delivery at harvest. Logistical challenges continued as
soybeans that would usually be exported to China were
being sent to other markets. Farm equipment dealers
reported giving large discounts in order to make sales as
many crop farmers continued to face financial challenges. Hog and cattle prices moved higher during the reporting period, but milk prices floundered in part because
of weak exports. Farm mediation services remained in
demand for troubled operations. ■
Construction and Real Estate
Construction and real estate activity decreased slightly
over the reporting period. Residential construction declined slightly, with growth in suburban single-family
homebuilding offset by declines in other markets. Home
sales also declined some. One contact attributed the
slowdown to rising interest rates and low inventories for
starter homes. Home prices and residential rents increased slightly. Nonresidential construction was little
changed overall, though one contact noted increased
demand from the education sector. Commercial real
estate activity was also little changed, though the pace
remained strong. Contacts noted particularly strong
demand for industrial space. Commercial rents edged
higher and vacancy rates edged lower. The availability of
sublease space increased marginally.
Manufacturing
Growth in manufacturing production continued at a moderate rate in October and early November. Steel output
rose moderately as end-user demand remained at a high
level. Steel imports continued to decline. Demand for
heavy machinery increased moderately as well, with
growth led by the construction and energy sectors. One
contact noted that supply chain constraints were holding
back growth. Demand for heavy trucks remained strong.
Order books for specialty metals manufacturers increased modestly: Growth was spread across a wide
variety of sectors, though contacts noted particularly
strong demand from the aerospace sector. Auto production was flat, but remained at a solid level.
Banking and Finance
Overall, financial conditions were little changed over the
reporting period. Financial market participants noted the
declines in equities prices and increased volatility. Business loan demand increased modestly, with contacts
reporting growth in the construction, manufacturing,
transportation, and energy sectors. Loan quality and
lending standards were little changed. Consumer loan
demand was flat overall, though contacts noted a slight
increase in demand for auto loans. Consumer loan quality and lending standards were also little changed.
For more information about District economic conditions visit:
chicagofed.org/cfsbc
G-2
Federal Reserve Bank of
St. Louis
The Beige Book ■ November 2018
Summary of Economic Activity
Economic conditions have slightly improved since our previous report. Firms indicated modest growth in employment
and wages. Wage increases were widespread and higher than previous years for the vast majority of firms. Similarly,
price pressures have increased modestly since our previous report. Consumer spending activity improved slightly, although auto sales showed little to no growth. Reports from manufacturing firms were upbeat; many firms reported strong
orders and a positive outlook. Conversely, reports from bankers and real estate contacts were generally pessimistic,
with these contacts reporting slight declines in activity. Overall, the outlook among all contacts continued to weaken but
remains slightly optimistic for the upcoming year. On net, a slightly greater share of contacts expect economic conditions in 2019 to be better or somewhat better than 2018.
raises for new hires at national retailers have pushed up
starting wages. Small business wages increased modestly in the St. Louis area and moderately in Tennessee.
Employment and Wages
Employment has grown modestly since the previous
reporting period. On net, 22 percent of business contacts
surveyed reported that employment was higher or slightly higher than a year ago. Approximately half of the
contacts expected their firm to increase employment
over the next year, and the remaining contacts expected
employment to remain unchanged. Contacts ranked an
inability to find candidates with the required skills as the
single greatest factor restraining hiring. The labor market
was especially tight in the manufacturing, construction,
and transportation sectors. One contact reported that
manufacturing firms were turning down new orders due
to worker shortages. Firms, particularly small businesses, continue to use nonwage benefits to attract employees. Staffing contacts in St. Louis reported that employees seem to have more leverage than employers for the
first time in several years.
Prices
Prices have increased modestly since the previous report. On net, 27 percent of business contacts reported
that prices charged to consumers increased relative to
last year. Nonlabor costs for businesses also rose modestly. On net, 33 percent of survey respondents held that
costs were higher than the same time last year, which is
unchanged from our survey three months ago. Metal
prices, while remaining high in year-over-year terms,
showed little change since the previous report. Agricultural prices remain generally low, and decreased international demand has increased the cost of using grain
storage facilities as farmers seek to store, rather than to
sell, their crops.
Consumer Spending
Wages have moderately increased since the previous
report. On net, 39 percent of survey respondents indicated that wages were higher or slightly higher than a year
ago, and 30 percent reported increases in labor costs.
Contacts reported that the tight labor market led to increased pay for both new hires and existing employees:
77 percent of firms reported raising wages and salaries
by more than they did in the past few years. Additionally,
Reports from general retailers, auto dealers, and hoteliers indicate that consumer spending has slightly increased since our previous report. Real sales tax collections increased in Arkansas, Missouri, Tennessee, and
Kentucky relative to a year ago. Reports from St. Louis
auto dealers indicated that auto sales slightly increased,
while Little Rock and Memphis auto dealers indicated
H-1
Federal Reserve Bank of St. Louis
that auto sales were flat relative to a year ago. Auto
dealers reported increased demand for new vehicles, but
they also expressed concern over higher interest rates
on new vehicle loans. Hospitality contacts in Missouri
reported that sales were flat year over year. Arkansas
tourism sales tax revenue slightly increased year over
year.
Commercial real estate activity has decreased modestly
since the previous report. Contacts reported a decrease
in demand for most property types, particularly office and
retail, and about 40 percent of respondents, on net,
reported a decrease in multifamily demand in the current
quarter. About 10 percent of respondents, on net, expect
a slowdown in activity to continue into the first quarter of
2019; however, respondents expect demand for retail
space to pick up in the first quarter of 2019.
Manufacturing
Manufacturing activity has increased moderately since
our previous report. A large majority of contacts reported
that production, new orders, and capacity utilization
increased. Several companies reported new capital
expenditure and facility expansion plans, including firms
that manufacture agricultural chemicals and window
coverings.
Commercial construction activity has remained unchanged since our previous report. There was a slight
decrease in multifamily permit activity in most of the
District’s major MSAs relative to the prior month, but
local contacts in Little Rock reported that the market was
strong and there was robust demand for construction.
On net, one-third of contacts expressed an optimistic
outlook going into the first quarter of 2019.
Contacts are also optimistic about the next quarter, with
net majorities expecting increases in production, new
orders, and capacity utilization. However, one contact in
the chemicals sector is reporting that layoffs will take
place between this quarter and the first quarter of 2019,
and a few manufacturing contacts expressed concern
that labor market tightness is contributing to a shortage
of qualified employees.
Banking and Finance
Banking conditions have weakened slightly since the
previous report. Loan demand for commercial and industrial loans was unchanged relative to year-ago levels,
while loan demand for mortgages slightly declined.
Bankers expect stable demand growth overall into the
first quarter of 2019. Credit standards overall tightened
slightly relative to year-ago levels. Overall delinquencies
remained relatively stable on a year-over-year basis,
with only a slight increase for the final quarter of 2018.
Commercial and industrial loan delinquencies are expected to remain unchanged in the first quarter of 2019.
Nonfinancial Services
Activity in the nonfinancial services sector has improved
slightly since the previous report. Across the District,
sales expectations were met. Compared with a year ago,
68 percent of survey respondents noted higher sales and
52 percent expect the next quarter also to be higher year
over year. Local contacts note that barge activity has
increased due to the large number of storage barges for
soybeans affected by recent tariffs. National logistics
firms continue to hire temporary workers due to higher
seasonal demand.
Agriculture and Natural Resources
District agriculture conditions declined modestly from the
previous reporting period. Corn, cotton, and soybean
yields are expected to be higher than 2017 levels, while
rice yields are expected to be lower. Contacts noted that
unusually wet weather has impacted crop quality negatively this fall, which contributed to a deterioration in crop
prices. In addition, contacts expressed concern over the
ongoing tariffs leveled at U.S. agricultural products.
There are reports of storage shortages as soybeans that
are normally exported to China are being stored in large
quantities rather than exported.
Real Estate and Construction
Residential real estate activity increased slightly. Seasonally adjusted home sales for October increased
slightly overall. Contacts continued to report inventory
shortages; and, on net, about one-quarter of contacts
reported that sales halfway through the fourth quarter
have fallen short of expectations.
Natural resource extraction conditions declined slightly
from September to October, with seasonally adjusted
production declining a little over 3 percent. October
production increased 3 percent from a year ago. ■
Residential construction activity was mixed. October
seasonally adjusted permit activity within District MSAs
was modestly lower than one year ago. However, about
36 percent of survey respondents, on net, reported an
increase in residential construction relative to the same
time last year, and the same fraction of respondents
reported that they expect this trend to continue into the
first quarter of 2019.
For more information about District economic conditions, visit:
https://research.stlouisfed.org/regecon/
H-2
Federal Reserve Bank of
Minneapolis
The Beige Book ■ November 2018
Summary of Economic Activity
Ninth District economic activity increased moderately since the previous report. Employment grew moderately, with
hiring demand remaining robust, but a tight labor supply was restraining employment growth. Wage pressures were
moderate overall, while price growth remained modest. The District economy showed growth in consumer spending,
construction, residential real estate, manufacturing, and energy. Commercial real estate activity was mixed, while agricultural conditions remained weak.
Employment and Wages
Wage pressures were moderate overall, with some
evidence of stronger pressures for certain industries and
worker skills. Several ad hoc surveys by the Minneapolis
Fed showed wage increases coalescing around 3
percent over the past 12 months. A small majority of
Minnesota and South Dakota firms reported wage
increases below 3 percent; however, a small majority of
Montana firms reported increases above 3 percent, as
did about 70 percent of Minneapolis-St. Paul
construction firms. A Minnesota services company
announced it was raising its base wage from $12 to $14
per hour in hopes of hiring 300 people by year’s end. A
tight labor market for high-tech skills in Minneapolis-St.
Paul has led to double-digit wage increases for some
information technology and other STEM positions over
the past 12 months. There were also reports that more
companies, especially those in construction trades, were
picking up a greater share of workers’ health insurance
premium costs to attract and retain employees.
Employment grew moderately since the last report.
Hiring demand remained robust, but a tight labor supply
was restraining employment growth. Job postings
tracked by district states were higher overall in October
compared with the same period a year earlier. Minnesota
and North Dakota saw particularly strong growth in job
postings, while South Dakota and the Upper Peninsula
of Michigan had small declines. Ad hoc surveys of
businesses in Minnesota, Montana, and South Dakota,
conducted in late October and November by the
Minneapolis Fed, found that a significant majority of
respondents’ firms were hiring; many were hiring to both
increase total headcount and replace turnover.
Numerous construction contacts in Minneapolis-St. Paul
said they were hiring, and most were looking to increase
total headcount. However, tight labor availability was
making it difficult for firms to find necessary workers.
Surveys by the Minneapolis Fed found that labor
availability was widely seen as the biggest obstacle to
short-term growth. Unemployment insurance claims
have also continued to drop; over the most recent sixweek period (through early November), both initial and
continuing claims saw a cumulative decline of 12 percent
across District states compared with the same period a
year earlier. A Montana contact noted that seasonal
layoffs for male-dominated industries like construction
have been pushed back this year. “This hasn’t happened
before in the years that we’ve been watching.”
Prices
Price Price growth remained generally modest since the
previous report, though input prices saw more pressure.
In a recent survey of large firms, about 30 percent saw
input prices rise by 3 percent or more over the past 12
months, but 41 percent believe they will rise by 3 percent
or more over the coming 12 months. Several contacts
reported notable increases in freight and transportation
logistics prices. Retail fuel prices in District states as of
I-1
Federal Reserve Bank of Minneapolis
late November were substantially lower than a month
earlier. However, home heating costs were expected to
increase faster in District states than nationally this
winter, largely due to rises in the prices of heating oil and
natural gas, as the average temperature forecast is
roughly flat from last year. Prices received by farmers for
corn, wheat, hay, and cattle increased in September
compared with a year earlier; prices for soybeans, hogs,
milk, chickens, eggs, and turkeys decreased.
Commercial real estate activity was mixed since the last
report. In Minneapolis-St. Paul, industrial and multifamily
sectors both continued to show healthy leasing demand,
with low vacancy rates despite significant new
construction. However, both retail and office vacancy
rates have been increasing. Several national retailers
announced closures in Minnesota, and one specialty
retailer announced the closure of eight stores in the
state. Consumer shifts to online retailers have
contributed to rising vacancy rates in retail space, but
have also contributed to lower industrial vacancies due
to increased leasing of industrial warehouse space in
Minneapolis-St. Paul. Residential real estate activity rose
moderately. Closed sales in October were mostly higher
compared with a year earlier across most of the District.
October home sales were particularly strong in western
and northern counties of Wisconsin. Sales in Montana’s
larger markets were mixed, but softer overall.
Consumer Spending and Tourism
Consumer spending grew moderately since the last
report. Taxable sales have seen strong growth in South
Dakota this fall compared with a year earlier; Wisconsin
also saw sales growth year over year, but at slower rates
than those seen over summer months. In Minnesota,
hotel demand rose, with higher occupancy and revenue
per available room in October compared with a year
earlier. Tourism activity was solid in Montana, with
October visits to Glacier National Park seeing a 9
percent increase. Total enplanements at Montana’s two
largest airports were also up 9 percent over a year
earlier. Attendance at national parks elsewhere in the
District were mixed. Total visits in October were down at
Mount Rushmore, as well as at Pictured Rocks in
Michigan’s Upper Peninsula, and vehicle crossings at
the U.P.’s Mackinac Bridge have been lower this fall
compared with a year earlier.
Manufacturing
District manufacturing activity increased modestly since
the previous report. An index of manufacturing
conditions indicated increased activity in October
compared with a month earlier in Minnesota and the
Dakotas. An industrial equipment producer announced a
large expansion that would nearly double capacity at a
plant in Minnesota. However, multiple contacts have
reported putting capital spending plans on hold due to
uncertainty in their outlooks.
Construction and Real Estate
Agriculture, Energy, and Natural Resources
Commercial construction activity grew moderately since
the last report. Industry data showed that total
construction spending in October was higher across
much of the District compared with a year earlier.
Industry data showed that both new commercial projects
and total active construction projects in the District as of
early November were slightly higher than a year ago.
However, there was also some evidence that the number
of active projects may be elevated to some degree by
the inability of construction firms to find available labor.
Overall, commercial permitting in October was strong in
Minneapolis-St. Paul, but otherwise mixed among the
District's other metro markets. Several industry contacts
in Minneapolis-St. Paul said project pipelines were full
heading into the end of the year and early part of 2019,
and industrial and medical construction sectors were
said to be strong. Another construction contact also
noted significant activity in the energy segment in
Minnesota. Residential construction activity saw
moderate growth. October single-family permitting was
higher in a notable majority of District metros compared
with a year earlier, while multifamily permitting was
mixed.
District agricultural conditions remained weak. According
to results from the Minneapolis Fed’s third-quarter
survey of agricultural credit conditions, roughly three in
five lenders surveyed reported that farm incomes
decreased in the third quarter relative to a year earlier,
while a similar proportion reported decreased capital
spending. While early indications were for very strong
production in much of the District, in some areas heavy
rains and unseasonably cold weather were complicating
harvests. District oil and gas exploration activity as of
late November increased moderately relative to the last
report. North Dakota oil production increased to a new
record in September. A major natural gas processing
plant began operations in North Dakota. ■
I-2
Federal Reserve Bank of
Kansas City
The Beige Book ■ November 2018
Summary of Economic Activity
Tenth District economic activity increased slightly in late October and November and remained modestly above yearago levels. Consumer spending was fairly flat as gains in retail and auto sales were offset by declines in restaurant and
tourism activity. Manufacturing activity continued to expand moderately in both durable and non-durable goods plants.
Sales rose at a modest-to-moderate pace in the professional and high-tech, wholesale trade, and transportation sectors,
and additional gains were expected in the months ahead. Residential real estate sales declined modestly and residential construction activity held steady, while overall activity in the commercial real estate sector increased. Energy activity
expanded, but the outlook was mixed due in part to geopolitical uncertainty. The agricultural outlook remained weak,
with lower soybean prices, weakness in dairy and hog markets, deteriorating farm income, and uncertainty surrounding
international trade. Employment and employee hours edged up across most industries, and about half of contacts expected to increase employment in the next twelve months due primarily to strong sales growth and overworked staff.
Wage growth expanded modestly, and additional gains were expected. Prices continued to rise, with gains in input
prices slightly outpacing those of selling prices.
Employment and Wages
Prices
Overall employment and employee hours edged up in
late October and November across the District, and
expectations were for modest gains in the months
ahead. Contacts in the retail trade, wholesale trade, auto
sales, real estate, professional services, health services,
and manufacturing sectors noted flat-to-modestly higher
employment, while those in the transportation, restaurant, and tourism sectors reported a decline. The same
sectors reporting an increase in employment, with the
addition of transportation, also noted rising employee
hours. About half of respondents expected employment
to increase at their firm over the next twelve months,
while the majority of the remaining respondents anticipated unchanged levels of employment. Those who
projected increased employment levels cited expectations for strong sales growth and currently overworked
staff as the primary reasons.
Input and selling prices continued to rise in late October
and November, with the pace of gains in input prices
slightly exceeding the growth of selling prices on average. In the retail sector, however, both input and selling
prices grew moderately, and additional gains were expected in the months ahead. Respondents in the transportation and restaurant sectors reported modest growth
in selling and input prices since the previous survey
period, and both were well above year-ago levels. Moderate gains were anticipated for input prices in the restaurant and transportation sector, while modest growth
was expected for selling prices moving forward. Manufacturers continued to report modest price growth for
finished products and moderately higher prices for raw
materials. Raw material prices were projected to increase moderately in the months ahead, while prices for
finished products were projected to rise modestly.
A majority of respondents continued to note labor shortages for low- and medium-skill workers, including positions for retail sales, commercial drivers, specialized IT,
construction, and restaurant staff. Wages grew modestly
since the previous survey, and most contacts reported
higher starting wages for new hires. Wages were expected to increase at a similar pace moving forward.
Consumer Spending
Consumer spending was fairly flat compared to the
previous survey period, however contacts expected
modest increases in the coming months driven by projected gains in the retail and auto sectors. Retail sales
rose slightly and remained well above year-ago levels.
Retail sales and inventory levels were anticipated to
increase moderately in the next few months. Auto sales
inched up compared to the previous survey period, and
J-1
Federal Reserve Bank of Kansas City
contacts expected both sales and inventories to rise
modestly in the coming months. Respondents noted
SUVs and trucks sold well, whereas sedans sold poorly.
Restaurant sales continued to fall modestly, though they
remained well above year-ago levels. Restaurant contacts anticipated sales to continue to decline slightly in
the coming months. Tourism activity also fell modestly
since the previous survey period.
Banking
Bankers reported steady overall loan demand compared
to the previous survey period. Specifically, respondents
reported a slight increase in demand for commercial real
estate loans, while the demand for commercial and
industrial loans, residential real estate, consumer installment, and agricultural loans fell. Bankers indicated loan
quality improved slightly compared to a year ago and
expected no change in loan quality over the next six
months. Credit standards remained largely unchanged in
all major loan categories. Overall, bankers reported a
slight increase in deposit levels.
Manufacturing and Other Business Activity
Manufacturing activity continued to expand at a moderate pace, and other business contacts experienced
modest-to-moderate sales growth. Factory activity grew
at both durable and nondurable goods plants due primarily to increases in metals, aircraft, food, and plastics. The
levels of production, shipments, and new orders increased modestly since the previous survey period, and
each remained higher than year-ago levels. Manufacturers expected modest increases in capital expenditures in
the coming months.
Energy
Energy activity expanded since the last survey period as
production continued to grow, although expectations for
future activity were mixed. The number of active oil rigs
increased moderately, and the number of active gas rigs
inched higher. Oil prices fell in November after rising
earlier in the year. Expectations are for continued production growth for crude oil in addition to supply increases for natural gas. International geopolitical discussions
surrounding waning OPEC production and U.S. sanctions on Saudi Arabia may affect District energy prices
and production expectations moving forward.
Outside of manufacturing, firms in the wholesale trade
and transportation sectors experienced moderate sales
growth, and professional and high-tech firms reported
modest sales growth. Transportation contacts expected
modest growth in the coming months, whereas wholesale trade and professional and high-tech contacts projected strong growth. Wholesale trade and professional
and high-tech firms anticipated capital expenditures to
increase modestly moving forward, while transportation
firms expected capital spending to rise slightly.
Agriculture
Farm income and credit conditions in the Tenth District
weakened slightly from the last reporting period. Corn,
wheat and cattle prices rose slightly. However, weakness in hog and dairy markets, significantly lower soybean prices, and trade uncertainty weighed on the agricultural outlook in the District. Expectations for farm
income were lowest in Missouri and Nebraska, which are
more concentrated in soybean production than other
states in the District. Alongside lower farm income, repayment rates declined slightly and demand for farm
loans increased modestly. In addition, producers’ working capital deteriorated moderately, and the share of
farm borrowers planning to sell mid- to long-term assets
increased from a year ago. Despite downward pressure
from a weaker farm economy and modest increases in
farm loan interest rates, farmland values decreased only
slightly. ■
Real Estate and Construction
District real estate activity was mixed as residential real
estate activity edged down and commercial real estate
activity rose. Residential home sales declined modestly
since the previous survey period, while home prices and
inventories continued to rise. Residential real estate
contacts expected steady residential home sales and
modest increases in selling prices and inventories in the
months ahead. Sales of low- and medium-priced homes
continued to outpace sales of higher-priced homes.
Overall residential construction activity was flat since the
previous survey period, and expectations were for no
change moving forward. Activity in the commercial real
estate sector increased slightly as sales and prices rose;
absorption, construction underway, and completions
were flat; and vacancy rates fell. Commercial real estate
contacts expected slight growth in overall activity in the
months ahead.
For more information about District economic conditions visit:
www.KansasCityFed.org/Research/RegionalEconomy
J-2
Federal Reserve Bank of
Dallas
The Beige Book ■ November 2018
Summary of Economic Activity
Expansion in the Eleventh District economy slowed to a moderate pace during the reporting period. A broad-based
deceleration was seen across the manufacturing and retail sectors and in loan volume growth. Home sales were soft
partly due to tight inventories and rising mortgage rates. Conversely, drilling activity increased and ample rainfall boosted crop conditions. Employment expanded, despite widespread labor shortages. Wage pressures were strong, and
tariffs drove up input costs. Outlooks were less optimistic than the previous report due to increased uncertainty arising
from trade disputes, rising interest rates, labor market constraints, and postelection politics.
onto customers. Input and selling price pressures eased
in retail, while pricing pressures in other service sectors
were largely unchanged. Natural gas prices rose since
the last report, while West Texas Intermediate crude oil
prices fell from their recent highs. Fuel prices dropped
even further, hurting refiners’ margins.
Employment and Wages
Widespread job growth continued, despite tight labor
markets. Labor shortages remained pervasive across
industries and skill sets but were the most severe for mid
-skilled positions such as truck drivers and blue-collar
workers in manufacturing, construction, and energy.
Most companies said they were struggling to find qualified workers, and many noted settling for less-qualified
candidates to fill vacancies.
Manufacturing
Expansion in the manufacturing sector slowed during the
reporting period, and outlooks were less optimistic than
they have been all year. Output growth softened notably
in November, with the tariffs, labor constraints, and trade
policy uncertainty cited as damping factors. The slowing
was broad based but most pronounced in fabricated
metals, construction related products, computer and
electronics, and food manufacturing. The Gulf Coast
refinery utilization rate remained high, while chemical
production flattened during the reporting period. Outlooks among downstream energy firms stayed optimistic,
although petrochemical companies were experiencing
margin compression from higher costs.
Upward wage pressures remained strong and prevalent,
although they did ease somewhat in manufacturing.
Many firms noted raising wages to recruit and retain
workers, and also using non-wage-based incentives
such as better benefits, improved working conditions,
and bonuses. A staffing firm said it had become difficult
to hire for positions paying less than $15 an hour in
Dallas–Fort Worth following Amazon’s announcement to
raise its minimum wage. A manufacturing equipment
supplier reported frequently raising wages to prevent its
employees from being poached by other firms, and one
contact noted high employee turnover despite paying
their groundskeepers $20 an hour.
Retail Sales
Retail sales expanded at a slower pace compared with
the previous reporting period. Online sales grew modestly as did motor vehicle sales, but some auto dealers said
rising interest rates were shrinking margins. Sales at
stores located along the Texas/Mexico border worsened
Prices
Input price pressures remained elevated in part due to
tariffs, particularly in manufacturing and construction,
and firms were struggling to pass these higher costs
K-1
Federal Reserve Bank of Dallas
partly due to weakness in the peso/dollar exchange rate,
and building material and garden equipment suppliers
noted flat activity. Retailers’ outlooks were less positive
than the last report as tariffs and rising interest rates
negatively impacted expectations.
loan growth, outlooks remained optimistic.
Energy
Drilling activity in the Eleventh District increased, but the
number of new wells brought into production in the Permian Basin continued to lag due to ongoing pipeline and
transportation capacity constraints. The completion of a
new pipeline project ahead of schedule has narrowed
the spread between in-basin and West Texas Intermediate crude oil prices. Margins of oilfield services firms
continued to be pressured by high costs and increased
competition. Conversely, growing supplies of local sand
and improvements in operational efficiency supported
producers’ margins. Overall, outlooks remained positive.
Nonfinancial Services
The nonfinancial services sector expanded broadly, with
revenue growth firming up among healthcare, information services, and accommodation and food services
firms. Demand for staffing services generally remained
brisk and broad based, with particular strength noted in
orders for healthcare staff, oilfield services labor, and
blue-collar workers such as electricians, welders, and
plumbers. Activity in the transportation services sector
was solid. Courier and air cargo volumes expanded. Rail
traffic stayed strong across most business lines, outside
of a decline in building products shipments that was
driven partly by a slowing housing market. Airlines said
passenger demand remained stable and continued
strength was expected in domestic air travel. Revenue
growth was lackluster among professional, scientific, and
technical services firms. Contacts were less optimistic in
part due to uncertainty stemming from trade issues and
politics.
Agriculture
Agricultural conditions improved further, with less than
one percent of the state in drought as of mid-November.
Ample rainfall has built up ground moisture reserves,
boosting crop prospects for 2019. However, excessive
precipitation in some areas has delayed planting of the
winter wheat crop and caused some quality issues for
cotton. Overall, agricultural producers were quite optimistic, although some continued to experience financial
difficulty from drought conditions earlier in the year. ■
Construction and Real Estate
Activity in the housing market was soft over the reporting
period as the recent rains and rising interest rates affected traffic and sales activity. Still, sales of moderately
priced homes mostly remained solid. The wet weather
also delayed lot development and homebuilding activity.
Home prices were flat to up, and contacts noted usual
year-end discounting. Outlooks remained positive, although there is increased trepidation about the impact of
rising mortgage rates and/or high construction costs on
future sales.
Conditions were little changed in the apartment market,
and contacts noted some supply-driven softness at the
high-end (prime Class A properties). Investor interest in
multifamily properties was high, particularly in Austin and
Houston. Industrial and retail markets generally remained healthy.
Financial Services
Growth in loan volumes moderated over the reporting
period. The deceleration was broad based across categories, including commercial and industrial, commercial
real estate, and residential real estate. Consumer loan
volume growth held steady. The cost of funds and loan
pricing rose further, and many contacts noted that loan
pricing remained very competitive. Deposit volumes
expanded, albeit at a slower rate. Despite the slowing in
For more information about District economic conditions visit:
www.dallasfed.org/research/texas
K-2
Federal Reserve Bank of
San Francisco
The Beige Book ■ November 2018
Summary of Economic Activity
Economic activity in the Twelfth District continued to expand at a moderate pace during the reporting period of early
October through mid-November. Conditions in the labor market tightened further, and wage growth was moderate. Price
inflation increased moderately. Sales of retail goods expanded somewhat, while activity in consumer and business
services was solid. Conditions in the manufacturing sector strengthened, and conditions in agriculture improved modestly. On balance, contacts reported that residential and commercial real estate market activity expanded at a solid pace.
Lending activity ticked down modestly.
Employment and Wages
Prices
Conditions in the labor market tightened further. Across
the District, contacts reported an increase in competition
for workers and a shrinking pool of qualified applicants.
A major shipping and logistics business in Northern
California revised upwards plans to hire seasonal workers and expected to convert more seasonal hires to
permanent employees than in the past. Contacts continued to note shortages of construction workers, even as
the real estate market cooled somewhat in some parts of
the District. A contact in the business services sector in
Washington observed increased competition from other
sectors for skilled accounting and information technology
professionals that are in short supply across the state. A
few contacts in the banking and agriculture industries in
California slowed their pace of hiring due to productivityenhancing investments.
Price inflation increased moderately over the reporting
period. Contacts reported a moderate pickup in the pace
of price increases at retailers and quick service restaurant chains, partly due to rising labor costs at these
businesses. Businesses in the shipping and logistics
industry planned to apply holiday surcharges due to high
freight volumes and previous increases in energy costs.
A contact in the steel industry was able to increase selling prices modestly due in part to reduced global competition. A contact reported that some businesses in light
manufacturing that source input materials from China
faced higher production costs. Potato prices were down
modestly due to supply outpacing demand after a strong
harvest.
Retail Trade and Services
Sales of retail goods expanded somewhat over the reporting period. A contact in Arizona noted strong consumer demand in the region, which drove retail sales
noticeably higher compared to this time last year. A
contact in the Mountain West noted that consumers have
begun to tend to purchase their lower-cost, basic goods
online and higher-cost, luxury items in stores, straining
brick and mortar establishments that sell everyday products. A major quick service restaurant chain based in
Washington reported that in-store traffic continued to
trend downward at a gradual pace.
Wage growth continued to increase moderately across
skill levels and industries. Nonwage compensation also
increased at several businesses, often in the form of
additional paid vacation days. Many contacts reported
that turnover was up noticeably, causing labor costs to
rise more than anticipated, as new hires negotiated
higher starting wages. A contact in Northern California
reported that salaries for software engineers continued
to increase noticeably. An airline company in the Mountain West noted moderate increases in starting salaries
for pilots.
L-1
Federal Reserve Bank of San Francisco
On balance, holiday sales are expected to increase
moderately relative to last year’s season, due in part to
solid momentum in consumer confidence and spending.
In the shipping and logistics industry, rising volumes in
the past month have led some contacts to expect a
robust holiday shopping season. One contact pointed to
last year’s income tax changes as a driver of a more
optimistic outlook for holiday spending. However, another was attentive to the negative impact that the recent
stock market declines could have on spending.
to limit the ability of growers to secure longer-term sales
contracts. Potato and wheat yields in the Mountain West
were strong, though exports of these products declined
moderately. Drier-than-usual conditions in parts of California lowered yields for select crops, like nuts and tomatoes, but contacts noted that inventories were at an
adequate level to meet demand.
Real Estate and Construction
Activity in real estate markets continued to expand at a
solid pace, though many contacts observed that the
pace of expansion has moderated somewhat in recent
months. Residential construction was mixed. In the
Mountain West and California, contacts observed generally solid construction activity and a shift into multifamily
construction from single family in certain regions. Contacts in the Pacific Northwest reported that building
slowed somewhat, citing expectations of weaker demand
due to rising mortgage rates as one factor restraining
new projects. In most of the District, home prices and
rents decelerated modestly, though prices were still high
by historical standards, supported by continued elevated
demand. Contacts noted slightly more positive developments in the commercial real estate market. A contact in
Northern California observed solid leasing demand from
businesses, in some cases resulting in rents above
advertised rates. Contacts were generally hesitant to
interpret any recent moderation in real estate activity as
a definite shift in the trajectory of the market.
Activity in the consumer and business services sectors
was solid. A contact in the shipping and logistics industry
reported a further increase in demand for freight services
and brisk competition in the industry. A contact in Northern California observed strong demand for software
products to address cybersecurity threats and to enhance business productivity. Demand from leisure
guests in the hospitality industry was solid, while nearterm business reservations declined further.
Manufacturing
Conditions in the manufacturing sector strengthened.
Contacts in the steel industry reported that capacity
utilization remained stable at an elevated level despite a
tick down in sales to automakers and builders. Solid
domestic demand from other sectors and beneficial trade
policy developments helped to bolster the industry. Contacts in Northern California observed that new orders of
semiconductors were strong, input materials were readily
available, and inventory levels were healthy. Deliveries
of commercial aircraft increased slightly from the same
period last year, while new orders grew significantly.
Financial Institutions
Lending activity ticked down modestly over the reporting
period. Growth in loan demand slowed modestly overall,
with several contacts attributing most of the slowdown to
higher interest rates. Net interest margins were flat to
down slightly. Activity in the venture capital market was
strong and equity valuations remained elevated despite
some recent corrections. Credit quality continued to be
healthy. ■
Agriculture and Resource-Related Industries
Conditions in the agriculture sector improved modestly.
Profits at beef and pork producers rose noticeably on a
year-over-year basis, due to strong domestic demand. A
contact in Central California reported that yields were
generally solid but that trade policy uncertainty continued
L-2
Cite this document
Federal Reserve (2018, December 18). Beige Book. Beige Book, Federal Reserve. https://whenthefedspeaks.com/doc/beige_book_20181219
@misc{wtfs_beige_book_20181219,
author = {Federal Reserve},
title = {Beige Book},
year = {2018},
month = {Dec},
howpublished = {Beige Book, Federal Reserve},
url = {https://whenthefedspeaks.com/doc/beige_book_20181219},
note = {Retrieved via When the Fed Speaks corpus}
}