Beige Book
For use at 2:00 PM EDT
Wednesday
January 16, 2019
The Beige Book
Summary of Commentary on Current Economic Conditions
By Federal Reserve District
January 2019
Federal Reserve Districts
Minneapolis
Boston
Chicago
New York
Cleveland
Philadelphia
San Francisco
Kansas City
St. Louis
Richmond
Atlanta
Dallas
Alaska and Hawaii
are part of the
San Francisco District.
The System serves commonwealths and territories as follows: the New York Bank serves the Commonwealth of Puerto Rico and the U.S. Virgin
Islands; the San Francisco Bank serves American Samoa, Guam, and the Commonwealth of the Northern Mariana Islands.
National Summary
Boston
1
A-1
First District
New York
B-1
Second District
Philadelphia
C-1
Third District
Cleveland
D-1
E-1
Fifth District
Atlanta
F-1
Sixth District
Chicago
G-1
Seventh District
St. Louis
H-1
Eighth District
Minneapolis
The Beige Book is a Federal Reserve System publication about current
economic conditions across the 12 Federal Reserve Districts. It characterizes regional economic conditions and prospects based on a variety
of mostly qualitative information, gathered directly from District
sources.
The qualitative nature of the Beige Book creates an opportunity to
characterize dynamics and identify emerging trends in the economy
that may not be readily apparent in the available economic data. Because this information is collected from a wide range of business and
community contacts through a variety of formal and informal methods,
the Beige Book can complement other forms of regional information
gathering.
How is the information collected?
Fourth District
Richmond
What is The Beige Book?
Each Federal Reserve Bank gathers anecdotal information on current
economic conditions in its District through reports from Bank and
Branch directors, plus phone and in-person interviews with and online
questionnaires completed by businesses, community contacts, economists, market experts, and other sources.
How is the information used?
The anecdotal information collected in the Beige Book supplements the
data and analysis used by Federal Reserve economists and staff to
assess economic conditions in the Federal Reserve Districts. This
information enables comparison of economic conditions in different
parts of the country, which can be helpful for assessing the outlook for
the national economy. The Beige Book also serves as a regular summary of the Federal Reserve System’s efforts to listen to businesses
and community organizations.
I-1
Ninth District
Kansas City
J-1
Tenth District
Dallas
K-1
Eleventh District
San Francisco
Twelfth District
L-1
This report was prepared at the Federal Reserve Bank of Chicago
based on information collected on or before January 7, 2019. This
document summarizes comments received from contacts outside the
Federal Reserve System and is not a commentary on the views of
Federal Reserve officials.
National Summary
The Beige Book ■ January 2019
Overall Economic Activity
Economic activity increased in most of the U.S., with eight of twelve Federal Reserve Districts reporting modest to
moderate growth. Nonauto retail sales grew modestly, as several Districts reported more holiday traffic compared with
last year. Auto sales were flat on balance. The majority of Districts indicated that manufacturing expanded, but that
growth had slowed, particularly in the auto and energy sectors. New home construction and existing home sales were
little changed, with several Districts reporting that sales were limited by rising prices and low inventory. Commercial
real estate activity was also little changed on balance. Most Districts reported modest to moderate growth in activity in
the nonfinancial services sector, though a few Districts noted that growth there had slowed. The energy sector expanded at a slower pace, and lower energy prices contributed to a pullback in the industry’s capital spending expectations.
The agriculture sector struggled as prices generally remained low despite recent increases. Overall, lending volumes
grew modestly, though a few Districts noted that growth had slowed. Outlooks generally remained positive, but many
Districts reported that contacts had become less optimistic in response to increased financial market volatility, rising
short-term interest rates, falling energy prices, and elevated trade and political uncertainty.
Employment and Wages
Employment increased in most of the country, with a plurality of Districts reporting modest growth. All Districts noted
that labor markets were tight and that firms were struggling to find workers at any skill level. Minneapolis indicated that
construction firms had turned down business because they could not find workers, and Atlanta reported that a few
contacts were either actively overstaffing or retaining employees through lulls in demand in anticipation of future
growth. Wages grew throughout the country, with the majority of Districts reporting moderate gains. Wages increased
across skill levels, and numerous Districts highlighted rising entry-level wages as firms sought to attract and retain
workers and as new minimum wage laws came into effect.
Prices
The majority of Districts reported modest to moderate increases in prices. Most Districts indicated that firms’ input costs
had risen, but reports were mixed on whether they could pass the higher costs on to customers. Reports often cited
rising materials and freight prices as sources of cost increases, and a number of Districts said that higher tariffs were
also a factor. While prices of most inputs were up, several Districts noted that fuel costs had gone down. A number of
Districts reported rising home prices, while prices for commercial and industrial space either increased or were flat.
Prices for agricultural commodities were generally somewhat higher.
Highlights by Federal Reserve District
Boston
New York
Business contacts reported continued year-over-year
growth in revenues even as they cited signs of a somewhat slower pace. Selected labor markets (occupations,
locations) remained tight and wage increases were
moderate. Some retailers and manufacturers raised
selling prices. Most respondents said their outlook was
positive, although somewhat less certain than earlier.
Regional economic activity leveled off in the latest reporting period, while labor markets remained tight and
wage growth picked up somewhat. Input costs and selling prices rose at a steady pace. Holiday season sales
were a bit on the sluggish side but still up from a year
ago. Tourism remained brisk, but most other sectors saw
activity flatten out or decline slightly. Banks reported a
dip in loan demand.
1
National Summary
Philadelphia
Minneapolis
Economic activity maintained a modest pace of growth,
although further slowing occurred among service sectors
and some real estate activity declined. Lack of qualified
labor continued to constrain hiring and raise wage pressures. Price increases remained modest. Nevertheless,
firms remained generally positive about the six-month
outlook.
Ninth District economic activity grew moderately. Labor
demand has ebbed slightly but remained healthy overall,
while labor markets remained very tight. Price pressures
were modest. District manufacturers indicated that business conditions were strong and generally expected to
continue, with upbeat outlooks for the year to come.
Holiday retail spending was strong.
Cleveland
Kansas City
Economic activity in the Fourth District increased slightly.
Hiring increased at a moderate pace. Upward pressure
on costs and selling prices continued. Retailers reported
slightly increased demand. Manufacturing and banking
contacts noted a seasonal slowdown. Nonresidential
construction continued to be strong and housing demand
stabilized. Professional services firms reported increased
activity driven by demand for information technologies.
Economic activity was flat since the previous survey, but
expectations were generally positive. District agricultural
conditions remained weak, and activity in the energy
sector eased slightly as the outlook for oil prices declined. However, retail sales were strongly above yearago levels, and manufacturing, wholesale trade, and
professional and high-tech sectors continued to expand.
Richmond
While economic activity remained healthy, growth abated
to a more modest pace. A broad-based deceleration was
seen across manufacturing, services, retail, and energy.
Hiring continued, and widespread labor shortages further
elevated wages. Price pressures eased slightly. Outlooks were markedly less optimistic than the previous
report.
Dallas
The regional economy expanded at a modest rate, on
balance, in recent weeks. While many service sector
industries saw positive growth, manufacturers reported a
decline in shipments and orders and faced higher input
costs due to tariffs. Loan demand increased and Fifth
District ports experienced robust growth. Overall, labor
demand and wages increased modestly while price
growth remained moderate.
San Francisco
Economic activity in the Twelfth District continued to
expand at a moderate pace. Labor market conditions
remained tight, and price inflation was flat. Sales of retail
goods expanded moderately, and activity in the consumer and business services sectors was solid. Conditions in
the manufacturing sector strengthened modestly. Activity
in real estate markets was solid on balance. Lending
activity ticked down.
Atlanta
Economic activity improved at a moderate pace. The
District’s labor market remained tight and wages increased, on average. Nonlabor input costs picked up;
however, reports of firms’ ability to pass along increases
were mixed. Holiday sales were solid. Home sales were
subdued. Manufacturers noted a decrease in new orders
and production. Bankers noted steady activity.
Chicago
Economic activity grew at a modest pace. Employment,
consumer spending, and business spending increased
modestly; manufacturing increased slightly; and construction and real estate activity was little changed.
Wages and prices rose modestly and financial conditions
deteriorated slightly. Prospects for farm income improved as corn, soybean, and wheat prices moved higher.
St. Louis
Reports from contacts indicate that economic conditions
have continued to improve, although the pace of growth
has slowed since our previous report. District banking
contacts reported positive but slower growth in loan
volumes during the fourth quarter.
2
Federal Reserve Bank of
Boston
The Beige Book ■ January 2019
Summary of Economic Activity
Economic activity in the First District expanded at a modest to moderate pace since the last report, amid some signs of
slowing growth. Retailers reported moderate increases in sales, and tourist activity was strong. Most manufacturers
cited increased revenue from a year ago, but some noted the pace of increase was slower recently than earlier in the
year. Software and information technology services firms also reported moderate revenue and demand growth in the
closing months of the year. Commercial real estate markets were largely unchanged since the last report. Residential
real estate markets saw ongoing price increases and mixed sales results; contacts in a couple of markets cited greater
“balance” as local shortages of housing inventory eased somewhat. While retailers (including an auto dealer) and manufacturers said sizable tariff increases would pose significant problems if they occurred and many respondents cited
uncertainty, outlooks remained mostly positive.
Employment and Wages
percent rise. Most software and IT services contacts said
there have been no real pricing changes throughout the
past year, although two contacts mentioned price increases in 2018 and one is looking towards another
increase in upcoming quarters.
Many contacts cited selected labor shortages and moderate increases in pay rates at the end of 2018. Retailers
noted that their labor costs will continue to go up in 2019,
in part because of state minimum wage increases and
labor shortages in some markets. On balance, however,
they said hiring in the retail sector has not been difficult.
By contrast, a tourism contact noted serious concern
about ongoing labor shortages on Cape Cod that will be
more severe in 2019 if limits on the J-1 and H-2B visa
programs are not raised. Manufacturing contacts did not
report any significant changes in employment. Some
cited difficulties finding workers, especially skilled engineers; however, one contact reported that after a
“market adjustment” raised compensation by 10 percent
to 15 percent, difficulties in hiring and retention dramatically eased. Software and IT services respondents reported annual wage and compensation increases of 2
percent to 4 percent, with no changes in average headcount or turnover rates.
Retail and Tourism
Retailers contacted for this round reported that comparable store sales increased by 2.8 percent to 4.0 percent
year-over-year. All said traffic in their brick-and-mortar
stores declined by a few percentage points compared to
2017, but noted that the average in-store purchase was
up in 2018 (one retailer said by 5 percent). A contact
with a strong online presence said that a significant rise
in direct sales made up for the decline in in-store purchases. Retailers expect to see small revenue gains in
2019 over 2018, with consumer confidence high.
A contact in the automotive industry in southern New
England reported that sales were steady but not robust.
Passenger traffic to Boston’s Logan Airport set a new
record in 2018; departing flights in December were up
7.4 percent year-over-year. In 2019 new flight services
will be added by domestic and international carriers.
Strong tourist activity was seen on Cape Cod through
December, as retailers and inns reported having a good
holiday season. This respondent said that economic
fundamentals in the United States remain strong, so
2019 should be a good year for the tourist industry.
Prices
Contacts cited modest to moderate increases in selling
prices. Retail contacts said they expect to raise their
selling prices between 1 percent and 4 percent in 2019,
depending on the inputs for a particular item. In manufacturing, pricing pressures were mixed. Input costs were
generally down due to lower fuel prices. A producer of
frozen fish said they were able to put through their first
“full price increase” since 2011 – an across-the-board 5-
A-1
Federal Reserve Bank of Boston
Manufacturing and Related Services
characterized as strong, showed some tentative signs of
softening, and contacts in that city expressed concerns
that property values could face downward pressure as
investors rebalance their portfolios after the recent declines in major stock market indexes. At the same time,
commercial real estate financing costs remained relatively low as some banks reportedly reduced their interestrate spreads on commercial mortgages. The outlook
remained largely pessimistic for the commercial real
estate market in Connecticut, while elsewhere in the
District contacts seemed optimistic for the near term but
increasingly uncertain about the outlook for late 2019
and beyond.
Three-quarters of the manufacturing firms contacted this
cycle reported higher sales year-on-year. One firm with
lower sales, a chemical company, said that the yearearlier period was exceptionally strong. Another contact
attributed the decline to slowing growth in the automotive
industry around the world. Some contacts said growth
slowed in the fourth quarter relative to earlier in the year.
A diversified manufacturer said that customers were
taking longer to pay bills. On the plus side, two contacts
said that a shortage of trucking capacity that had been a
problem in recent years appeared to have eased. Contacts did not report any major revisions to capital expenditure plans.
Residential Real Estate
Respondents generally expected growth to continue in
2019, but they expressed significant reservations. Contacts viewed the trade situation as a significant risk factor. Several contacts noted that the length of the economic expansion made a downturn more likely, but none
pointed to any specific issues with their customers or
markets.
Contacts reported that First District residential real estate
markets had a strong finish and a good year overall in
2018. For single family homes, closed sales were up
year-over-year from November 2017 to November 2018
in Rhode Island, Boston, and Maine, and down in Massachusetts and New Hampshire. (Data are missing for
Connecticut because of an ongoing technical issue.) For
condos, closed sales decreased in all reporting areas but
Rhode Island. Vermont saw a decrease in sales for
single family homes and condos combined. Median
sales prices increased generally, with the exception of
condo markets in Rhode Island and Maine, which reported mild price decreases year-over-year.
Software and Information Technology Services
Software and IT services firms reported moderate growth
as the fourth quarter drew to a close. The majority of
contacts noted revenue growth in the mid-to-high single
digits year-over-year, with corresponding positive growth
in product demand as well, both quarter-over-quarter
and year-over-year. Looking to 2019, all but one contact
reported a desire to focus more on investing in sales and
marketing. Overall, contacts expressed wariness about
the uncertainty they have felt in markets, but noted no
specific impacts on their individual firms to date.
Residential markets in Rhode Island and Boston became
more balanced in recent months, with growing supplies
of homes for sale and moderation in the pace of home
price appreciation. Despite a seller’s market environment, contacts said real estate was a preferred investment choice, given the volatile U.S. stock market. ■
Commercial Real Estate
Commercial real estate markets in the First District
showed few changes since the last report. Office leasing
activity remained muted in the Hartford area, maintained
a moderate pace in both the Providence and Portland
areas, and stayed strong in the Boston area.
Contacts in each of those metro areas noted that suburban office demand remains weaker than urban office
demand. Industrial leasing demand remained very robust
in the Boston area but continued to soften in Maine and
in Connecticut. In Rhode Island, low inventory of industrial space relative to demand has spurred increased interest in industrial construction, although one contact expected developers to exercise caution.
Investment sales demand in Providence strengthened on
balance in 2018 from 2017, while in Hartford and Portland investment sales were described as steady in recent months. Boston’s investment market, while still
For more information about District economic conditions visit:
www.bostonfed.org/regional-economy
A-2
Federal Reserve Bank of
New York
The Beige Book ■ January 2019
Summary of Economic Activity
Economic activity in the Second District has leveled off in the latest reporting period. Still, the labor market has remained
tight, and wage growth has picked up slightly. Businesses noted that both input costs and selling prices continued to rise
at a steady pace. Manufacturing activity leveled off, while business was down slightly in a number of service industries.
On the other hand, tourism has remained fairly robust. Holiday season sales were a bit on the sluggish side but still up
from a year ago. Housing markets have shown some further signs of softening, while commercial real estate markets
have been steady overall. Finally, banks reported some weakening in loan demand and little change in delinquency
rates.
Employment and Wages
education & health. Contacts across most industry sectors reported steady to moderately rising selling prices.
Two exceptions were real estate and transportation,
where more contacts said they planned to reduce than
raise their prices. A sizable proportion of businesses in
transportation and wholesale trade indicated plans to
hike prices in the months ahead.
The labor market has remained tight across the District,
with employers continuing to report difficulties in filling a
wide variety of open positions. Businesses reported that
employment was little changed, on balance, since the
last report. Firms in manufacturing, wholesale trade,
finance, and leisure & hospitality reported modest net
hiring, while contacts in the transportation, health &
education, and professional & business services sectors
indicated that employment was flat to down modestly.
Retailers noted little change in holiday-season hiring,
relative to the prior year, though more staff was reportedly assigned to handling on-line orders.
Retailers generally indicated that selling prices remained
stable, though some noted more widespread discounting
than in recent years. Average ticket prices for Broadway
shows rose less than usual this past December and
were down more than 5 percent from a year earlier.
Consumer Spending
Wages have picked up somewhat, particularly in retail
and leisure & hospitality. Employers indicated that they
are budgeting for moderately larger wage increases in
2019 than they did for 2018. A number of business contacts in New York State, including a few manufacturers,
expressed concern about the recent hike in New York’s
minimum wage.
Retail sales were mixed but, on balance, up modestly. A
major retail chain noted that holiday season sales were
up modestly from the prior year but slightly below plan.
Retailers in upstate New York were somewhat more
upbeat, characterizing sales as fairly strong. A growing
share of sales have been on-line, including merchandise
ordered in advance and picked up at stores. Inventories
were a bit leaner than usual going into the holiday season, but they were mostly at or slightly above desired
levels at the start of the new year.
Prices
Businesses reported little change in the pace of both
input price increases and selling price increases in the
latest reporting period. Input price pressures tended to
be most widespread in manufacturing, finance, and
New vehicle sales were mostly flat in recent weeks,
according to dealers in upstate New York, but down from
B-1
Federal Reserve Bank of New York
last quarter but remained slightly ahead of a year earlier.
The inventory of unsold homes has risen noticeably but
is still fairly low by historical standards. Housing markets
in the rest of the metro area have seen similar trends:
weakening sales, steady prices, and rising (but still low)
inventories. A local housing-industry expert noted that
the curtailed federal tax deductibility of homeowner
expenses has caused trepidation among both current
and prospective homeowners.
a year earlier. New vehicle inventories remained a bit on
the high side. Sales of used vehicles were mixed but, on
balance, steady. Dealers indicated that credit conditions
remained in good shape.
Consumer confidence in the Middle Atlantic states (NY,
NJ, PA), which had climbed to a cyclical high in November, retreated in December but remained quite elevated,
based on the Conference Board’s monthly survey.
Manufacturing and Distribution
Residential rents across the District have been mostly
flat and little changed from a year earlier. In New York
City, landlord concessions have remained ubiquitous,
and this has helped to keep rental vacancy rates low.
The manufacturing and distribution sectors weakened
noticeably in the latest reporting period. Manufacturers
noted a sharp deceleration in business activity, while
wholesale distributors and transportation firms reported
outright declines.
Commercial real estate markets have been mixed but
little changed overall. Office availability rates have been
steady, while asking rents have been steady to up moderately. Retail markets have continued to soften, and
there has been concern that retail vacancies will rise
more sharply after the holiday season. Industrial markets, on the other hand, have remained robust: rents
have continued to climb briskly and availability rates
have been steady at or near multi-year lows.
Looking to the months ahead, contacts in these sectors
remained somewhat optimistic, on balance, though less
so than in recent months. As in recent reports, a handful
of contacts continued to express concern about tariffs
and trade restrictions.
Services
Overall, business has been mixed but, on balance, softer
in the latest reporting period. Contacts in the professional & business services, education & health, and information industries reported flat to declining activity at year
end, though they remain cautiously optimistic about the
near-term outlook.
New multi-family construction starts were sluggish,
though a substantial volume of residential development
remains under construction—particularly in New York
City. New commercial construction starts have also been
fairly subdued, aside from a sizable volume of new office
development in Long Island.
Leisure & hospitality businesses reported steady, moderate growth. In particular, New York City saw fairly strong
tourism over the holiday season. A local tourism-sector
expert indicated that the number of visitors has climbed
and hotel occupancy rates remained high, though visitors have been spending less, on average, than in the
past. Broadway theaters reported strong gains in revenues and especially attendance, which was up more
than 20 percent from a year earlier in December.
Banking and Finance
Small- to medium-sized banks in the District reported
lower demand for consumer loans, residential mortgages, and C&I loans, but steady demand for commercial
mortgages. A decrease was also reported in refinancing
activity. Bankers noted unchanged credit standards for
residential mortgages but tightening standards for other
types of loans. There was some further narrowing in loan
spreads for consumer loans and residential mortgages.
Finally, banks reported that delinquency rates held
steady across all categories. ■
Real Estate and Construction
Housing markets across the District have softened since
the last report. Homes sales in upstate New York have
slowed somewhat, and the prevalence of bidding wars
has receded; still, the inventory of homes on the market
remains exceptionally low, and prices have continued to
rise, reflecting solid demand and low supply.
In New York City, sales of existing co-ops and condos
continued to slow, especially on new developments.
Selling prices for newly-built condos have fallen sharply,
while resale prices on existing apartments edged down
For more information about District economic conditions visit:
www.newyorkfed.org/data-and-statistics/regional-datacenter/index.html
B-2
Federal Reserve Bank of
Philadelphia
The Beige Book ■ January 2019
Summary of Economic Activity
On balance, aggregate business activity in the Third District maintained a modest pace of growth during the current
Beige Book period, although slowing occurred among service sectors and some real estate activity declined. The labor
market remains tight, which continued to constrain hiring at a modest pace and to apply moderate upward wage pressures. Price pressures remained modest and eased a bit for service sectors. Nonfinancial services eased back to a
modest pace of growth, while manufacturing and nonauto retail sales maintained a modest pace. Auto sales were essentially unchanged, and tourism activity continued to grow slightly. Residential real estate sectors tended to decline,
while commercial real estate tended to be flat or down slightly. The growth outlook over the next six months remained
positive, with half of the nonmanufacturing firms and over 40 percent of the manufacturers anticipating increases in
general activity.
Employment and Wages
early 2019, so wage rate hikes were expected to pick
back up in the first quarter.
Employment growth continued at a modest pace during
the current Beige Book period. The share of firms reporting an increase in staff generally ranged between 15 and
25 percent among broad sectors. The firms noted very
little change in the average hours worked since the prior
Beige Book period.
Prices
Price increases remained modest for most firms. Moreover, compared with the prior period, a lower percentage
of nonmanufacturing firms reported higher prices paid for
inputs and prices received for their own goods. The
share of manufacturing firms reporting increases in
prices paid remained just above 40 percent, while prices
received by manufacturers and prices paid by nonmanufacturers increased for about 25 percent of the firms. The
share of nonmanufacturing firms reporting increases in
prices received fell below 15 percent.
Many contacts continued to note a tight labor market;
however, builders said that construction activity had
peaked or was peaking and that residential and commercial contractors were beginning to scramble for new
projects to keep their workers employed. Staffing firms
reported ongoing difficulty hiring and retaining workers,
although one firm noted that orders had slowed a bit.
Looking ahead six months, nearly 60 percent of the
manufacturing firms continued to anticipate paying higher prices for inputs, while those firms expecting to receive higher prices for their own goods fell to 45 percent.
On balance, wage growth continued at a moderate pace
as firms typically cited increases for wages and benefits
that averaged 3.0 to 3.5 percent. In one of the District’s
tightest labor markets, average wage rates were up 6.0
percent over the prior year. The share of nonmanufacturing contacts who reported increases in wage and benefit
costs remained steady at just over one-third. One staffing firm noted that wage increases had slowed but that
several clients would be evaluating starting wages in
Manufacturing
Manufacturing activity continued at a modest pace of
growth – typical for the Third District. The percentage of
firms that reported increased shipments fell somewhat,
while the percentage reporting an increase in new orders
edged up.
C-1
Federal Reserve Bank of Philadelphia
The makers of paper products, primary metal products,
and electronic equipment tended to note gains in new
orders and shipments; the makers of lumber products,
chemicals, fabricated metal products, and industrial
equipment reported mixed results. Contacts often cited
labor supply issues as a deterrent to growth, in addition
to supply chain problems, rising commodity prices, and
uncertainty surrounding tariffs. Demand for equipment to
supply the oil and gas producing sectors has slackened
again.
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).
During the current period (reported without seasonal
adjustments), volumes grew moderately in mortgages
and in commercial and industrial lending; grew modestly
in commercial real estate; and declined somewhat in
home equity lines, auto loans, and other consumer loans
(not elsewhere classified).
On balance, manufacturers continued to expect general
activity to increase over the next six months. Expectations of future increases in new orders, shipments, employment, and capital spending remained nearly the
same as the prior period and at high levels.
Bankers continued to note a strong underlying economy
but reported that clients were “jittery” due to economic
uncertainty. Contacts continued to cite strong competition for deposits and quality loans but noted little concern
over credit quality deterioration.
Consumer Spending
Real Estate and Construction
Nonauto retailers reported a continuation of modest
growth through the holiday season. Many contacts noted
increased traffic per store and greater spending per
customer – citing good weather, low gas prices, and an
extended holiday shopping season as supporting factors.
According to homebuilders, activity appears to have
fallen modestly – one large builder reported that the
market had softened further in November. A smaller
central Pennsylvania builder noted slow sales through
year-end and the “lowest traffic in eight to 10 years,”
while a South Jersey builder reported okay sales but that
its backlog was down 14 percent compared with last
year.
Auto sales remained essentially flat compared with high
2017 levels – which continued to surprise dealers. While
dealers provided early projections of slight year-overyear increases for December, in January, some dealers
observed that year-end sales appeared to have slowed.
Existing home sales continued to decline moderately
across most local markets – hampered by extremely low
inventories. However, recent sales and an inventory
drawdown have strengthened the Poconos market,
which has labored with an excess of foreclosed properties since the Great Recession.
Tourism activity continued to grow slightly, according to
contacts. A lack of snow hampered ski resort activity, but
occupancies and spending at mountain resorts and
restaurants remained solid. Growth of total Atlantic City
casino revenue remained high in November, while traditional revenue from slots and table games fell again,
exclusive of the two new casinos.
On balance, commercial real estate construction continued to decline slightly off high levels. Contacts noted
ongoing strength in industrial/warehouse properties,
except in areas with an insufficient labor supply. While
architects and engineers remain busy, the pipeline is
thinning for new office, retail, and high-rise residential
projects. Contractors are preparing for a slight decline in
2019 activity. Commercial leasing activity has held
steady, but analysts note an abundance of caution
among market participants. ■
Nonfinancial Services
Service-sector firms reported a modest pace of growth –
a notable slowdown from the prior Beige Book period.
The percentage of firms reporting increased sales fell by
over 20 percentage points to about 35 percent, and
reports of new orders dropped 10 points to about 25
percent. Meanwhile, reports of declining sales and fewer
new orders increased. Despite widespread reports of a
slowdown, one large firm noted that its customers remain current on their bills. Expectations of future growth
remained relatively strong but did fall to half of firms from
two-thirds in the prior period.
For more information about District economic conditions visit:
www.philadelphiafed.org/research-and-data/regionaleconomy
C-2
Federal Reserve Bank of
Cleveland
The Beige Book ■ January 2019
Summary of Economic Activity
Economic activity in the Fourth District increased slightly since our previous report, with firms across industries reporting
mostly stable demand. District firms continued hiring at a moderate but slightly softer pace than in recent months. Contacts noted continuing wage pressures to attract and retain workers. Reported wage increases were moderate and in
line with recent trends. Upward costs pressures, especially for raw materials, remained elevated. Contacts also noted
higher transportation costs. Builders and manufacturers reported being able to pass through cost increases to their
customers. Demand was stable or increased in retail, construction, and nonfinancial services but softened slightly in
manufacturing and banking, a situation which contacts largely attributed to seasonal factors.
Employment and Wages
including steel, concrete, and wood products. Various
manufacturing firms continued to attribute cost increases
to the effect of tariffs. Freight contacts reported recent
decreases in diesel costs but noted that other costs have
continued to increase, including truck parts and repairs.
Retail contacts in turn noted continuing upward pressure
on freight costs. Construction and manufacturing firms
raised their prices to pass through higher costs of raw
materials to consumers. The ability to pass through cost
increases was similar to that reported in prior survey
periods. A slightly lower proportion of freight contacts
raised their rates compared with those who did so during
the prior survey period. Retail contacts reported seasonal price promotions, while some professional services
firms noted that increased demand and improved market
opportunities have allowed them to raise prices.
District firms added workers at a pace that was moderate
but slightly softer than in the previous survey period.
Most firms that reported increased hiring also noted
improved customer demand, while firms that reported
decreased hiring noted seasonal business declines as
reasons behind their staffing decisions. Across various
industries, several firms reported hiring for new positions
because of business expansions. Contacts also reported
hiring to replace departed workers. A steel producer
noted difficulty finding hourly workers. Driver turnover
remained a problem in the freight industry; however, one
trucking contact reported some success hiring drivers.
Reports of wage pressures were similar to those of the
previous period, and firms across many industries offered increased incentives to retain workers and attract
new talent. In addition to annual cost-of-living and merit
increases, some construction contacts raised incentives
for retention, and manufacturers increased base pay to
attract skilled new hires.
Consumer Spending
Nondurable goods retailers reported slightly improved
demand, driven primary by seasonal factors. However,
these retailers believe the momentum from the holidays
will continue after the holiday shopping season, and they
predict customer demand in the first quarter will remain
strong. These retailers expect that growth in 2019 will
outpace growth in 2018 overall. Nondurable goods retailers continued to see moderate wage and nonlabor cost
Prices
Upward pressures on input costs and selling prices
remained elevated and were similar to those reported in
the previous survey period. Contacts reported strong
pressure on input costs, especially for raw materials,
D-1
Federal Reserve Bank of Cleveland
inflation and raised prices modestly. Auto retailers reported steady to slightly increasing demand overall,
driven by used and nonluxury vehicles and increased
new-vehicle incentives. While overall demand is up,
rising interest rates are holding back demand and shifting it towards less expensive vehicles. Auto retailers
expect demand to remain steady in the next quarter but
to decrease in 2019 overall.
dle-market firms continued to seek financing for plant
equipment and mergers and acquisitions. Volatility in
financial markets and political uncertainty have had a
negative effect on consumer and business confidence
and cloud the outlook for loan demand in the coming
quarter. Some bankers indicated that rising interest rates
may also dampen demand.
Manufacturing
Activity in nonfinancial services increased at a modest
pace. Professional and business services firms noted
increased demand, especially in the information sector,
in which firms reported regular year-end increases in
purchases of software and digital technologies. Freight
contacts noted that while demand remains high, capacity
constraints continued to limit growth in the industry, and
while most freight contacts reported stable demand
during the period, some trucking contacts noted softer
demand compared with that of the previous quarter
because of the pull-ahead of imports from China. Several contacts anticipate continuing high levels of activity,
but some reported cautious optimism about the near
future. ■
Nonfinancial Services
Manufacturing conditions softened at the end of the
fourth quarter, but many contacts reported that this was
largely a result of the usual seasonal slowdown. Continued uncertainty about international trade policy and
volatility in financial markets may dampen demand in
2019, and contacts signaled that customers’ capital
expenditures are slowing. They also acknowledged that
some of the strength in 2018 was driven by orders being
pulled-ahead amid concern about future price increases,
which have now come to pass or will be implemented in
early 2019. The outlook for conditions in 2019 remains
fair.
Real Estate and Construction
Residential builders and realtors reported stable demand
in the current period, a break from a trend of softening
demand for housing in the recent survey periods. While
decreasing home affordability weighed on customer
demand over the past year, a slight drop in mortgage
rates spurred some demand recently. The decrease in
home affordability was driven by rising interest rates and
also by rising selling prices as builders boosted prices to
cover their increases in wages and nonlabor costs. Realtors noted decreased demand from first-time homebuyers. Housing inventory was stable. Residential builders
expect worsening demand both in the first quarter and in
2019 overall.
Conditions in nonresidential construction continued to be
strong and improved slightly during the period. Demand
from the industrial and education sectors was noted to
be especially strong. Backlogs remained elevated and
were increasing. Commercial real estate developers
reported stable conditions. Most nonresidential builders
were optimistic about growth in the first quarter, and
commercial real estate developers expect stable conditions. Nonresidential builders expect moderate growth in
2019 overall. Commercial real estate developers’ outlooks for 2019 were mixed.
Financial Services
Banking conditions softened slightly, driven by seasonality in commercial real estate, mortgage, and auto lending. Business inquiries were steady, and large and mid-
For more information about District economic conditions visit:
www.clevelandfed.org/region/
D-2
Federal Reserve Bank of
Richmond
The Beige Book ■ January 2019
Summary of Economic Activity
Since our previous Beige Book report, the Fifth District economy expanded at a modest rate. One exception was the
manufacturing sector where many firms reported a decline in shipments and new orders and continued to report high
input costs due to tariffs. Meanwhile, District ports saw robust activity, mainly from imports as companies tried to get
goods in the country ahead of anticipated tariff increases. Trucking remained strong but companies continued to report
capacity constraints in both labor and trucks. Travel and tourism increased modestly, overall, while retail shopping was
hampered by adverse weather. Residential real estate activity picked up modestly with an increase in home sales but a
decline in buyer traffic. Meanwhile, demand for commercial real estate increased moderately, with notable strength in
industrial leasing. Lenders saw a modest increase in demand, particularly for commercial lending. On balance, nonfinancial services firms experienced modest growth. Energy sector firms reported moderate growth as coal production increased and pipeline construction continued. The demand for labor increased moderately while wage growth remained
modest. Price growth remained moderate, overall, despite firms’ reports of higher input costs.
Employment and Wages
Manufacturing
On balance, the demand for labor increased modestly in
recent weeks, but firms indicated that hiring remained
constrained by the tight labor market. Some of the most
hard-to-fill positions were electricians, hotel and restaurant workers, construction workers and managers, computer engineers, and cyber professionals. Meanwhile, a
staffing agency reported a decrease in demand for temporary staffing services as more clients were hiring fulltime workers instead. Wage growth remained modest,
overall; however, a few contacts reported sharp increases in starting wages for particular positions.
A large share of the Fifth District manufacturers surveyed reported a decline in shipments and new orders in
recent weeks. Some firms attributed the decrease to
slowing global demand, adverse weather conditions,
and/or seasonal factors. Meanwhile, rising raw materials
costs were widely reported with some price increases
being attributed to tariffs. A Maryland can manufacturer
looked for ways to increase automation to reduce the
number of employees in order to help offset the rising
cost of raw materials. A Virginia display case manufacturer had Chinese goods shipped through west coast
ports in order to get goods to the country ahead of an
anticipated tariff increase. Meanwhile, a West Virginia
steel company increased capital expenditures as they
experienced strong business.
Prices
Since our previous Beige Book report, price growth
remained moderate, overall. According to our most
recent surveys, manufacturing firms continued to report
margin compression as input price growth outpaced
selling price growth. Several manufacturers attributed
the rise in input costs to tariffs. A food manufacturer
added that the loss of domestic crops due to adverse
weather forced them to turn to higher-priced imports,
which were subject to tariffs. Likewise, service sector
firms saw moderate price growth for selling prices that
was outpaced by input price growth. Several services
firms also attributed higher input costs to tariffs.
Ports and Transportation
Fifth District ports saw robust activity in recent weeks.
Import volumes continued to exceed export volumes.
Port executives noted a slight softening in auto exports
but saw strong growth in imports, particularly from China.
They attributed much of the strong import volumes to
orders being made early to avoid possible tariff hikes,
and they expected trade to soften in the next few
months. One port had to store incoming cargo for retail-
E-1
Federal Reserve Bank of Richmond
ers who did not have adequate storage space. A District
airport reported strong demand despite some weather
related cancellations.
On the whole, commercial real estate activity picked up
moderately in recent weeks. District brokers continued to
report strong industrial leasing activity, and in the office
and retail sectors, only a few contacts reported the normal seasonal slowing. District brokers continued to report low vacancy rates and strong absorption rates.
Rental rates generally increased across the industrial
market while rate increases were reportedly stable to flat
for retail and office space. Multifamily leasing remained
strong, but reports on construction activity varied across
the District.
Demand for trucking remained strong in recent weeks
despite a typical seasonal slowdown in shipping. Trucking firms continued to report capacity constraints. Some
companies looked for more drivers to hire while others
had enough drivers but not enough trucks. Trucking
firms were generally optimistic about future growth and
continued to make capital investments, but some contacts expressed concerns about tariffs and rising interest
rates.
Banking and Finance
Loan demand grew modestly in recent weeks as gains in
commercial lending drove the overall increase. Residential mortgage lending was generally reported as flat to
down slightly compared to about a month ago, but up
from the same time last year. On the commercial side,
real estate loan demand picked up moderately. Deposits
rose moderately, on balance, in recent weeks. Business
loan demand increased slightly while automotive lending
was reportedly flat. Credit quality and credit standards
remained strong throughout the District.
Retail, Travel, and Tourism
Travel and tourism grew modestly in the Fifth District in
recent weeks. In Asheville, North Carolina, hotels were
fully booked through the holidays, and tourism remained
strong in Charleston, South Carolina, despite poor
weather. However, hotels in Washington, D.C., saw
lower occupancy and fewer meeting space reservations.
New hotels and restaurants continued to open around
the Fifth District, and some business owners expressed
concerns about retaining their staff as competition increases. A Virginia resort executive noted that heavy
reliance on J1 visa holders made them vulnerable to
possible changes in immigration law.
Nonfinancial Services
Since our previous Beige Book, nonfinancial services
demand increased modestly, overall. The most positive
reports came from firms in the tech sector. A software
development firm and an IT consulting business reported
strong growth. Also, a Fifth District university reported an
increase in interest in computer science and IT related
majors. Meanwhile, an accounting firm experienced solid
growth and expected continued growth in 2019.
Retailers in the Fifth District reported mixed conditions
since our last report. Many firms felt that inclement
weather hurt their business. A North Carolina auto dealer reported good business, particularly for new cars that
had strong manufacturer’s incentives, but saw a slight
softening in demand for used vehicles. A West Virginia
store saw profit margins decline as they were unable to
pass along higher transportation costs. Conversely, a
Maryland retailer was able to raise prices to pass along
higher costs that stemmed from steel tariffs.
Agriculture and Natural Resources
Energy sector contacts reported moderate growth. Coal
production increased in West Virginia as the demand for
coal exports remained strong and prices were fairly
stable. Pipeline construction continued but was running
behind schedule due to adverse weather conditions. In
addition, construction in some areas was halted over
environmental issues. ■
Real Estate and Construction
Residential real estate firms indicated modest growth,
overall. Home sales rose modestly in recent weeks and
were reportedly up compared to last year. Sales prices
increased modestly, overall. Meanwhile, home inventories remained at low levels, as homes in good condition
continued to sell quickly. However, contacts reported a
slight uptick in days on the market in the past few weeks
because of reduced buyer traffic. In most markets, new
residential construction continued at a modest pace with
limited speculative construction.
For more information about District economic conditions visit:
www.richmondfed.org/research/regional_economy
E-2
Federal Reserve Bank of
Atlanta
The Beige Book ■ January 2019
Summary of Economic Activity
Sixth District business contacts remained largely positive with a majority noting that economic activity grew at a moderate pace over the reporting period. Most contacts expect steady growth in the near-term; however, several contacts
cited increased levels of uncertainty going into 2019, to include concerns over politics and trade. As labor markets remained tight, many firms noted increasing retention efforts. On balance, wages increased since the previous report, with
pressure growing particularly among low-skill, hourly positions. Nonlabor input costs increased and the ability to pass
along the increases varied among firms. Contacts reported that retail sales were solid during the holiday season and
vehicle sales were up slightly. Reports from the hospitality sector were positive, reflecting strong advanced bookings for
early 2019. Contacts reported that residential real estate activity slowed and commercial real estate activity remained
stable over the reporting period. Manufacturers indicated that new orders and production levels decreased since the
previous report. Contacts indicated that banking conditions were stable.
Employment and Wages
Prices
Similar to previous reports, business contacts remained
focused on employee retention. District employers continued to expand wage and non-wage compensation
offerings to retain workers. In spite of these efforts, firms
expressed concern about their ability to meet growing
demand with existing staffing levels. A few contacts from
construction, manufacturing, and health services mentioned they were actively overstaffing certain positions
where possible, or were holding on to workers even as
demand eased in an effort to position themselves for
future growth. Business contacts also mentioned that
efforts to build culture and loyalty remained important to
retention.
District firms continued to report rising input costs, particularly for products impacted by tariffs. Price increases
related to tariffs were passed along with no significant
pushback or impact to margins. However, some businesses reported hesitancy to pass along increases unrelated to tariffs, opting instead to continue to internalize
cost pressures through a combination of lower margins
and productivity improvements. The Atlanta Fed’s Business Inflation Expectations survey showed year-overyear unit costs were up 2.2 percent in December. Survey
respondents indicated they expect unit costs to rise 2.3
percent over the next twelve months.
Average wage increases were typically reported around
3 percent across the District, a level that most firms
intend to maintain in 2019. Broadly, businesses continued to report notable wage pressure among low-skill,
hourly jobs, particularly in hospitality and retail. A number of business contacts noted that announcements by
large national companies to raise their minimum wage
intensified pressure among similar jobs. Challenges with
escalating wage pressure were especially acute among
small businesses, which reported struggles to compete
with large- and medium-sized firms’ ability to increase
wages.
On balance, District retailers reported steady sales levels
throughout the holiday season. Online sales levels continued to grow at a faster pace than brick and mortar
sales. Recreational goods retailers noted an increase in
sales since the last report. Automotive dealers reported
an uptick in sales levels in November.
Consumer Spending and Tourism
Travel and tourism contacts across the District noted a
strong holiday travel season with growth in business and
leisure travel. Hotel demand and average daily rates
were higher than expected. The outlook for 2019 remains positive with healthy advanced bookings through
the first quarter of the year.
F-1
Federal Reserve Bank of Atlanta
Construction and Real Estate
ued but at a slower pace, especially in real estate. Financial institutions continued to loosen underwriting standards on selected portfolios due to slowing demand for
credit and increased competition. Credit quality metrics
generally remained positive with nonaccrual loans remaining near historical lows; however, some institutions
in the District experienced an increase in consumer
delinquencies.
Housing activity slowed on a year-over-over basis towards the end of 2018. In many District areas, existing
home sales either moderated or declined. Although
inventory levels remained low, they increased on a yearover-year basis in many markets. New home construction continued to lag behind demand with most new
home starts being concentrated in higher price points
within prime/high-demand submarkets. Though moderating, rising construction costs and low supply continued to
push new home prices higher.
Energy
Contacts reported that takeaway capacity of oil and gas
products from the West Texas Permian region to the
Gulf Coast remained extremely tight. Deepwater production continued to pick up in the Gulf Coast, as new drilling platform projects came online in the fourth quarter.
Refinery utilization declined in the fourth quarter as many
plants engaged in maintenance/turnarounds during the
winter months. Demand for renewable energy, especially
electricity, continued to grow compared to electricity
generated by coal, gas, or nuclear. Industrial consumption was mostly down in late 2018 due to seasonal factors. Weather and improved efficiencies continued to
drive down residential and commercial consumption.
Commercial real estate leasing and sales activity remained steady during the reporting period. On average,
vacancy rates in most District markets continued to trend
downward modestly. Strength continued in the industrial,
multifamily, and medical sectors. Contacts reported
momentum in the industrial sector that continued to
outpace the levels of new supply. Contacts continued to
report concerns with bankruptcies and slowing activity in
the big-box retail sector. Office market contacts reported
overall continued strength; however, higher levels of
employee densification and greater deliveries of space
appear to be creating pockets of slowing in some local
markets.
Agriculture
Agriculture conditions across the District were mixed.
Recent reports showed most of the District was droughtfree with the exception of parts of south Florida where
there were abnormally dry to moderate drought conditions. The USDA designated some counties in Alabama,
Florida, Georgia, and Mississippi as natural disaster
areas due to damages and losses attributed to Hurricane
Michael, Tropical Storm Gordon, and flooding. The December forecast for Florida’s orange crops was unchanged from the prior month, but up significantly from
last year’s production. In mid-December, weekly cash
prices for corn, cotton, and beef were up while rice,
soybean, broiler, and egg prices were down on a yearover-year basis. ■
Manufacturing
Reports from manufacturing contacts indicated that
business conditions softened slightly since the previous
report. New orders and production levels decreased, and
purchasing managers reported shorter wait times for
supply deliveries. However, expectations for future production levels increased, with over half of contacts expecting higher production over the next six months, up
from the previous report.
Transportation
The majority of District transportation contacts reported
increased activity since the previous report. Ports noted
record container volumes, along with further growth in
trade of autos and heavy machinery. According to air
cargo contacts, global air freight volumes continued to
grow; however, in recent months, growth decelerated in
some regions due to a softening in demand. Railroad
contacts reported significant year-over-year increases in
total traffic, including notable growth in intermodal shipments. Logistics firms saw improvements in volumes of
delivered packages as compared with last year’s holiday
season.
Banking and Finance
Conditions at financial institutions held steady over the
reporting period. Higher interest rates improved earnings
and net interest margins for the majority of banks and
increased competition for deposits. Loan growth contin-
For more information about District economic conditions visit:
www.frbatlanta.org/economy-matters/regional-economics
F-2
Federal Reserve Bank of
Chicago
The Beige Book ■ January 2019
Summary of Economic Activity
Economic activity in the Seventh District grew at a modest pace in late November and December, and contacts expected growth to continue at that pace over the next 6 to 12 months. Employment, consumer spending, and business
spending increased modestly; manufacturing increased slightly; and construction and real estate activity was little
changed. Wages and prices rose modestly and financial conditions deteriorated slightly. Prospects for farm income
improved as corn, soybean, and wheat prices moved higher.
Employment and Wages
Consumer Spending
Employment growth continued at 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 and professional and technical workers, while 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 staffing firm that primarily supplies manufacturers with production workers reported continued difficulty
in filling orders and no change in billable hours. Wage
growth remained modest overall. Contacts were most
likely to report wage increases for managerial, professional and technical, and administrative workers. Multiple
manufacturing contacts reported that rising wages for
entry-level positions was leading them to invest in automation that would increase these workers’ productivity
and justify the higher wages. Many firms reported growing benefits costs.
Consumer spending rose modestly over the reporting
period. Nonauto retail sales increased at a moderate
pace, as contacts reported solid holiday sales and widespread gains across sales categories. Contacts also
highlighted significant growth in the travel and personal
service sectors. Light vehicle sales were flat and slightly
under dealers’ expectations for the reporting period.
Some contacts attributed the slower-than-expected
vehicle sales to rising interest rates and declines in the
stock market.
Business Spending
Business spending increased modestly in late November
and December. Retail contacts said that inventories
were generally at comfortable levels. Most manufacturing contacts also reported that stocks were at comfortable levels, though steel service center inventories remained below historical norms and one steel consumer
reported cutting back their own production because of
steel input shortages. 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. Energy demand from commercial and
industrial users increased modestly, led by greater consumption by data centers and manufacturers. Demand
for transportation services also increased modestly from
an already strong level.
Prices
Prices rose modestly in late November and December,
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.
G-1
Federal Reserve Bank of Chicago
Construction and Real Estate
Agriculture
Construction and real estate activity was little changed
over the reporting period. Residential construction increased slightly, with growth concentrated in the suburban single-family market. Nonresidential construction
was little changed on balance, with reports of increased
activity in the industrial and infrastructure sectors offset
by declines elsewhere. Home sales were flat overall,
though one contact in the Detroit area reported a moderate decline in sales, particularly for homes under
$250,000. Home prices and residential rents increased
slightly. Commercial real estate activity was little
changed, though the pace remained strong. Vacancy
rates, sublease space, and rents were little changed.
Prices for corn, soybeans, and wheat moved higher over
the reporting period, supported in part by news that trade
talks between the U.S. and China had resumed and that
China had purchased some U.S. soybeans. A second
round of payments from the Federal Government’s Market Facilitation Program also supported farm incomes
(primarily for soybean producers), although payments
have been disrupted by the government shutdown. The
shutdown also slowed the release of government reports
on agricultural market conditions, leading to greater
uncertainty for market participants. Contacts noted that
the profitability of the 2018 harvest was still unclear as a
large amount of the harvest remained unsold. Lower
ethanol prices weighed on ethanol producers, and there
were reports of plant closures as well as expectations of
more closures in the future. Cattle, egg, and dairy prices
all rose, though dairies generally continued to face difficult operating conditions. Hog prices fell over the reporting period. Contacts noted that rising input prices for
crop and livestock producers as well as higher interest
rates were shrinking margins. ■
Manufacturing
Growth in manufacturing production slowed in late November and December, with contacts reporting only a
slight increase in output. That said, most contacts were
pleased with the level of production. Demand for steel
increased, but at a slower rate than earlier in the year.
Steel imports continued to decline. Demand for heavy
machinery increased moderately, with growth spread
across the construction, transportation, and energy
sectors. Demand for heavy trucks increased slightly from
an already strong level. Specialty metals manufacturers
reported modest increases in order books, with contacts
highlighting growth in the medical devices, aerospace,
and defense sectors. Auto production declined slightly,
but remained at a solid level.
Banking and Finance
Financial conditions deteriorated slightly overall during
the reporting period. Financial market participants noted
substantial declines in equities prices and increased
volatility. Business loan demand increased modestly,
with contacts highlighting growth in the construction,
manufacturing, and transportation sectors. Loan quality
and lending standards were little changed. Consumer
loan demand increased slightly, supported by increased
auto lending. Consumer loan quality and lending standards were little changed. Demand for consumer insurance was 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 ■ January 2019
Summary of Economic Activity
Reports from contacts indicate that economic conditions have slightly improved since our previous report. Firms continued to report difficulties finding qualified workers. Overall, wage pressures have increased moderately, with contacts
citing minimum wage increases as a contributing factor. Reports on consumer spending were positive. Activity in the
manufacturing sector has increased in recent months, although at a slower rate than noted in the previous report. District banking contacts reported positive but slower growth in loan volumes during the fourth quarter. Agricultural conditions improved slightly thanks to higher crop prices; however, overall conditions remain weak in this sector.
Employment and Wages
prices showed some of the largest declines, but remain
elevated in year-over-year terms. Coal prices have risen
slightly since the previous report.
Employment has grown slightly since the previous report. Contacts in Arkansas and Missouri reported slight
growth in manufacturing employment, and small business employment increased modestly. Information technology firms in the St. Louis area reported plans to increase hiring in early 2019. Contacts throughout the
District continued to cite difficulties finding qualified
employees. The labor market was particularly tight for
technical jobs, with some firms lowering education requirements to attract more candidates. Schools and
firms also continued to develop training programs to
alleviate shortages in skilled trades.
Broadly, agricultural prices have risen slightly since the
previous report. Prices for soybeans and soybean meal
have risen around 3 percent but remain lower than one
year ago. Corn, corn meal, and sorghum all have posted
particularly strong gains since the previous report.
Consumer Spending
Reports from general retailers, auto dealers, and hoteliers indicate that consumer spending activity has increased modestly since our previous report. November
real sales tax collections increased in Arkansas, Tennessee, and Kentucky, but decreased in Missouri relative to
a year ago. The West Tennessee consumer outlook
remains positive, albeit less positive than earlier this
year. On net, West Tennessee consumers expect to
spend more compared with last year. Reports from Louisville auto dealers indicated that auto sales do not seem
to have been affected by rising interest rates. Arkansas
tourism sales tax revenue increased year over year.
Wages have increased moderately since the previous
report. Pay raises were especially strong for entry-level
positions. Contacts in information technology and manufacturing reported that labor market tightness led to
increases in starting wages. Furthermore, minimum
wage increases in healthcare and the public sector were
either announced or took effect throughout the District.
Small business wages in Missouri and Tennessee grew
moderately.
Prices
Manufacturing
Prices have remained unchanged on net since the previous report. Metal prices have decreased slightly. Steel
Manufacturing activity has increased at a moderate pace
since our previous report. Survey-based indexes showed
H-1
Federal Reserve Bank of St. Louis
that Arkansas and Missouri manufacturing activity continued to expand from November to December, but the
pace of growth slowed. New orders and production also
increased in both states, but at a slower pace than in the
previous report. Several contacts expressed an optimistic outlook for the next quarter, including manufacturers
of commercial vehicle parts and primary metals. An
aluminum producer reported running at nearly full capacity and is considering additional expansion options.
Similarly, contacts in the vehicle parts manufacturing
industry noted strong sales in October. On the other
hand, several manufacturers noted increases in wages
leading to higher costs and higher turnover rates, making
it difficult for them to recruit engineers and staff.
bankers, outstanding loan volumes grew by 4 percent
relative to year-ago levels in the fourth quarter, which
was a slight dip from the third quarter, continuing the
steady decline in the rate of loan growth since the end of
2016. Commercial and industrial lending continued to be
robust, but took a slight downward turn from the third
quarter. Residential real estate lending in the District
continued to grow slowly and lagged behind national
rates for the fourth consecutive quarter. Commercial real
estate maintained a positive, but slightly lower, growth
rate compared with last quarter. Bankers reported a
slight increase in deposits growth.
Agriculture and Natural Resources
District agriculture conditions have improved slightly
since the previous report. The percentage of winter
wheat rated fair or better remained approximately unchanged from the end of October to the end of November and remains at 93 percent. This is an increase from
89 percent of winter wheat rated fair or better at the end
of 2017. Contacts continued to report very high crop
yields for 2018. However, farmers still face headwinds
due to low crop prices and continued trade concerns.
Nonfinancial Services
Activity in the nonfinancial services sector has been
unchanged since the previous report. The number of
vacancies for nonfinancial services occupations in December has decreased over the previous month. This
can be attributed to a slowdown following the holiday
rush; however, year-to-year vacancies are also down.
The transportation industry continues to experience
growth. Major logistics firms continue to make investments in distribution centers across the District. Growth
is limited in the river transportation industry as barges
dependent on coal transportation continue to experience
a slowdown in this line of business.
Natural resource extraction conditions improved slightly
from October to November, with seasonally adjusted
coal production increasing slightly. November production
was also up slightly from a year ago. ■
Real Estate and Construction
Residential real estate activity has improved slightly
since the previous report. Seasonally adjusted home
sales for November increased slightly from the previous
report across most of the District’s four largest MSAs.
Inventory levels remained low.
Residential construction activity was flat. St. Louis builders reported a slight decline in year-to-date single-family
permits, but were optimistic that the recent decline in
mortgage rates would increase construction activity in
the near future. Contacts in Louisville expressed concern
regarding rising interest rates and the rising cost of building homes.
Commercial real estate activity has improved slightly
since the previous report. Louisville contacts reported
increased demand for retail property types compared
with this time last year. Commercial construction activity
was flat. Louisville contacts noted that multi-family construction is robust while there is a lack of new warehouse
construction.
Banking and Finance
Banking conditions in the District have improved modestly since the previous report. According to reports from
For more information about District economic conditions, visit:
https://research.stlouisfed.org/regecon/
H-2
Federal Reserve Bank of
Minneapolis
The Beige Book ■ January 2019
Summary of Economic Activity
The Ninth District economy grew modestly overall since the last report. Employment grew moderately, though lack of
available labor continued to hamper overall hiring. Wage pressures were moderate, while price pressures were modest.
The District economy showed growth in consumer spending, manufacturing, commercial real estate, and mining. However, construction and residential real estate were mixed, energy slowed, and agriculture remained weak.
Employment and Wages
Wage pressures rose moderately. Recent surveys by the
Minneapolis Fed found widespread wage increases that
coalesced a little below 3 percent. One survey found
more persistent wage increases for new employees and
specific positions, rather than company-wide raises.
Staffing firm contacts noted continued reluctance among
some clients to raise wages enough to change hiring
difficulties. “Clients are not changing with the labor
market, so wages are not going up as much as they
should,” said a contact in Minneapolis-St. Paul. A central
Minnesota contact said that “skilled trades are hard to
find and wages are not increasing (enough) to bring in
good candidates that have the necessary skills and
background.” Most surveys showed that expectations for
future wage hikes were slightly below 3 percent. One
modest exception was the Minneapolis Fed’s annual
manufacturing survey (conducted in partnership with the
Minnesota Department of Employment and Economic
Development). Respondents to this survey expected
wages to increase by 3 percent to 5 percent in 2019.
Employment grew moderately since the last report,
though lack of available labor continued to hamper
overall hiring. Demand for labor across the District has
ebbed slightly but remained healthy overall. November
job postings fell slightly in Minnesota, South Dakota and
Michigan’s Upper Peninsula compared with a year
earlier, in contrast with double-digit increases in Montana
and North Dakota. Among more than a dozen staffing
firm contacts, mostly in Minneapolis-St. Paul, a small
majority said job orders and total clients were higher in
the fourth quarter compared with a year earlier. But tight
labor supply was limiting job placements and hours
booked among staffing firms, with unfilled job orders
seeing a notable increase. Surveys by the Minneapolis
Fed in late November and December identified labor
availability as the biggest obstacle to short-term growth.
In a separate, external survey of Minnesota builders,
almost two-thirds said the lack of available labor has
forced them to turn down business. A Montana retailer
noted that “every business is hiring and the hiring pool is
shallow.” Very little relief in labor supply was expected.
Numerous metro areas were at or near record-low
unemployment; unemployment insurance claims over
the most recent six-week period (through midDecember) dropped more than 4 percent across District
states, and continuing claims dropped by 10 percent.
Prices
Price pressures were modest since the last report.
Slightly more than half of respondents to the Minneapolis
Fed’s annual manufacturing survey reported that prices
charged for their products increased over the past year,
while just over a third reported unchanged prices. For
the coming year, a similar proportion expected to
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Federal Reserve Bank of Minneapolis
increase their prices, while a strong majority expected
the rate of inflation in the broader economy to increase.
Retail fuel prices continued to fall sharply in District
states through the end of 2018, reaching their lowest
levels in nearly two years by early January. Prices
received by farmers for corn, wheat, hay, hogs, cattle,
and eggs increased in October compared with a year
earlier; prices for soybeans, milk, chickens, and turkeys
decreased.
residential activity elsewhere was flat or declined over
the same period.
Commercial real estate increased slightly since the last
report. Vacancy rates in multi-family units continued to
be low throughout the District despite healthy
construction activity. Similar market conditions existed
for industrial space in Minneapolis-St. Paul. Large
retailers continued to be pressured, with multiple big-box
store closures across the District. Residential real estate
was mixed. November home sales grew modestly over
the previous year in western Wisconsin, Sioux Falls,
S.D. and Missoula, Mont., but fell across Minnesota as
well as in Bozeman and Great Falls, Mont.
Consumer Spending
Consumer spending rose moderately since the last
report. State-level sales tax collections in November
were higher in the Dakotas and Wisconsin. Lodging
taxes were higher in Montana over this period, but hotel
occupancy rates in Minnesota fell and average room
rates were flat. Total enplanements at a number of
District airports in November rose notably, with the
exception of Minneapolis-St. Paul International, which
saw a slight decrease. Retail contacts reported a strong
holiday shopping season overall. A mall manager in
southern Minnesota said foot traffic was up on Black
Friday compared with a year earlier, and stayed strong
though the holidays despite the loss of a major anchor
tenant earlier in the year. The manager added, “Overall
sales and traffic exceeded expectations almost entirely
across the board.”
Manufacturing
District manufacturing activity increased moderately
since the previous report. Respondents to the
Minneapolis Fed’s annual manufacturing survey
indicated growth in orders, production, employment,
capital investment, and productivity over the past year,
with expectations for further growth in 2019. An index of
manufacturing conditions produced by Creighton
University indicated increased activity in December in
Minnesota and the Dakotas. A producer of electrical
transmission equipment broke ground on a large new
plant in South Dakota.
Agriculture, Energy, and Natural Resources
Construction and Real Estate
Agricultural conditions in the District were stable at low
levels. District oil and gas drilling activity slowed notably
recently in response to a rapid decline in the price of
crude oil. An industry contact reported that expectations
for capital expenditures in the Bakken oil patch have
shifted downward dramatically. However, as of late
December, the drilling rig count in the region was
unchanged from a month earlier. District iron ore mines
were operating at near capacity, with a recent estimate
suggesting 2018 production would be up slightly from the
previous year. ■
Commercial construction was mixed since the last
report. An industry database of construction spending
showed November activity was slower than a year
earlier, particularly for nonresidential building. However,
this was possibly related to a particularly strong October.
Construction contacts in Minneapolis-St. Paul noted
strong demand for new industrial building, but office
construction was slow. Another industry database
showed that projects out for bid in District states were
somewhat higher over the most recent six-week period
(through mid-December) compared with a year earlier.
The average number of active projects was also higher
over the same period; however, this might be the result
of projects taking longer due to labor shortages in
construction. Available data for November and
December showed commercial permitting was higher in
the core cities of Minneapolis and St. Paul, but lower
across most of the District’s other metro cities.
Residential construction was mixed. Minneapolis-St.
Paul and Bismarck, N.D., saw healthy year-end
increases for both single- and multi-family units. But
I-2
Federal Reserve Bank of
Kansas City
The Beige Book ■ January 2019
Summary of Economic Activity
Tenth District economic activity was roughly flat in December and early January, as growth in several sectors was offset
by a slowdown in others. Moving forward, expectations were mostly positive for growth in the months ahead. Retail
sales were strongly above year-ago levels, but growth in overall consumer spending was tempered by lower auto, restaurant, and tourism sales. Manufacturing activity edged up since the last survey period, and contacts expected modest
increases in capital spending in the coming months. Sales rose at a modest pace in the professional and high-tech and
wholesale trade sectors but fell modestly in the transportation sector. Residential real estate activity declined modestly,
while overall activity in the commercial real estate sector rose slightly. Energy activity eased slightly since the previous
survey period, and price expectations for crude oil declined further due to an increase in supply and rising global tensions. The District agricultural outlook remained weak despite slight gains in some commodity prices. Employment and
employee hours rose across most industries in the District, and additional gains were anticipated in the months ahead.
Wages expanded at a modest pace and were expected to grow at a similar pace moving forward. District prices rose
further, and gains in input prices continued to slightly outpace those of selling prices.
Employment and Wages
selling prices expanded at a modest pace. Respondents
in the transportation sector reported flat input and selling
prices since the previous survey period, although both
were strongly above year-ago levels. Manufacturers
noted modest growth in raw material prices, while finished product prices held steady. Prices for finished
products and raw materials in the manufacturing sector
were expected to rise moderately moving forward.
Employment across the District rose modestly in December and early January, and employee hours edged up.
Employment and employee hours were expected to
pickup modestly in the months ahead. Respondents in
the retail trade, wholesale trade, transportation, professional services, real estate, health services, restaurant,
and manufacturing sectors noted rising employment and
employee hours, while contacts in the auto sales and
tourism sectors reported a decline. Contacts in the energy sector reported no change in employment levels,
although slight gains were anticipated moving forward.
Consumer Spending
Despite modestly higher retail sales, a decline in auto,
restaurant and tourism sales weighed on overall consumer spending compared to the previous survey period.
However, contacts expected consumer spending to
increase slightly in the coming months. Retail sales rose
modestly compared to the previous survey period and
were strongly above year-ago levels. Respondents noted
seasonal items and lower-priced goods sold well, whereas higher-priced items sold poorly. Auto sales fell modestly since the previous survey period, although contacts
expected sales to expand at a modest pace in the coming months. In response to a question about projected
capital spending, several auto contacts noted recent
downward revisions to capital spending plans for 2019.
Restaurant sales dropped moderately since the previous
survey period, and contacts anticipated sales to decline
modestly in the coming months. Tourism sales sank
moderately compared to the previous survey period, but
A majority of respondents continued to report labor
shortages for low- and medium-skill workers, including
positions for retail sales, mechanics, technicians, truck
drivers, restaurant staff, and specialized IT workers.
Wages continued to expand at a modest pace since the
previous survey period and were moderately above yearago levels. Wages were expected to continue their current pace of growth in the months ahead.
Prices
District input prices were modestly higher since the
previous survey period, while selling prices rose slightly.
The pace of input and selling price growth was anticipated to accelerate in the months ahead. Input prices in the
retail and restaurant sectors rose moderately, while
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Federal Reserve Bank of Kansas City
were modestly above year-ago levels. One tourism
respondent attributed some of the tumbling sales over
the past six months to environmental factors, such as
fires and drought seen throughout the summer in parts of
the District.
and agricultural loans fell. Bankers indicated no change
in loan quality compared to a year ago and expected a
slight decline in loan quality over the next six months.
Credit standards remained largely unchanged in all
major loan categories, and bankers reported a modest
increase in deposit levels.
Manufacturing and Other Business Activity
Energy
Manufacturing activity edged up compared to the previous survey period, and other business contacts noted
mixed sales growth. Although factory activity continued
to expand, the pace of growth slowed at both durable
and nondurable goods plants due primarily to decreases
in metals, electronics, and petroleum/coal products. The
level of production and shipments fell slightly whereas
new orders and inventories expanded slightly since the
previous survey period. Production, shipments, inventories and new orders each remained above year-ago
levels, and manufacturers expected modest increases in
capital spending in the coming months.
Energy activity eased slightly since the last survey period, but production of oil and natural gas remained at
high levels. The overall number of active oil rigs across
the District was steady, as the number of rigs increased
in Kansas and Wyoming and moderated slightly in Oklahoma. The natural gas rig count was relatively flat since
the previous survey period. Crude oil inventories remained well above their five-year average, while natural
gas stocks dipped lower. In December, crude oil prices
continued to fall, though more slowly than in November.
Price expectations for crude oil were down due to an
increase in supply and rising global tensions. In addition,
District energy contacts reported lower capital spending
expectations for 2019 as a result of the recent decline in
oil prices.
Outside of manufacturing, firms in the wholesale trade
and professional and high-tech sectors experienced
modest increases in sales, while transportation firms
reported a modest decline. In the coming months, transportation firms anticipated moderate sales growth, and
wholesale trade and professional and high-tech contacts
expected strong sales growth.
Agriculture
The Tenth District farm economy remained weak despite
a slight improvement in prices of some agricultural commodities. In the crop sector, prices increased slightly
from the prior period. Corn and wheat prices were slightly higher than year-ago levels, but soybean prices remained lower as uncertainty surrounding trade persisted.
Although good yields contributed to higher 2018 corn
and soybean production in Nebraska, below average
yields in Missouri could put downward pressure on farm
income. Cotton prices fell sharply since the prior period
on expectations of lower ginning activity which, combined with lower 2018 production in Oklahoma due to
poor yields, could also reduce revenues. In the livestock
sector, cattle prices increased slightly compared to the
previous survey period while hog prices were slightly
lower. ■
Real Estate and Construction
Real estate activity in the District remained mixed as
residential real estate activity declined modestly while
commercial real estate activity rose slightly. Residential
home sales fell at a moderate pace since the previous
survey period, and home prices and inventories continued to rise. Residential sales were expected to be flat in
the months ahead, while home prices and inventories
were projected to rise further. Sales of low- and mediumprices homes continued to outpace sales of higherpriced homes. Residential construction activity declined
slightly since the previous survey period but was anticipated to rise slightly moving forward. Activity in the commercial real estate sector continued to expand at a slight
pace as sales, prices, construction underway, and absorption rose, while vacancy rates and completions were
flat. Contacts in commercial real estate expected additional slight gains in overall activity in the months ahead.
Banking
Bankers reported a slight increase in overall loan demand compared to the previous survey period. Specifically, respondents reported a slight increase in the demand for commercial and industrial loans. Demand for
commercial real estate loans held steady, while demand
for residential real estate loans, consumer installment,
For more information about District economic conditions visit:
www.KansasCityFed.org/Research/RegionalEconomy
J-2
Federal Reserve Bank of
Dallas
The Beige Book ■ January 2019
Summary of Economic Activity
Expansion in the Eleventh District economy slowed to a more modest pace over the reporting period. While the level of
activity generally remained healthy, growth decelerated broadly across the manufacturing, services, retail, and energy
sectors. Loan volumes declined slightly and new home sales fell modestly. Conversely, ample soil moisture has boosted
crop conditions and improved prospects for the agricultural sector this year. Employment expanded, albeit at a slightly
slower pace, despite continued widespread labor shortages. Wage growth remained elevated, while price growth abated
to more normal levels. Outlooks were notably less optimistic than in the previous report due to declining oil prices, political and trade uncertainty, higher interest rates, and stock market volatility.
vice sector. Overall, most district firms were not able to
raise selling prices fully in step with cost increases. Only
about a quarter of the more than 300 Texas business
executives surveyed said they were able to pass on to
customers most or all of their cost increases. A durable
goods manufacturer noted difficulty competing with
foreign companies not facing the same raw materials
tariffs. Margins at oilfield services firms continued to be
under pressure from high costs and increasing competition.
Employment and Wages
Employment growth continued but slowed slightly over
the reporting period, and labor market tightness persisted. Contacts continued to note a lack of available workers, both high skilled and low skilled, with specific mentions of shortages in construction, energy, hospitality,
health care, banking, and transportation (truck drivers
specifically).
Wage growth had been on the rise for most of 2018 but
eased toward yearend in several sectors, while still
remaining elevated. Numerous contacts said workers
were expecting higher pay, and many raised wages by
3-10 percent in response. One contact implemented a
higher minimum wage to reduce employee turnover and
attract higher-quality applicants. Firms responding to
special questions on wages reported 4.5 percent annual
wage growth in 2018, on average, with expectations of
growth slowing to 4.0 percent in 2019.
Manufacturing
Over the reporting period, output growth continued to
abate slightly for both durables and nondurables manufacturing. The Texas manufacturing sector ended 2018
with modest growth, a downshift from the more robust
expansion seen earlier in the year. Lower fuel prices
boosted demand among petroleum refineries.
Outlooks among manufacturers turned slightly negative
in December. Contacts pointed to declining oil prices,
labor constraints, political uncertainty, higher interest
rates, and reduced activity in the housing and energy
sectors as factors restraining growth or damping outlooks.
Prices
Input price growth abated to more moderate levels
across most industries in December. Oil producers reported relatively stable costs due to rising supplies of
local sand and ongoing improvements in operational
efficiency. Over the reporting period, selling price growth
moderated: falling to a more moderate pace in goodsproducing industries but remaining elevated in the ser-
Retail Sales
Retail sales expanded at a slower pace compared with
the previous reporting period. Online sales growth picked
K-1
Federal Reserve Bank of Dallas
up, while some contacts reported weakness in in-store
sales. Auto sales weakened slightly, with a couple of
contacts citing the negative effects of increasing interest
rates, and one noting increased competition and price
shopping by customers. Retailers along the border noted
increased competition in Mexico’s retail market and thus
fewer Mexican shoppers. Overall, outlooks in the retail
sector were notably less optimistic at yearend 2018 than
in the prior Beige Book.
relations, increased interest rates, and uncertainties in
U.S. and global markets among factors creating a more
difficult lending environment.
Energy
Energy activity remained strong but growth slowed notably, and outlooks worsened. Drilling and completion
activity were flat over the reporting period, while the
inventory of uncompleted wells continued to grow due to
lower oil prices and ongoing pipeline and transportation
bottlenecks in the Permian Basin. Lower oil prices were
a worry, and about half of energy firms lowered capital
spending plans for 2019 in response, according to the
Dallas Fed Energy Survey. However, most firms still
believe their capital spending will be higher in 2019
compared with 2018. On average, survey respondents
expect the WTI oil price to be around $60 per barrel at
yearend 2019—above the reported average breakeven
price to profitably drill new wells.
Nonfinancial Services
Growth in the nonfinancial services sector slowed notably over the reporting period. The slowing was led by
staffing services, where demand decelerated from very
high levels and revenue declined for some firms. A few
staffing contacts reported increased uncertainty and
customers delaying hiring plans. Slight revenue reductions were also reported in the health care sector, with
multiple contacts mentioning an erosion of pricing power.
Reports from transportation services firms were mixed.
Leisure and hospitality was a bright spot, with solid revenue growth through yearend, and growth among professional, scientific, and technical services firms remained
fairly stable.
Agriculture
Ample soil moisture has boosted agricultural producers’
outlook for 2019, although prices for several crops remain low. The new farm bill offers farmers greater flexibility in choosing coverage options and reintroduced
cotton as a covered commodity after it was removed in
the 2014 farm bill. This cotton safety net is meaningful
for many cotton growers as they secure financing for the
upcoming crop season. Conditions in the livestock sector
generally remained favorable, but milk prices have fallen
over the reporting period and may cause strain on dairies. ■
Firms’ outlooks deteriorated, with contacts citing softening oil prices, general market volatility, and political and
trade uncertainty.
Construction and Real Estate
New home sales fell modestly since the last Beige Book,
while reports on existing-home sales were mixed. Ongoing construction delays, in part due to fall rains, were
noted in Houston, and one contact said that builders and
developers were adjusting to the new flood plain regulations in the city. Outlooks were cautious, and builders
were selective in signing new deals.
Apartment demand was seasonally slow over the reporting period. Rent growth strengthened in Austin, remained modest in Dallas and San Antonio, and slowed
in Houston. Contacts continued to note some supplydriven softness in rent growth at the high-end. Industrial
and retail activity generally remained healthy. Office
demand was mixed, with leasing most active for new
Class A office space.
Financial Services
Loan volumes declined slightly over the reporting period,
led by a reduction in residential real estate loan volumes.
Loan pricing continued to increase but at a slightly faster
pace. Deposit volumes rose notably. Outlooks were less
optimistic than they were six weeks ago, as more than a
third of contacts believe general business activity will be
worse six months from now. Bankers cite oil prices, trade
For more information about District economic conditions visit:
www.dallasfed.org/research/texas
K-2
Federal Reserve Bank of
San Francisco
The Beige Book ■ January 2019
Summary of Economic Activity
Economic activity in the Twelfth District continued to expand at a moderate pace during the reporting period of midNovember through December. Conditions in the labor market remained tight, and wage growth was moderate. Price
inflation was flat. Sales of retail goods expanded moderately, while activity in consumer and business services was
solid. Conditions in the manufacturing sector strengthened modestly, and conditions in agriculture deteriorated slightly.
On balance, contacts reported that residential and commercial real estate market activity expanded at a solid pace.
Lending activity ticked down.
Employment and Wages
Prices
Conditions in the labor market remained tight. Contacts
reported that worker shortages persisted across industries and skill levels. Nonetheless, several contacts
reported an uptick in the pace of hiring. A major shipping
and logistics business in Northern California hired more
seasonal workers than usual in response to strong holiday demand. In the restaurant industry, a contact in the
Pacific Northwest observed rising employment levels,
while contacts in the Mountain West and Southern California noted intense worker shortages that led one chain
to cancel plans to open additional locations. A contact in
the California banking industry increased employment as
warranted by business demand but noted that future
hiring plans would be sensitive to developments in the
broader economy.
Overall, price inflation was flat over the reporting period.
Contacts in manufacturing and utilities observed upward
pricing pressures due mainly to a further moderate
pickup in the cost of metal inputs and higher financing
costs for capital-intensive production. Food and beverage prices increased somewhat, reflecting higher labor
costs at producers. The growth of building material prices slowed a bit, due in part to noticeably lower lumber
costs, which fell because of the moderation in the housing market. Lower oil prices resulted in reduced fuel
surcharges at shipping and logistics businesses and a
modest decline in the price of some petroleum-based
inputs to manufacturing. In the agriculture sector, prices
declined modestly as demand from abroad weakened in
response to trade policy changes and the stronger dollar.
Wage growth continued to increase moderately. Contacts across the District observed intense compensation
pressures for more highly skilled workers. Employers
with vacancies in the information technology, cybersecurity, and management fields continued to boost starting
salaries to attract qualified candidates. Wages for lowerskilled workers also rose moderately, due to brisk competition and, in some cases, in reaction to imminent
minimum wage increases in the new year. A Southern
California contact in the business services sector reported that training costs also increased as positions turned
over more frequently given the tight job market.
Retail Trade and Services
Sales of retail goods expanded moderately. Contacts
observed that a solid holiday shopping season bolstered
retail activity over the reporting period, thanks in part to
elevated consumer confidence and household wealth. A
contact in the Pacific Northwest reported that demand at
home-improvement stores increased further. In the food
and beverage industry, a contact reported a modest
increase in sales driven by increased demand for higherend products. Automotive sales in the Mountain West
declined slightly, due in part to higher financing costs.
L-1
Federal Reserve Bank of San Francisco
Activity in the consumer and business services sectors
was solid. Demand for shipping and logistics services
continued to be strong. Demand for automotive repair
services in the Mountain West picked up; one contact
attributed the increase to drivers preferring to repair
instead of replace their vehicles as financing costs increased. A contact in Southern California observed a
slight tick down in tourist activity.
contacts continued to observe slightly slower growth in
recent months, especially in the residential market. A
contact in Eastern Washington reported that overall
housing permits for construction were slightly lower on a
year-over-year basis due to a drop in permits for multifamily units, though single-family units registered a yearover-year increase. In Oregon, housing inventory ticked
up but was still very low by historical standards. A contact in Southern California reported that shortages of
more-affordable housing units persisted, while construction of higher-end apartment buildings continued despite
flagging demand in that segment. A contact in Oregon
noted that housing prices were up substantially on a year
-over-year basis, thanks in part to brisk demand from out
-of-state buyers looking for less expensive housing options.
Manufacturing
Conditions in the manufacturing sector strengthened
modestly overall. Contacts in Northern California reported that activity in the semiconductor industry was solid,
but they noted the potential for stock market turbulence
to modestly limit new orders. Deliveries and new orders
of commercial aircraft increased slightly from the same
period last year. A contact in the Pacific Northwest observed that demand for manufactured lumber products
ticked down, due in part to somewhat slower growth in
the housing market.
In the commercial real estate market, contacts generally
noted solid construction activity and demand. Contacts in
the Pacific Northwest observed strong building activity.
In Eastern Washington, construction was under way on a
major e-commerce distribution center. In Seattle, contacts noted brisk activity in office construction and leasing. Rents were stable at an elevated level, and contacts
reported continued low vacancy rates.
Agriculture and Resource-Related Industries
Conditions in the agriculture sector deteriorated slightly.
Many contacts cited trade policy changes and the appreciation of the dollar as drivers of weaker sales in the
sector. Demand from abroad for a variety of crops declined noticeably, hurting profitability for certain growers
across the District. A few contacts reported higher inventory levels for crops such as soybeans and perishable
fruits, while growers sought alternative markets for their
products. A contact in California noted that the outlook
for crop yields in the new year improved modestly after
rainfall beat expectations over the reporting period.
Financial Institutions
Lending activity ticked down over the reporting period.
Growth in loan demand slowed slightly, with contacts
generally attributing most of the moderation to higher
interest rates. At the same time, for many banks, competitive pressures in loan and deposit pricing increased
and net interest margins narrowed. Most contacts reported that credit quality remained healthy. A few observed
that lending standards loosened modestly. ■
Real Estate and Construction
Real estate markets expanded solidly overall, though
L-2
Cite this document
Federal Reserve (2019, January 29). Beige Book. Beige Book, Federal Reserve. https://whenthefedspeaks.com/doc/beige_book_20190130
@misc{wtfs_beige_book_20190130,
author = {Federal Reserve},
title = {Beige Book},
year = {2019},
month = {Jan},
howpublished = {Beige Book, Federal Reserve},
url = {https://whenthefedspeaks.com/doc/beige_book_20190130},
note = {Retrieved via When the Fed Speaks corpus}
}