Beige Book
For use at 2:00 PM EST
Wednesday
March 6, 2019
The Beige Book
Summary of Commentary on Current Economic Conditions
By Federal Reserve District
February 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 Kansas City
based on information collected on or before February 25, 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 ■ February 2019
Overall Economic Activity
Economic activity continued to expand in late January and February, with ten Districts reporting slight-to-moderate
growth, and Philadelphia and St. Louis reporting flat economic conditions. About half of the Districts noted that the
government shutdown had led to slower economic activity in some sectors including retail, auto sales, tourism, real
estate, restaurants, manufacturing, and staffing services. Consumer spending activity was mixed across the country,
with contacts from several Districts attributing lower retail and auto sales to harsh winter weather and to higher costs of
credit. Manufacturing activity strengthened on balance, but numerous manufacturing contacts conveyed concerns
about weakening global demand, higher costs due to tariffs, and ongoing trade policy uncertainty. Activity in the nonfinancial services sector increased at a modest-to-moderate pace in most Districts, driven in part by growth in the professional, scientific, and technical services sub-sector. Residential construction activity was steady or slightly higher
across most of the U.S., but residential home sales were generally lower. Several real estate contacts noted that inventories had risen slightly but remained historically low, while home prices continued to appreciate but at a slightly slower
pace. Agricultural conditions remained weak, and energy activity was mixed across Districts.
Employment and Wages
Employment increased in most Districts, with modest-to-moderate gains in a majority of Districts and steady to slightly
higher employment in the rest. Labor markets remained tight for all skill levels, including notable worker shortages for
positions relating to information technology, manufacturing, trucking, restaurants, and construction. Contacts reported
labor shortages were restricting employment growth in some areas. Contacts in the higher education sector from the
St. Louis District indicated falling enrollment as potential students were increasingly choosing to enter the labor market.
Wages continued to increase for both low- and high-skilled positions across the nation, and a majority of Districts reported moderately higher wages. In addition, contacts in about half of the Districts noted rising non-wage forms of
employee compensation, including bonuses, relocation assistance, vacation time, and flexible work arrangements.
Prices
Prices continued to increase at a modest-to-moderate pace, with several Districts noting faster growth for input prices
than selling prices. The ability to pass on higher input costs to consumers varied by region and industry, and a few
Districts noted that demand and the level of industry competition played a role in this variance. A few Districts continued to report upward price pressures from tariffs on certain goods and services. However, several Districts noted that
the price of steel, which has been impacted by tariffs, had stabilized or fallen recently. In addition, energy costs, including fuel, declined in some areas. Agriculture commodity prices were mixed, though soybeans and dairy prices were
notably weak.
Highlights by Federal Reserve District
Boston
New York
Retailers and the restaurant industry reported continued
growth in sales. Most manufacturers cited sales increases, but some said sales were down from a year earlier.
Staffing firms also reported revenue declines, which they
attributed to tight labor markets. Some retailers reported
price increases. Aside from manufacturers, outlooks
remained positive.
Regional economic activity increased slightly in the latest
reporting period, while labor markets remained tight and
wage growth picked up further. Input costs rose at a
steady pace, while selling prices accelerated slightly.
Consumer spending weakened, while housing markets
were steady to slightly softer. Most sectors saw modest
growth in activity. Banks reported weaker loan demand
and a modest pickup in delinquency rates.
1
National Summary
Philadelphia
St. Louis
On balance, growth of aggregate Third District business
activity appeared to pause during the current Beige Book
period. Most sectors showed little or no change from the
prior period. Lack of qualified labor continued to constrain hiring and raise wage pressures, while price increases remained modest. Nevertheless, the firms remained generally positive about the six-month outlook.
Economic activity was unchanged from the previous
report. Manufacturing activity continued to improve at a
moderate pace. District bankers reported a slight decrease in loan volumes in the first quarter. Residential
real estate contacts reported that recent sales have
fallen below expectations. Local farmers expressed
concerns regarding the near-term status of the industry.
Cleveland
Minneapolis
The District economy grew at a modest pace, with services driving much of that growth. Seasonal factors temporarily weighed on growth in construction and freight.
Employment increased modestly in many sectors. Wages grew moderately across the board. Selling prices rose
moderately, as companies passed through cost increases to their customers. A drop in mortgage rates spurred
slight improvement in home sales.
Ninth District economic activity grew modestly. Labor
demand remained healthy, but signs of weakness surfaced. Price and wage pressures were moderate. Consumer spending offered mixed signals on economic
activity. Manufacturing, energy, and mining activity grew,
but agricultural financial conditions continued to deteriorate and no change was expected in the coming months.
Richmond
Economic activity expanded slightly, and additional gains
were expected in the months ahead. Consumer spending increased slightly, with gains in retail, restaurant,
auto and tourism sales. Manufacturing, wholesale trade,
transportation, and professional and high-tech firms also
reported rising activity. However, residential real estate
activity fell modestly, and agricultural conditions remained weak.
Kansas City
On balance, the regional economy expanded at a modest pace. Port activity, trucking, and tourism were generally increasing at a moderate to robust rate. Labor demand strengthened moderately, overall. Manufacturers,
retailers, and nonfinancial services firms gave mixed accounts. Some retail and professional business services
in and around D.C. cited delays and lost activity due to
the partial federal government shutdown.
Dallas
Atlanta
Economic activity expanded moderately, with a slight
pickup in demand seen across the manufacturing, services, and housing sectors. Drilling activity dipped. Hiring
continued at a moderate pace, and employment outlooks
were bullish. Input price pressures moderated but wage
pressures remained elevated. Outlooks were more optimistic than the previous report.
Economic activity moderately expanded. The District’s
labor market remained tight and wages increased, on
average. Nonlabor input costs continued to rise. Retail
sales were flat, and tourism was robust. Home sales
continued to slow, and commercial real estate was
steady. Manufacturers noted that new orders were flat,
but production and inventories increased. Bankers noted
steady activity.
San Francisco
Economic activity in the Twelfth District continued to
expand at a moderate pace. Labor market conditions
remained tight, and price inflation was unchanged. Sales
of retail goods expanded modestly, and activity in the
consumer and business services sectors was strong.
Conditions in the manufacturing sector strengthened
moderately. Activity in real estate markets expanded
moderately on balance. Overall lending activity was flat.
Chicago
Economic activity increased slightly on balance. Employment and business spending increased slightly;
manufacturing and construction and real estate activity
were little changed; and consumer spending fell modestly. Wages rose modestly, prices rose slightly, and financial conditions improved modestly. Contacts expected
crop incomes to be lower in 2019 than in 2018.
2
Federal Reserve Bank of
Boston
The Beige Book ■ February 2019
Summary of Economic Activity
Reports from business contacts in the First District indicate that activity was somewhat mixed since the last report.
Retailers reported moderate increases in sales, and restaurant sales were also up. Manufacturers’ results, by contrast,
were varied, with half of this round’s respondents citing declines in sales or revenue or a marked slowdown in the pace
of growth. Staffing firms also reported revenue declines, largely attributable to a shortfall of candidates in the current
tight labor market. Commercial real estate markets were similar or slightly improved since the last report. Residential
real estate markets in most areas saw declines in closed sales and increases in median sales prices. Manufacturers
said they were cautious about 2019; other contacts’ outlooks remained mostly positive.
Employment and Wages
Retail and Tourism
Business contacts said that labor markets remained tight
but wage pressures continued to be moderate. Beyond a
shortage of workers in certain skill categories, such as
information technology, retail respondents reported no
real problems filling job openings. Depending on local
labor market conditions, some retailers reported seeing
higher wage costs. The restaurant industry complained
of severe labor shortages. Hiring by manufacturers was
mixed. A furniture maker laid off 10 workers in January.
A semiconductor manufacturer facing big declines in
demand from China put a hiring freeze in place, but they
were reluctant to institute layoffs since it takes three to
six months to train new workers. Three-quarters of manufacturing contacts reported continuing to hire at their
normal pace; none cited unusual wage pressure. Staffing
firms reported tight labor markets and some increases in
bill and pay rates (that is, wages).
Retailers contacted for this round reported that on a year
-over-year basis, comparable-store sales were up by mid
-single-digit percentages. Capital spending plans for
2019 are a bit higher than 2018. One contact observed
that consumers seem willing to spend on all categories
of goods, “whether a $10 T-shirt or a $2,000 television
set.” Moderate but positive growth is expected for the
rest of this year, though there is some lingering worry
that higher tariffs, if implemented, could put a damper on
sales of affected products.
A contact in the Massachusetts restaurant industry reported that based on meal tax receipts, restaurant sales
were up 5.4 percent year-over-year in January. However, these overall results were largely driven by new entrants, as established locations reported sales ranging
from flat to down or up 1 percent. Such lackluster performance, higher operating costs, acute labor shortages,
and higher labor costs (in part attributable to scheduled
increases in the minimum wage for tipped workers) have
prompted recent restaurant closings by some experienced and high-profile operators. Given the greater
competition from the proliferation of restaurants, operators are reluctant to raise menu prices to cover their
higher costs. Despite the threat of more closings, aggregate expectations for the Massachusetts restaurant
industry in 2019 are positive.
Prices
Pricing reports were mixed. Retailers said price declines
for certain food categories have slowed down and some
grocery categories saw price increases. A prominent bigbox retailer reported that some consumer goods manufacturers announced plans to raise prices by 7 percent to
10 percent, though when these cost increases pass
through to retail prices depends on when contracts with
individual retail chains are renewed. Manufacturing
contacts reported no unusual pricing pressures.
A-1
Federal Reserve Bank of Boston
Manufacturing and Related Services
ing rents continuing to rise in the former and holding
steady in the latter. Office leasing was described as
stable at a modest pace in Providence and slow (but
also stable) in Hartford. In Providence, office rents were
up 2 percent to 4 percent from one year ago; in Hartford,
rents have been flat for an extended period. Industrial
leasing demand was robust in most of the First District,
although low inventories held back activity in Rhode
Island. Contacts in Providence and Hartford perceived
that investors were increasingly seeking to purchase
properties in smaller cities in order to obtain higher yields
than in Boston, but hard numbers on transactions volume were not available.
The news from manufacturers was mixed. Of eight responding firms, two reported substantial drops in sales
and two reported significant weakness. The two firms
that reported serious issues were a semiconductor manufacturer and a furniture builder. The furniture firm
makes its products in factories in New England; they
reported sales in January were down 30 percent versus
the same period a year earlier; but better results over
President’s Day weekend reduced concern. The semiconductor firm sells mostly to the auto industry and said
that a 40 percent drop in new orders from China was the
biggest fall in sales since the collapse of Lehman in
2008. Two other firms, both with heavy exposure to
semiconductors, said that the market had slowed significantly since earlier in 2018. Four other contacts reported
good overall sales.
Planned construction of speculative office space tailored
to the life sciences industry increased in the Boston
area. Commercial real estate lenders were reported to
be offering increasingly narrow interest rate spreads and
generous loan terms. Construction costs continued to
rise on average, and one Boston contact saw steep
increases in subcontracting costs from a year ago that
were attributed to scarce labor in the skilled trades.
Capital expenditures were down for several contacts and
unchanged for others. One said that they had
“mothballed” plans for a major expansion of a semiconductor wafer plant; another said they might delay construction of a new plant due to start this summer.
Most contacts maintained a positive outlook. However,
some expect economic growth—and hence demand for
commercial real estate—to slow in 2019.
Most manufacturing contacts expressed caution about
2019. The ones facing the most severe declines were
waiting to see if the weakness was transitory, while
others said they were very uncertain. The slowdown in
China, whether or not the result of trade issues, cast a
shadow over the manufacturing sector.
Residential Real Estate
Heading into 2019, residential real estate markets in the
First District experienced a slowdown in sales. Sales
decreased or stayed flat in all reporting areas for both
single family homes and condos. (Most areas reported
year-over-year changes from December 2017 to December 2018, while New Hampshire reported statistics
through January 2019.) Contacts cited interest rate
hikes, appreciating prices, and the recent partial government shut down as possible reasons for lower sales.
Staffing Services
New England staffing firms reported negative single-digit
revenue growth for the year 2018. Regardless of industry
and placement type, all respondents cited low unemployment rates and limited applicant supply as challenges to
their business, and remarked on the healthy number of
job requests from clients. A few staffing firms said the
tight labor market made it possible to raise rates, with no
push-back from clients. Most firms reported ongoing
work to strengthen relationships with community groups
and advertise for candidates on social media channels.
The partial government shutdown reportedly created
uncertainty among client organizations, who were less
willing to make hiring decisions near the end of 2018.
Under tight labor market conditions and with a limited
talent pool, respondents expressed mixed views on the
outlook, but a majority were optimistic.
For single family homes, median sales prices increased
in all reporting areas but Massachusetts. Inventory
dropped in all areas except Rhode Island. For condos,
prices declined in Rhode Island, Massachusetts, and
New Hampshire, stayed flat in Boston, and increased
slightly in Maine. Condo inventory increased in most
areas, while New Hampshire saw a moderate drop.
Vermont data refer to single family homes and condos
combined; the median sales price increased, while inventories declined. ■
Commercial Real Estate
Commercial real estate fundamentals in the First District
were either flat or up slightly in recent weeks, depending
on the location and property type. Office leasing activity
remained strong in both Boston and Portland, with ask-
For more information about District economic conditions visit:
www.bostonfed.org/regional-economy
A-2
Federal Reserve Bank of
New York
The Beige Book ■ February 2019
Summary of Economic Activity
Economic activity in the Second District has increased slightly since the last report. The labor market has remained
tight, and wage growth has picked up further—mainly in lower wage industries. Businesses noted continued widespread
cost pressures and increasingly widespread hikes in selling prices. Manufacturing activity expanded slightly, while business picked up in a number of service industries. Consumer spending has been weaker, on balance, and tourism has
been mixed. Housing markets have been stable to slightly softer, while commercial real estate markets have remained
steady overall. Finally, banks reported steady to weaker loan demand and a modest upturn in delinquency rates.
ately rising selling prices, with the most widespread rises
reported from wholesalers. Contacts in the real estate
and education & health sectors reported that selling
prices were flat overall.
Employment and Wages
The labor market has remained tight across the District,
with employers reporting ongoing difficulties in filling job
openings, particularly for skilled trades and technical
fields. Businesses generally reported that employment
was flat to up slightly, on balance, since the beginning of
the year. Firms in the wholesale, finance, and education
& health sectors reported modest net hiring, while contacts in the manufacturing, transportation, professional &
business services, and real estate & construction sectors
indicated that employment was essentially flat. Contacts
in the retail and information industries noted modest net
declines in staffing levels.
Retailers generally indicated that selling prices were up
modestly in early 2019, though one major chain reported
more discounting than usual to clear out excess holidayseason inventories. Nightly rates for New York City hotel
rooms were little changed from a year earlier, and average ticket prices for Broadway shows continued to slip
further and were down 5-6 percent from a year earlier.
Consumer Spending
Retail sales were mixed but sluggish, on balance. A
major retail chain noted that sales were well below plan
in January and down from a year earlier before rebounding modestly in early February; the weakness was partly
attributed to adverse weather and the government shutdown. Reports from retailers in upstate New York were
more upbeat, characterizing sales activity as solid. Inventories, which were a bit leaner than usual going into
the holiday season, were generally said to be in good
shape as of mid-February.
Wages have picked up further, particularly in the lowerwage retail and leisure & hospitality industries. A number
of business contacts in New York State’s manufacturing,
retail, and leisure & hospitality sectors indicated that the
year-end hike in the minimum wage was affecting their
employment and compensation decisions.
Prices
Businesses reported ongoing widespread escalation in
input prices and increasingly widespread hikes in selling
prices in the latest reporting period. Input price
pressures tended to be most widespread in transportation and wholesale & retail trade sectors. Contacts
across most industry sectors reported steady to moder-
New vehicle sales have weakened in early 2019, according to dealers in upstate New York, falling well below
early-2018 levels. Some of this weakness was attributed
to harsh winter weather. New vehicle inventories re-
B-1
Federal Reserve Bank of New York
expert noted that potential buyers have been hesitant. At
the high end of the market, an oversupply and concern
about the curtailed federal tax deductibility of homeowner expenses have weighed on the market. At the lower
end, some potential buyers have become more inclined
to rent than to buy.
mained somewhat high, on balance. 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 and edged down further in
January, based on the Conference Board’s monthly
survey.
Residential rents across the District have picked up
somewhat since the last report but remain roughly on par
with a year earlier. In New York City, the prevalence of
landlord concessions appears to have receded somewhat and rents have risen modestly, as rental vacancy
rates have remained low. The recent withdrawal of Amazon’s planned expansion in northwestern Queens has
reportedly had little effect on the area’s housing market.
Manufacturing and Distribution
The manufacturing and distribution sectors picked up
somewhat in the latest reporting period. Manufacturers
noted a modest pickup in growth, while wholesale distributors and transportation firms reported solid gains, following weak reports at the end of 2018.
Commercial real estate markets have been mixed but
little changed overall. Both office availability rates and
asking rents have remained steady, on balance. Retail
markets have continued to soften, as vacancies have
continued to rise. Industrial markets, on the other hand,
have remained firm: While availability rates have leveled
off at low levels, rents have continued to climb briskly—
mainly in the New York City metropolitan region.
Looking ahead, contacts in the manufacturing and
wholesale trade sectors have regained a fairly high level
of optimism, but those in the transportation sector have
remained more circumspect. A number of contacts continued to express concern about tariffs and trade restrictions, as well as New York State’s minimum wage
hikes.
Services
New multi-family construction starts remained sluggish,
though a substantial volume of residential development
remains under construction—particularly in New York
City. New office construction starts picked up in New
York City but remained sluggish elsewhere.
Overall, business has been mixed but, on balance, up
modestly in the latest reporting period. Contacts in the
information and health & education sectors reported flat
activity in early 2019, while businesses in professional &
business services noted some pickup in activity.
Banking and Finance
Leisure & hospitality businesses reported steady, moderate growth. Tourism was mixed in New York City, following a brisk holiday season. A local tourism-sector expert
indicated that hotel occupancy rates, though still fairly
elevated, slipped below year-ago levels. However,
Broadway theaters continued to report strong year-overyear gains in revenues and especially attendance, which
was up nearly 20 percent from a year earlier in both
January and early February.
Small to medium-sized banks in the District reported
lower demand for consumer loans, residential mortgages, and commercial mortgages, but slightly higher demand for commercial and industrial (C&I) loans. Refinancing activity was reported to be little changed. Banks
reported higher credit standards for commercial mortgages but unchanged standards across other categories.
Higher loan spreads were reported on residential mortgages, while spreads were steady for all other categories. Finally, banks reported increased delinquency rates
on consumer and C&I loans but unchanged delinquency
rates on residential and commercial mortgages. ■
Real Estate and Construction
Housing markets across the District have been stable to
somewhat softer since the last report. Homes sales in
upstate New York have slowed further, though the inventory of homes on the market has remained low, and
prices have continued to rise. In New York City, sales of
existing co-ops and condos have slowed further. Selling
prices for newly-built condos have weakened further,
while resale prices on existing apartments have been
mostly flat to down slightly. The inventory of unsold
homes has continued to climb but is still fairly low by
historical standards. Housing markets in the rest of the
metro area followed a similar pattern. A local housing
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 ■ February 2019
Summary of Economic Activity
On balance, growth of aggregate Third District business activity appeared to pause for much of the current Beige Book
period; however, late reports indicated a resumption of slight growth in some sectors. Significant sectors, including
manufacturing, nonfinancial services, and nonauto retail sales, slowed from modest growth in the prior period to little or
no change in the current period. Factors cited for the slowdown included weak global demand and uncertainty because
of trade wars and the government shutdown. Nevertheless, employment continued to grow at a modest pace, although
the labor market remained tight and upward wage pressures remained moderate. Price pressures remained modest.
Despite the apparent pause in growth, firms’ outlook for growth over the next six months remained positive, with twothirds of the nonmanufacturing firms and nearly half of the manufacturers anticipating increases in general activity.
Employment and Wages
Prices
Employment growth continued at a modest pace during
the current Beige Book period. About one-fourth of the
firms reported an increase in staff. Manufacturers have
noted little change in the average hours worked since
the prior Beige Book period; however, average hours
appeared to contract a bit among other firms.
Price increases remained modest for most firms. The
share of manufacturing firms reporting increases in
prices paid and prices received averaged around 30
percent. The share was much lower among nonmanufacturing firms. Several contacts noted that food commodity prices had remained modest or were better than
expected.
Most contacts continued to note that the labor market
was very tight and that hiring and retaining workers
remained difficult. Firms are responding by raising wages, increasing job flexibility, training new hires who have
fewer skills than desired, and making greater use of trial
periods of temp agency placements.
Looking ahead six months, the percentage of manufacturing firms that expect to pay higher prices for inputs fell
to 40 percent from 60 percent. Those firms expecting to
receive higher prices for their own goods fell to 30 percent from near 50 percent.
Wage growth continued at a moderate pace, with reports
of wage and benefit cost increases averaging about 3.0
percent. The share of nonmanufacturing contacts who
reported increases in wage and benefit costs edged
higher to near 40 percent. Contacts noted that recent
state increases in the minimum wage may cause some
wage compression, but most firms were already paying
above the new minimums. A few that were not continue
to look toward automation.
Manufacturing
Manufacturing activity appeared to decline slightly – a
reversal of trend from modest growth. The percentage of
firms that reported increased shipments and new orders
fell almost to one-fifth, but the percentage reporting
decreases rose to about one-fourth.
The makers of chemicals, primary and fabricated metal
products, and electronic and industrial equipment mostly
have noted no change in new orders and shipments –
and occasionally declines – since the prior period. However, these changes were weaker than those reported
C-1
Federal Reserve Bank of Philadelphia
for the same period last year. The makers of lumber and
paper products also reported flat or negative activity,
changes which were comparable to the prior year.
new orders remained nearly the same, while reports of
declining sales and fewer new orders edged higher on
average. Expectations of future growth rebounded to
two-thirds of the firms from half in the prior period.
Explanations cited for the slowdown included falling
demand from European and Asian markets, with tariffs
and Brexit as prime factors. Reduced demand from
domestic sources was attributed to several factors: a
pullback in orders following an excessive inventory
buildup; lower oil prices, which have dampened capital
expenditures from energy producers; and uncertainty
during the government shutdown.
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 robustly in commercial and
industrial lending and in other consumer loans (not elsewhere classified). Loans grew modestly in commercial
real estate and home mortgages; auto loans were flat;
and home equity lines declined.
Despite the current period’s pause, manufacturers’ expectations of general activity six months from now did
not shift. Moreover, expectations of future shipments
also held steady. However, expectations of future new
orders, employment, and capital spending edged lower.
On balance, expectations for each of these indicators
were near or above their historic nonrecession averages.
Bankers cited client uncertainty stemming from trade
policy, the government shutdown, and global outlooks
but described no concerns with the underlying U.S.
economy. Lending standards were mostly unchanged,
with a few banks tightening in specific segments. Contacts also noted no problems with credit quality.
Consumer Spending
On balance, nonauto retailers reported slight gains in the
new year. While some brick-and-mortar retailers continue to lose market share to online stores, contacts cited
low unemployment rates, relatively high consumer confidence, and relatively low gas prices as factors contributing to ongoing gains in current sales and in expected
sales. However, the government shutdown was costly for
a few smaller Center City Philadelphia businesses, such
as coffee shops, that serve federal office buildings and
national historic areas.
Real Estate and Construction
According to homebuilders, contract signings appear to
have held steady, although excessive rain has hampered
construction activity. One builder – just returned from a
national trade conference – reported that after a yearend slowdown, activity had picked up by February, nationally and locally.
Existing home sales continued to decline moderately
across most local markets. Contacts noted no early
signs that the spring selling season would bring an end
to the extremely low inventories that have constrained
sales.
Auto sales continued to bump along at relatively high
levels, with little overall change compared with the same
period last year. Sales reports for January were mixed,
and some early reports for February noted a decline.
On balance, commercial real estate construction and
leasing activity appear to have edged down slightly from
relatively high levels. However, most contacts remain
very busy. Consolidations in health care and education
are fueling new projects for architects and engineers.
Contacts noted that absorption of new hotel properties
and high-end multifamily units have largely kept pace
with construction. The strong market for industrial and
warehouse space continued for smaller spaces; however, demand may have eased a bit for warehouses in
excess of 1 million square feet. ■
Tourism activity was off a bit, according to contacts. One
contact noted an unexpected downtick in activity in the
Poconos – partially due to poor weather in January.
Philadelphia hotels were challenged compared with last
year; the Eagles’ 2019 playoff run included no home
games, then the government shutdown closed several
national park attractions, reducing tourism activity in the
city. An analyst noted concerns with ongoing trade uncertainty and the strong dollar, which reduces foreign
tourist visits and average visitor spending.
Nonfinancial Services
On balance, service-sector firms grew slightly as midperiod reports suggested a brief pause in activity. The
percentage of firms reporting increases in sales and in
For more information about District economic conditions visit:
www.philadelphiafed.org/research-and-data/regionaleconomy
C-2
Federal Reserve Bank of
Cleveland
The Beige Book ■ February 2019
Summary of Economic Activity
Economic activity in the Fourth District grew at a modest pace since our last report. Professional and business services
saw moderate demand growth. Home sales increased slightly because of a drop in mortgage rates. Retailers noted a
slight softening in demand after the holiday season, while banking conditions improved modestly after seasonal slowness. Seasonal factors weighed on growth in nonresidential construction and transportation. Manufacturers gave mixed
reports, as some saw a pickup in demand, while others reported slowness and uncertainty in the global economy
weighed on growth. Employment in the District increased modestly, with much of the growth coming from nonfinancial
services and from manufacturing. Wages rose moderately across many sectors and occupations. District companies
increased their selling prices moderately. Construction companies passed on strong input cost increases. By contrast,
manufacturers’ prices remained more stable as the input cost pressures they had been facing in prior periods abated.
Transportation companies raised prices, but retailers did not raise prices to cover transportation cost increases.
Employment and Wages
Wages in the District rose at a moderate pace that was
similar to that of the previous survey round. Wage
growth was broad-based, as wages rose for a wide
range of industries and occupations. Bankers raised
wages both for low-wage and for high-wage positions,
citing competitive labor markets. A couple of construction
companies granted large retention-focused merit increases to office staff, but other companies mentioned
that they tended to grant raises during busier seasons.
Manufacturers re-evaluated wage rates for blue-collar
laborers, and many manufacturers increased pay beyond the rate of inflation. Auto dealers also noted that
pay for qualified technicians rose. Trucking companies
continued to compete on wages, noting that demand for
drivers exceeded supply. Some retailers felt pressure
from local minimum wage increases. Staffing firms also
noted upward wage pressures. One firm stated that new
hires have been pressuring the firm to increase its starting wages; another stated that it now offers raises every
6 months instead of every 18 months, as it did previously. The rate of hiring by professional and business services firms accelerated somewhat. Nevertheless, wage
increases in the industry decelerated, with a number of
firms stating that wages were already high.
District contacts reported modest increases in staffing
levels. Construction companies added some office staff
but, because of the winter weather, did not hire field
workers. They expect to resume increasing field staff in
the spring. Manufacturers added both salaried and hourly staff, with one contact stating that her company had
been hiring more of its temporary staff into full-time
employment. Staffing companies reported increased
placements and noted that nursing, information technology, and manufacturing staff are particularly in demand.
Professional and business services firms, especially
information technology firms, accelerated hiring to meet
strong demand and expected to continue to add to their
payrolls in the next few months. Trucking companies
continued to add drivers when possible, but railroad
companies downsized their staff. Railroad companies
expected further staff reductions in the next few months.
Retailers indicated that staff turnover was higher than
usual in the beginning of the year and that they were
hiring to maintain staff levels. Still, nondurable goods
retailers continued to increase wages in line with inflation. Retailers planned to hold staff levels steady in the
next few months.
D-1
Federal Reserve Bank of Cleveland
Prices
be better than it would be absent intervention in the
Chinese market.
Selling prices rose moderately, with many businesses
reporting that they were keeping up with input cost inflation. Upward cost pressures were strong for construction
firms, which reported higher concrete prices. Nonresidential builders, and to a lesser extent homebuilders,
raised their selling prices to maintain their margins.
Upward cost pressures in manufacturing eased, as a
number of producers reported stable or even lower steel
prices after the tariff-driven steel price escalation in
2018. Because manufacturers did not see the same cost
pressures as construction firms, they did not raise their
prices to the same extent. Some producers actually cut
their prices because of the lower steel prices. Retailers
cited tariffs and higher transportation prices as elevating
their costs. Yet, the majority of retailers held their prices
steady, while auto dealers and producers gave fewer
new-vehicle incentives. Transportation contacts reported
elevated input costs as higher maintenance, repair, and
other services costs outweighed savings from stable or
lower fuel prices. However, pricing power was strong for
transportation firms. The majority of freight contacts were
able to raise their fees thanks to continued strong demand for their services.
Real Estate and Construction
Demand for residential real estate and construction
improved slightly, as lower mortgage rates spurred home
sales. Homebuilders and real estate agents expressed
optimism that conditions will improve in the next few
months, though they attributed this expectation primarily
to warmer weather. Real estate agents reported that
homeownership, relative to renting, rose in the region.
Nonresidential construction remained steady, as negative seasonal effects countered underlying demand
growth. Nonresidential builders noted that they believed
normal seasonal variation caused the pause in demand
growth, and they expected growth to resume once winter
ends. Nonresidential builders’ backlogs increased, as the
stable and strong demand outpaced their ability to work
through it during the winter. Builders acquired more
public projects than private work.
Financial Services
Banking conditions recovered after a seasonal slowdown. Though some seasonal softness remained on the
consumer side, this was offset by strength in commercial
and industrial lending. Consumer demand for credit
declined as consumers used the first quarter to pay off
credit card balances following the holiday season. Reports about mortgage and auto lending were mixed.
Some bankers indicated they felt the housing market
was slowing, while others expected a seasonal upswing
in mortgage demand. Commercial demand was concentrated among large and middle-market firms for mergers
and acquisitions and some CRE projects, though one
banker noted that “precautionary demand for cash and
liquidity” had increased from commercial customers.
Consumer Spending
Retailers reported slightly softer demand following the
strong holiday season. By contrast, contacts had indicated in the prior survey round that they had expected solid
growth through the first quarter of 2019. One auto retailer noted that sales of new vehicles had decreased slightly because of higher prices, while the demand for used
vehicles increased. Retailers expect demand growth
going into the second quarter of 2019 to be the same or
better than in 2018.
Manufacturing
Manufacturers in the District gave mixed reports. Many
contacts reported that activity picked up during the last
two months as a result of the usual seasonal build up
and that they expect growth to continue. However, others expressed concerns about a number of factors that
dragged down demand and weighed on the outlook for
future growth. These include 1) supply chain constraints
that have affected the availability of intermediate goods
and components, 2) slower global growth—particularly in
Europe and China—that contributed to a slowing in
orders, 3) continued uncertainty about the future of tariffs
on steel and aluminum and ongoing US–China trade
negotiations, and 4) decreased consumer confidence. In
addition to the ongoing trade negotiations between China and the United States, one manufacturer noted that if
Chinese policymakers choose to stimulate heavy industry in their country, the outlook for his organization would
Nonfinancial Services
Professional and business services firms reported moderate demand and growth. A contact at a design firm
noted that previously postponed projects were coming to
fruition because consumer confidence improved. These
firms expected sales and growth to be strong over the
next few months. Freight contacts reported demand was
flat because of extreme weather in the Midwest and
Northeast. These contacts expect shipping volumes to
be stable in the coming months. The majority of nonfinancial services firms expected to modestly increase
their prices charged over the course of 2019. ■
For more information about District economic conditions visit:
www.clevelandfed.org/region/
D-2
Federal Reserve Bank of
Richmond
The Beige Book ■ February 2019
Summary of Economic Activity
The Fifth District economy continued to grow at a modest pace in recent weeks. Port activity remained robust; however,
some contacts expressed concern that trade policy could negatively affect volumes in the next several months. Meanwhile, trucking demand growth slowed to a moderate pace. Manufacturing activity was mixed, and firms continued to
report uncertainties and higher materials costs associated with tariffs and trade. Travel and tourism rose moderately,
overall. However, a sharp decline in tourism was reported by several firms in and around the District of Columbia, which
was attributed to the partial federal government shutdown. Retailers gave mixed reports; some with lower sales citied
poor weather or the shutdown. Several nonfinancial services firms also reported project delays and lost revenue due to
the shutdown, but other businesses saw increased demand for their services. Residential and commercial real estate
sales and leasing rose modestly, on balance. Banks reported modest growth in loan volumes. Labor demand strengthened moderately, wages rose modestly, and many firms reported using non-wage benefits to attract and retain talent.
Price growth remained moderate, overall.
Employment and Wages
than selling prices, but both remained moderate, overall.
The demand for labor strengthened moderately in recent
weeks. Staffing firms reported that the volume of worker
conversion from temporary to permanent increased
modestly. Meanwhile, employers continued to report
very tight labor markets and difficulties finding qualified
workers, particularly hourly workers. Additionally, firms
reported high demand for construction workers, executive assistants, HR professionals, engineers, IT professionals, accounting and finance professionals, plant
production workers, mechanics, and truckers. Wage
increases remained modest, overall. Meanwhile, many
firms reported offering bonuses or relocation assistance
to attract and retain talent.
Manufacturing
Fifth District manufacturing activity was mixed in recent
weeks. Several firms, including a Virginia furniture manufacturer, continued to struggle to deal with uncertainty
surrounding tariff-related cost increases. In addition, a
cabinet manufacturer reported strong demand and was
able to pass through part of the materials cost increase
that resulted from the tariffs. Many firms, such as a Maryland concrete company, attributed a decline in business
to intemperate weather. Food manufacturers in Maryland
and Virginia reported robust growth despite a drop in
sales to D.C. area restaurants during the partial government shutdown.
Prices
Ports and Transportation
Price growth remained moderate, overall, since our
previous Beige Book report. Manufacturing prices received continued to increase at a moderate rate. Also,
input price growth slowed slightly but still outpaced
growth in selling prices. Manufacturers noted some price
declines for energy, petrochemicals, corrugated boxes,
and transportation costs, although several firms continued to report paying higher prices for tariffed raw materials, such as steel and aluminum. Services sector firms
indicated that prices paid rose at a slightly faster rate
Ports in the Fifth District saw robust activity in recent
weeks. Growth in imports was particularly strong and
continued to surpass growth in exports. Ports invested in
capital expansion to allow for continued growth but remained concerned about how business in the next several months might be affected by trade policy. One port
executive saw business bounce back after weakness at
the end of 2018. Another source reported record business to start the year but expected it to slow in the near
E-1
Federal Reserve Bank of Richmond
future. In addition, an airport saw continued growth in
both passenger traffic and cargo.
restaurant, grocery, and industrial space, while retail
activity was stable to increasing. Moreover, vacancy
rates decreased slightly across all sub-markets, and
contacts reported that limited inventory pushed rental
rates up slightly in some areas. On the commercial sales
side, brokers reported modest increases in prices and
volumes. Multi-family leasing remained healthy, although
reports on construction activity varied across the District.
Trucking companies saw demand growth slow to a
moderate pace. A North Carolina firm attributed some of
the slowing to inclement weather but was cutting back
on hiring in anticipation of a slower year. In addition, a
Virginia firm saw a softening in retail shipments. A company in the District of Columbia reported trimming discretionary spending as business was expected to slow
down. Concerns about a decline in the pace of trade
growth in the coming year were also expressed.
Banking and Finance
On the whole, loan volumes increased modestly since
our previous report. Residential mortgage demand was
generally described as stable to increasing modestly,
and bankers reported that deposits were up moderately.
Commercial real estate loan demand remained strong.
Other business loan demand increased slightly, on balance, while automotive lending was reportedly flat. Loan
and deposit interest rates edged higher while credit
quality and credit standards remained strong, overall.
Retail, Travel, and Tourism
Travel and tourism in the Fifth District picked up moderately since our last report. A Virginia resort saw strong
business, and an executive at a West Virginia hotel
reported that warming weather was helping business. In
Charleston, South Carolina, tourism remained steady
despite the temporary closure of Fort Sumter during the
partial government shutdown. Meanwhile, the Washington, D.C., area saw a sharp drop in visitors during the
shutdown and a hotel in Asheville, North Carolina, reported lower occupancy.
Nonfinancial Services
Reports from nonfinancial services firms were mixed in
recent weeks. Demand increased for some engineering
consultants, law firms, advertising agencies, hospitals,
and IT businesses. Meanwhile, several firms noted a
decrease in demand, including those engaged in telecommunications, security services, and federal government contractors. Overall, firms indicated that the partial
government shutdown resulted in lost revenue, job cuts,
and project delays due to lapses in grant and permit
approvals. ■
Fifth District retailers reported mixed conditions in recent
weeks. Many retailers saw a drop in business, which
resulted from bad weather, while others struggled with
continued cost increases due, in part, to tariffs. A West
Virginia auto dealer attributed a sharp decline in sales to
the government shutdown leaving potential customers
without pay; however, a Virginia dealer reported solid
business. Meanwhile, a South Carolina retailer invested
in new storage to allow for sales growth, and a West
Virginia sporting goods retailer reported steady demand.
Real Estate and Construction
Residential real estate contacts indicated modest
growth, overall. Home sales rose modestly in recent
weeks and buyer traffic was reportedly steady, despite
winter storms hitting some areas in the District. Brokers
reported that inventories generally remained at low
levels. Agents continued to report that lower- to middlepriced homes were absorbed quickly and, in some cases, received multiple offers. District home prices increased slightly, although agents reported slower price
growth in homes priced above $800,000. Residential
construction was steady in most markets; however, with
limited speculative homebuilding.
Commercial real estate leasing rose modestly in recent
weeks. District brokers reported increased demand for
For more information about District economic conditions visit:
www.richmondfed.org/research/regional_economy
E-2
Federal Reserve Bank of
Atlanta
The Beige Book ■ February 2019
Summary of Economic Activity
Sixth District business contacts reported that economic activity continued to advance at a moderate pace over the reporting period and the outlook among contacts remained positive. Labor markets continued to tighten, and some firms
noted relocating certain segments of their operations to gain access to larger pools of talent. On balance, firms noted
growth in wages since the previous report, along with mounting pressure in a number of hard-to-fill positions. Nonlabor
costs continued to rise, particularly for those goods and services impacted by tariffs. Retail sales growth was flat over
the reporting period, and vehicle sales were slow. Reports from the hospitality sector were upbeat, with solid growth in
business and leisure travel over year earlier levels. The slowdown in residential real estate activity noted in the last
report continued, and commercial real estate activity remained steady. Manufacturers reported that new orders were
flat; however, production levels increased. Banking contacts indicated that conditions remained stable.
Employment and Wages
Prices
Business contacts continued to cite challenges finding
and retaining workers, particularly in information technology, construction, food services, medical, finance, manufacturing, and transportation. In response to these challenges, some firms shared that they were considering or
had already taken steps to relocate portions of their
business, mainly information technology, finance and
accounting, customer service, and upper management
positions, to larger urban locations with greater access to
talent. Several contacts continued to report that their
inability to find workers hindered their firm’s ability to
grow and meet rising demand. Consequently, many cited
a renewed focus on productivity enhancements using
existing and/or new technology and automated systems.
Increases in some nonlabor input costs continued to be
reported by business contacts. Rising costs were predominately noted in goods and services impacted by
tariffs, as well as in transportation and construction. The
Atlanta Fed’s Business Inflation Expectations survey
showed year-over-year unit costs were up 1.9 percent in
February. Survey respondents indicated they expect unit
costs to rise 1.9 percent over the next twelve months.
On average, firms across the District reported wage
increases from 2½ to 4 percent. Increases were greater
and pressure was described as more acute in urban
areas and/or among hard-to-fill positions, including jobs
in nursing and other medical fields, engineering, manufacturing, retail, hospitality, and banking and finance.
Similar to previous reports, many contacts shared that
even after increasing wages, they struggled to attract
enough qualified candidates, and thus indicated expanding non-wage offerings, such as additional vacation time,
flexible work arrangements, and/or reduced hours for full
-time, exempt employees.
On balance, travel and tourism contacts reported a
strong start to 2019 with solid growth in business and
leisure travel compared to the same time period last
year. The outlook for activity remains positive with
healthy advance bookings reported through the first
quarter of this year.
Consumer Spending and Tourism
District retailers reported flat sales growth since the
previous report. Automotive dealers reported a slow start
to 2019. Retail and automotive contacts expect modest
sales growth, on a year-over-year basis, for 2019.
Construction and Real Estate
Although affordability remains a challenge for the housing sector, the recent moderation in interest rates alleviated some pressure and led to increasing optimism
among sellers and homebuilders as they head into the
peak selling season. Existing home sales in 2018 were
F-1
Federal Reserve Bank of Atlanta
flat or down in many markets throughout the District
compared to the previous year. Inventory levels, though
increasing on a year-over-year basis, remained low in
most markets. Home price appreciation moderated in
many markets as declining sales and rising inventory
levels led to less upward pressure on prices.
District, particularly among firms planning to export crude
from Louisiana ports. Chemical and petrochemical industry contacts reported steady activity and slightly higher
levels of capacity utilization over the previous reporting
period. While some new refinery and chemical projects
were announced, many contacts indicated that activity
was in a lull during the first quarter and was expected to
pick up later in the year. From the utilities perspective,
cold weather created a surge of demand among residential and commercial customers.
Commercial real estate leasing and sales activity remained steady across most District markets. Overall,
rents grew and vacancies trended downward at a modest pace. Strength remained in the industrial, multifamily,
and medical sectors. Office market contacts reported
overall persistent strength; however, higher levels of
employee densification and greater deliveries of space
appeared to be creating pockets of slowing in some local
markets.
Agriculture
Agricultural conditions across the District were mixed.
Recent reports showed that most of the District was
drought-free, with the exception of small areas in south
Florida and coastal Louisiana where conditions were
abnormally dry. The February forecast for Florida's orange crops was unchanged from the previous month but
remained significantly ahead of last year’s production.
Since November, weekly cash prices were up for corn,
soybeans, beef and broilers, while cotton and rice prices
were down. ■
Manufacturing
Manufacturing contacts described overall business conditions as relatively healthy during the reporting period.
While new order levels were somewhat flat, production
levels were reported to have increased, along with a
small rise in finished inventories. Purchasing managers
reported no significant change in wait times for supply
deliveries. Expectations for future production levels
remained strong, with over one-half of contacts expecting higher production over the next six months.
Transportation
District transportation firms cited mixed results since the
previous report. Railroad contacts noted that total rail
traffic was up modestly compared with year-earlier levels; however, intermodal shipments declined slightly.
Port contacts cited substantial increases in container
traffic, bulk and break bulk cargo, and autos. Trucking
activity slowed since the previous report, in line with
expectations. Most transportation contacts in the District
expect higher demand in 2019.
Banking and Finance
Financial institutions remained healthy due in part to
sustained earnings growth and a relatively benign credit
environment. Increasing interest rates had a positive
impact on earnings though funding costs put some pressure on net interest margins for a number of institutions.
Loan growth was stable even as overall asset growth
slowed due to a declining securities portfolio. Overall,
credit quality metrics remained positive with charge-offs
and nonaccrual loans still near historical lows.
Energy
New discoveries in the Gulf of Mexico contributed to
increased activity in offshore exploration and production.
Exports of crude continued to accelerate. Pipeline construction and operations remained strong across the
For more information about District economic conditions visit:
www.frbatlanta.org/economy-matters/regional-economics
F-2
Federal Reserve Bank of
Chicago
The Beige Book ■ February 2019
Summary of Economic Activity
Economic activity in the Seventh District increased slightly on balance in January and early February, though contacts
expected growth to return to a modest pace over the next 6 to 12 months. Employment and business spending increased slightly; manufacturing and construction and real estate activity were little changed; and consumer spending fell
modestly. Wages rose modestly, prices rose slightly, and financial conditions improved modestly. Contacts expected
crop incomes to be lower in 2019 than in 2018. Only a small share of contacts indicated that the government shutdown
had hurt product demand or affected business decisions.
Employment and Wages
Consumer Spending
Employment increased slightly over the reporting period
and contacts expected a similar-sized increase over the
next 6 to 12 months. Hiring was focused on professional
and technical, production, and 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 a small decline in
billable hours. A number of manufacturing contacts
noted that a slowdown in demand had reduced their
reliance on overtime and lessened the urgency of filling
open positions. Wage growth remained modest overall.
Contacts were most likely to report wage increases for
managerial, professional and technical, and production
workers. Many firms reported growing benefits costs.
Consumer spending fell modestly over the reporting
period. Nonauto retail sales decreased modestly, with
declines in the furniture, appliances, apparel, and home
improvement sectors outweighing increases in the hardware, lawn and garden, and personal services categories. Numerous contacts attributed slower sales to the
harsh winter weather that occurred over the reporting
period. Light vehicle sales also fell. Dealers believed that
bad weather played a role in the decline and noted some
improvement in early February compared with January,
though some also expressed concern about underlying
weakness in demand.
Business Spending
Business spending increased slightly in January and
early February. Retail contacts said that inventories were
generally at comfortable levels, though some auto dealers reported elevated inventories. Most manufacturers
indicated that stocks were at comfortable levels, though
heavy-duty truck inventories were low. Capital spending
increased slightly, with contacts expecting somewhat
faster growth 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 was little changed. Demand for
transportation services was flat, but remained at a strong
level.
Prices
Prices rose slightly in January and early February,
though contacts expected price increases to pick up to a
modest rate over the next 6 to 12 months. Retail prices
were little changed. Producer prices rose modestly,
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 real estate activity
slowed some, held back by tight inventories for lowerpriced homes and reduced demand for higher-priced
homes. One contact noted that while entry-level inventories remained tight, they had risen for the first time in
four years. Investor demand for multifamily properties
remained strong. Home prices and rents edged higher.
Nonresidential construction was unchanged on balance,
though one contact noted a pickup in bidding activity.
Contacts indicated that shortages of materials and workers were leading to delays in completing projects. Commercial real estate activity was also unchanged, with
growth in demand for industrial space offset by declines
in demand for big box retail and office space. Contacts
noted that in many areas the availability of industrial
space was quite limited. Rents and the overall availability
of sublease space were flat. Vacancy rates edged higher.
Prices for corn were up a bit over the reporting period,
while soybean and wheat prices moved lower. Contacts
expected crop incomes to be lower in 2019 compared
with 2018, anticipating that prices will stay low and the
harvest will be smaller than 2018’s bumper crop. They
also thought low soybean prices would lead farmers to
switch some fields from soybeans to corn. Contacts
noted positive reports on trade talks between the U.S.
and China—including news that China bought some US
soybeans. Livestock prices increased overall, and harsh
winter weather required extra feeding expenditures for
animals. ■
Manufacturing
Manufacturing production was little changed in January
and early February, though contacts were generally
pleased with the level of activity. Demand for steel increased, but at a slower rate than in most of 2018.
Growth in heavy machinery demand was also slower
than a year ago, but remained solid across major selling
sectors. Heavy truck production was little changed but
continued at a strong pace, and one contact noted that
large backlogs suggested the level of output would be
sustained through much of 2019. Specialty metals manufacturers reported slight increases in order books, 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 improved modestly over the reporting period. Market participants noted a decline in volatility and rising equities prices. Business loan demand rose
slightly, led by increased lending to the manufacturing
and food and beverage sectors. Loan quality was little
changed, though one contact noted increased delinquencies among retailers. Loan standards were little
changed. Consumer loan demand decreased slightly,
primarily because of lower home loan volumes; loan
quality and standards were little changed.
For more information about District economic conditions visit:
chicagofed.org/cfsbc
G-2
Federal Reserve Bank of
St. Louis
The Beige Book ■ February 2019
Summary of Economic Activity
Economic conditions have been unchanged since our previous report. Labor market conditions remained tight as firms
continued to note difficulties finding qualified workers. Wages increased at a moderate pace, and survey respondents
reported a slight increase in prices charged to consumers. Reports on consumer spending were mixed. Manufacturing
activity continued to improve at a moderate pace. Residential real estate contacts were relatively pessimistic compared
with previous reports. District bankers reported a slight decrease in loan demand. Agricultural conditions declined slightly, and contacts expressed concerns over rising input costs and low commodity prices. Overall, the outlook among
contacts continued to weaken for the fourth consecutive quarter but remains slightly optimistic. On net, a slightly greater
share of contacts expect conditions in 2019 to be better or somewhat better than in 2018.
Employment and Wages
Prices
Employment has grown slightly since the previous reporting period. On net, 11 percent of contacts reported
that employment was higher than a year ago. Worker
shortages continued to restrict hiring. Contacts reported
a tight labor market for skilled jobs in construction,
healthcare, and manufacturing. One contact in the tech
industry noted a shortage of technical workers, citing
difficulties finding and retaining migrant workers and
temporary employees. Contacts also reported difficulties
finding unskilled workers with reliable means of transportation to work. Louisville contacts in higher education
noted that enrollments are down as the employeefriendly labor market has led potential students to enter
the workforce instead of pursuing a college degree.
Prices have increased slightly since the previous report.
On net, 20 percent of contacts held that consumer prices
increased relative to last year, which is a moderately
smaller share than three months prior. Nonlabor costs
have increased modestly. On net, 30 percent of business
contacts reported that nonlabor costs increased from a
year ago. Agriculture prices generally decreased across
the District. The prices of corn, cotton, and soybeans
have all shown slight to modest declines since the previous report. Coal and steel prices likewise decreased
modestly, although coal prices remained elevated compared with one year ago.
Consumer Spending
Reports from general retailers, auto dealers, and hoteliers indicate mixed consumer activity since the previous
report. January real sales tax collections increased in
Kentucky, decreased in Missouri, and were flat in Arkansas and Tennessee relative to a year ago. Retailers in
West Tennessee reported mixed activity, and contacts in
Missouri indicated that poor weather negatively impacted
sales. Surveyed auto dealers were split between sales
meeting and falling short of expectations. Multiple dealers expressed concerns over higher interest rates, and
there were reports of a shift in demand toward low-end
vehicles. Arkansas tourism sales tax revenue was flat
year over year.
Wages have increased moderately since the previous
report. On net, 40 percent of contacts reported that
wages were higher or slightly higher than a year ago,
and 39 percent reported that labor costs increased.
Contacts in construction and healthcare indicated that
the tight labor market led to pay raises. One construction
firm reported raising base salaries for the first time in
over a decade. Small business wages throughout the
District grew modestly.
H-1
Federal Reserve Bank of St. Louis
Manufacturing
Banking and Finance
Manufacturing activity has increased moderately since
our previous report. Contacts reported that production,
new orders, and capacity utilization increased in the first
quarter relative to one year ago, and they expect this
growth to continue into the second quarter. Surveybased indexes also indicated that Arkansas and Missouri
manufacturing activity continued to expand from December to January. Several firms announced plans to expand facilities and hire new employees, including manufacturers in the automotive and furniture industries.
However, a Memphis medicine manufacturer announced
plans to lay off workers by mid-March.
Banking conditions in the District have weakened slightly
since the previous report. Demand for commercial and
industry loans decreased relative to a year ago, while
demand for mortgages was flat. Bankers expect no
change to overall loan demand in the second quarter.
Credit standards were generally flat compared with yearago levels but continued to tighten for commercial and
industrial loans. Delinquencies fell on a year-over-year
basis but are expected to remain unchanged in the second quarter.
Agriculture and Natural Resources
District agriculture conditions declined slightly from the
previous reporting period. The number of acres of winter
wheat planted this season decreased slightly from last
year’s total. Local agriculture contacts continued to express pessimism about the industry in the near term as
low commodity prices and rising input costs strain farm
incomes.
Nonfinancial Services
Activity in the services sector has modestly improved
since the previous report. Local contacts indicated that
sales midway through the first quarter met or exceeded
expectations. On net, 20 percent of contacts reported
higher dollar sales than a year ago, and 35 percent
predicted continuing improvement over the next quarter.
Posted vacancies for nonfinancial service jobs increased
across Louisville, Memphis, and St. Louis from December to January. Major transportation firms in the District
announced plans to expand full-time and part-time hiring.
Natural resource extraction conditions declined modestly
from December to January, with seasonally adjusted
coal production falling 6 percent. January production
increased nearly 5 percent from a year ago. ■
Real Estate and Construction
Residential real estate activity has declined slightly since
the previous report. On net, 10 percent of respondents
reported a decrease in demand for single-family homes
compared with a year ago, and about two-thirds of contacts noted that first-quarter sales have fallen short of
expectations. Contacts continued to report inventory
shortages.
Residential construction activity was flat. Contacts reported no change in construction activity relative to the
same time last year. About 10 percent of contacts, on
net, expect activity to increase in the second quarter.
Commercial real estate activity was mixed. Survey respondents reported an increase in demand for industrial
space year over year but no change in the demand for
office buildings and a decrease in demand for retail
properties. These contacts expect demand for office and
industrial space to increase in the next quarter and the
demand for retail properties to continue to decline.
Commercial construction activity improved slightly. Contacts reported increased demand for construction of
office and retail property types. One respondent noted
that labor shortages are slowing down project construction schedules. Memphis area contacts reported that
some companies are choosing to renovate existing
facilities rather than build new ones.
For more information about District economic conditions, visit:
https://research.stlouisfed.org/regecon/
H-2
Federal Reserve Bank of
Minneapolis
The Beige Book ■ February 2019
Summary of Economic Activity
The Ninth District economy grew modestly overall since the last report. Employment grew slightly, hampered by tight
labor and some signs of weakness. Wage and price pressures were moderate. The District economy showed growth in
services, manufacturing, residential construction, commercial real estate, energy, and mining. However, consumer
spending and commercial construction were mixed, and agriculture remained weak.
Employment and Wages
Wage pressures rose moderately. A Minnesota staffing
contact noted that there was “still a lot of wage
pressure,” estimating that wages had risen 5 percent
over the past year. Recent polls by the Minneapolis Fed
found that annual wage increases continued to average
around 3 percent, with variations higher and lower
depending on sector and geography. For example,
average wage increases reported by South Dakota
retailers were lower than those of Minnesota
construction firms. However, five polls each revealed
expectations that wages for the coming year would rise
at a slightly slower rate than the previous year.
Employment rose slightly overall since the last report,
with some signs of weakness. Recent job postings data
(December or January, depending on the state) were
mixed among District states compared with a year
earlier. North Dakota and Montana both saw healthy
increases in job postings, but declines were seen in
Minnesota, South Dakota, and the Upper Peninsula of
Michigan. Several January polls of Minnesota
businesses by the Minneapolis Fed generally found solid
hiring demand. A poll of large employers found moderate
hiring at in-state operations, yet more aggressive hiring
at operations outside the state. Labor markets continued
to be tight. Initial unemployment insurance (UI) claims
fell in most District states during the first five weeks of
2019 compared with the same period a year earlier;
Minnesota was an exception, seeing a 3 percent
increase. Continuing UI claims fell 13 percent across
District states over this period. There were also some
signs of employment weakness. A Minneapolis-St. Paul
staffing contact saw job orders and total hours in
December and January fall by the “high single digits.”
Two major retailers announced plans to close dozens of
stores across the District by this spring. And an eastern
North Dakota manufacturer announced that it will close a
facility, affecting 300 workers, though a contact there
said most workers “should be able to find employment
elsewhere.”
Prices
Price pressures were moderate overall since the last
report, but input costs increased faster than overall
prices. Nearly a third of respondents to a recent survey
of large firms reported input price increases of more than
3 percent from a year ago, while a slightly larger share
reported increases of 2 percent to 3 percent. The pace of
increase in steel prices stabilized recently, according to
contacts in manufacturing and utilities. Retail fuel prices
in District states as of mid-February increased slightly
from the previous reporting period but remained
substantially lower than their level a year earlier; natural
gas prices remained elevated. Prices received by
farmers for corn, wheat, and hay increased in November
compared with a year earlier; prices for soybeans, milk,
eggs, hogs, cattle, and turkeys decreased.
I-1
Federal Reserve Bank of Minneapolis
earlier, while Billings, Mont., and Rochester and St.
Cloud (Minn.) saw small declines.
Consumer Spending
Consumer spending was mixed since the last report. A
vehicle dealership with multiple locations in the District
said total sales of both new and used vehicles were
lower in January compared with a year earlier. A District
contact noted that RV sales saw a slowdown in the
second half of 2018 and that he anticipated “2019 being
down again” by roughly 5 percent due to higher interest
rates and higher unit costs. Sales and other consumer
taxes in North Dakota were notably higher in December,
but flat in January compared with a year earlier. A poll of
South Dakota retailers showed flat sales in the fourth
quarter compared with a year earlier, with only slightly
higher expectations for the first half of 2019. However,
District airports generally showed higher enplanements
in January; in Bozeman, Mont., January passengers
rose 20 percent over a year earlier, and car rentals were
also higher. The ski season in northwestern Montana
was “going really well,” according to a local source, and
lodging sales taxes across the state were higher in
January compared with a year earlier. Minnesota hotels
saw an up-and-down performance. December
occupancy and revenue per available room rose slightly,
but January figures declined.
Commercial real estate grew moderately since the last
report. Industrial property vacancies remained low in the
Minneapolis-St. Paul region despite significant new
construction, and average price per square foot
remained healthy. Office vacancy rates in the region
were stable at somewhat elevated levels. Multifamily
vacancy rates have stayed low throughout much of the
region, while new construction continued. Retail
vacancies have risen in many District markets, as major
bankruptcies continued to roll through the chain-retail
industry. Residential real estate was widely lower.
January home sales registered a decline across most of
the District’s larger cities, with a number seeing doubledigit drops compared with a year earlier.
Manufacturing
District manufacturing activity increased modestly since
the last report. An index of manufacturing conditions
indicated increased activity in January compared with a
month earlier in Minnesota and South Dakota; the index
for North Dakota indicated flat to slightly decreased
activity. Two small firms began expansions at facilities in
Minnesota. In contrast, a supplier of capital equipment
reported that customers were cutting back on
investments. A filtration plant in Minnesota announced
that it was cutting around 100 workers.
Services
Activity in the services sector increased briskly. Contacts
in banking and financial services generally described
conditions as strong, with bullish sentiment among
corporate clients. Demand for loans was strong even as
the cost of credit was increasing. Rail freight demand
was solid, according to industry sources. Domestic
shipments on the Great Lakes nearly doubled in January
relative to a year earlier; total volume for the season was
up 4 percent.
Agriculture, Energy, and Natural Resources
District agricultural conditions were stable at low levels.
Crop production estimates indicated that 2018 was a
strong year throughout the District, with new records in
some states. However, producers continued to struggle
with low commodity prices and expressed concerns
about the effects of trade tensions. Respondents to the
Minneapolis Fed’s fourth-quarter (January) survey of
agricultural credit conditions indicated that farm income
and capital spending decreased relative to a year earlier,
with further declines expected for the coming three
months. Oil and gas drilling in North Dakota and
Montana as of mid-February increased from a month
earlier. District iron ore mines continued to operate at
near capacity. ■
Construction and Real Estate
Commercial construction was mixed since the last
report. An industry database showed that the cumulative
value of construction starts in December rose across the
District compared with the same period a year earlier;
however, January values declined slightly, possibly
influenced by extreme weather. A Minnesota source
noted that the pace of projects was moderating, but
added, “That’s not a bad thing” given the previous pace.
He also noted that the rising pace of construction costs
created “a shrinking pool of projects that make economic
sense.” Residential construction was slightly higher
across the District; a modest increase was seen in
Minneapolis-St. Paul in January compared with a year
I-2
Federal Reserve Bank of
Kansas City
The Beige Book ■ February 2019
Summary of Economic Activity
Tenth District economic activity expanded slightly in late January and February, and contacts expected additional gains
in the months ahead. Consumer spending expanded slightly, led by modest gains in the auto and tourism sectors. Manufacturing activity also grew at a slight pace despite a decline in new orders for exports. Sales rose in the professional
and high-tech, transportation, and wholesale trade sectors, and contacts expected additional gains moving forward.
Commercial real estate activity continued to rise slightly, while residential real estate activity declined further. Conditions
in the energy sector held steady since the previous survey period, and contacts were optimistic that OPEC production
cuts and recent commodity price increases would boost overall activity in the coming months. Farm income continued to
decline slightly, although farmland values remained relatively steady. Bankers reported a modest decline in loan demand, but loan quality, credit standards and deposit levels were stable. Overall employment and employee hours held
steady across the District, although conditions were mixed across sectors. Wages continued to rise at a modest pace,
with additional gains expected moving forward. Input and selling prices rose further, led by higher prices in the retail
sector.
Employment and Wages
expected prices to increase further in the months ahead.
Input prices in the retail sector grew at a strong pace
since the last survey, while input prices in the restaurant
sector rose modestly. Contacts in both sectors noted
steady selling prices and expected growth of input prices
to continue to outpace that of selling prices moving forward. Input prices in the construction supply sector fell
since the previous survey period, while transportation
respondents noted steady input prices. Both sectors
reported moderately higher input prices over year-ago
levels. Manufacturers reported a modest increase in the
prices of finished products and raw materials, and both
were projected to expand further in the coming months.
Overall District employment and employee hours held
steady in late January and February, and respondents
projected slight gains in the months ahead. Contacts in
the wholesale trade, real estate, health services, restaurant, and tourism sectors noted steady-to-modestly
higher levels of employment, while those in the retail
trade, auto sales, transportation, and professional and
high-tech services noted a decline. Employee hours
were mixed across sectors since the previous survey,
but hours in all sectors were steady-to-modestly higher
than year-ago levels.
A majority of respondents continued to report labor
shortages for low- and medium-skill workers, including
positions for truck drivers, all retail store positions, skilled
technicians, and specialty-trade construction workers. A
few contacts also noted shortages for high-skilled positions such as those in information technology, engineering, and finance. Wages continued to expand at a modest pace since the previous survey period and were
strongly above year-ago levels. Additional modest wage
gains were projected for the months ahead.
Consumer Spending
Consumer spending expanded slightly compared to the
previous survey, and contacts expected modest gains in
the months ahead. Retail sales increased slightly in late
January and February and were moderately above yearago levels. Respondents expected retail sales to increase modestly in the next few months. Auto sales grew
modestly since the last survey period as well as compared to year-ago levels. SUVs and trucks sold well,
while sedans sold poorly. Auto contacts expected strong
increases in capital spending in the months ahead despite many contacts noting increases in the cost of credit. Restaurant sales rose slightly, and contacts expected
sales to increase in the coming months. Tourism activity
Prices
Contacts in a majority of sectors reported rising input
and selling prices, with overall input prices up moderately and selling prices up modestly. In addition, contacts
J-1
Federal Reserve Bank of Kansas City
increased modestly compared to the previous survey
period, and contacts anticipated slight sales increases in
the months ahead.
Banking
Bankers reported a modest decrease in overall loan
demand including moderate decreases in the demand
for commercial real estate loans, and slight-to-modest
decreases in the demand for commercial and industrial
loans, residential real estate loans, consumer installment, and agricultural loans. Loan quality remained
unchanged compared to a year ago, but bankers expected a modest decline in loan quality over the next six
months. Credit standards also remained largely unchanged in all major loan categories, and deposit levels
were stable.
Manufacturing and Other Business Activity
Manufacturing activity grew slightly since the previous
survey period, and business contacts in wholesale trade,
transportation, and professional and high-tech sectors
also reported rising sales. Factory activity increased at
both durable and nondurable goods plants, with faster
growth at durable goods plants due primarily to increases in electrical equipment and appliances, and furniture
manufacturing. Production, shipments, and new orders
each ticked down compared to the previous survey
period, but remained above year-ago levels. Contacts
reported slightly lower new orders for exports compared
to both the previous survey period and year-ago levels.
Energy
District energy activity was generally steady compared
with the previous survey period. The number of active oil
rigs fell across the District, primarily in Oklahoma and
Kansas, and the natural gas rig count was also down
slightly. However, production of oil and natural gas remained at high levels, and overall rig productivity continued to improve. Regional energy firms expected the
expansion of LNG pipeline capacity later this year to help
accommodate increased production. Oil prices rose
modestly after dropping in late 2018, but remained below
year-ago levels. Additional OPEC production cuts and
price increases have buoyed expectations among District contacts for future energy activity.
Outside of manufacturing, firms in the wholesale trade
and professional and high-tech sectors experienced
moderate growth in sales, while sales rose slightly at
transportation firms compared to the previous survey
period. In the coming months, wholesale trade, transportation, and professional and high-tech contacts anticipated moderate sales growth.
Real Estate and Construction
District real estate activity remained mixed as residential
real estate activity declined modestly while commercial
real estate activity rose slightly. However, contacts in
both commercial and residential real estate projected
gains in the months ahead. Residential home sales fell
at a modest pace in late January and February, although
they remained moderately above year-ago levels. Residential inventories held steady, and selling prices rose
moderately. Residential home sales, inventories, and
prices were expected to rise in the coming months.
Sales of low- and medium-priced homes continued to
outpace sales of higher-priced homes. Residential construction activity declined modestly including fewer housing starts, less potential buyer traffic, and lower construction supply sales. Respondents in the residential construction sector expected activity to rise in the months
ahead. Commercial real estate activity continued to
expand slightly as sales and absorption rose, and vacancy rates declined slightly. Commercial real estate contacts expected a similar pace of growth moving forward.
Agriculture
Farm income continued to decline slightly, but farmland
values remained relatively stable in the Tenth District.
Farm income decreased throughout the region in the last
survey period according to District representatives, but
modest increases in both crop and livestock prices could
improve revenues for some farm operations moving
forward. Demand for agricultural loans remained strong,
and contacts reported a slight reduction in funding availability. Additionally, repayment rates on agricultural loans
slowed modestly, and interest rates on farm loans increased slightly. Despite persistent weaknesses in farm
finances and higher interest rates, farmland values remained relatively stable. However, a majority of contacts
expected farmland values to decline moderately in 2019.
However, District contacts indicated that demand for
farmland remained high, and the volume of farmland
sales compared to last year increased modestly in Nebraska and Kansas. ■
For more information about District economic conditions visit:
www.KansasCityFed.org/Research/RegionalEconomy
J-2
Federal Reserve Bank of
Dallas
The Beige Book ■ February 2019
Summary of Economic Activity
The Eleventh District economy expanded at a moderate pace. Activity in the manufacturing, housing, and nonfinancial
services sectors improved. Loan volumes ticked up, and retail sales grew modestly. Abundant soil moisture boosted
outlooks in the agricultural sector. Drilling activity declined. Employment expanded moderately, despite a tight labor
market. Wage growth remained elevated, while price growth eased. Outlooks improved; however, some contacts reported weaker-than-expected output/revenue growth over the reporting period and mentioned factors such as tariffs, slower
activity in the energy sector, increased uncertainty, weaker global economy, and labor constraints.
costs, but lower fuel prices were mentioned by transportation service contacts. Selling price growth was slight in
the construction and manufacturing sectors but moderate in service-providing industries. Passing on cost increases to customers was becoming more difficult, and
contacts from various industries mentioned that margins
continued to be under pressure from high costs and/or
increased competition. Conversely, two staffing firms
said they were able to raise bill rates as planned.
Employment and Wages
Employment grew moderately during the reporting period. A lack of qualified candidates continued to challenge
businesses across sectors and skill levels, but shortages
remained most severe for mid-skilled positions such as
nurse aides, heavy equipment technicians, auto mechanics, construction personnel, and factory floor workers. There were multiple mentions of restaurant worker
shortages, and one commercial landscape management
firm said they were looking to fill 75-100 entry-level
positions.
Manufacturing
Overall output growth improved slightly during the reporting period, led by an increase in fabricated metals and
transportation equipment manufacturing. Outlooks
among manufacturers improved compared with the
previous reporting period, but trade issues, labor constraints, the rising cost of credit, and political uncertainty
were cited as factors damping outlooks.
Wage pressures generally remained elevated. One
staffing firm noted that employers were especially willing
to raise wages for jobs paying less than $15 per hour. A
durable goods manufacturer said raising starting hourly
pay by at least 15 percent had helped draw in more and
better-qualified applicants.
Looking ahead, firms were bullish on their hiring plans.
Forty-eight percent of the 384 firms responding to supplemental questions in the February Texas Business
Outlook Surveys said they expect to increase their employment over the next six to twelve months while only 8
percent said they expected to decrease jobs.
Gulf Coast refinery operating rates remained healthy in
January, but contacts said that an oversupplied gasoline
market will drive utilization rates lower. Outlooks were
less optimistic, with demand growth projected to be soft,
particularly in Mexico—a major export market.
Prices
Reports on retail spending were mixed, though overall,
sales expanded modestly. Some retailers noted a slight
uptick in sales activity following the end of the govern-
Retail Sales
Input price growth moderated, particularly in the retail
sector. Homebuilders generally cited stable material
K-1
Federal Reserve Bank of Dallas
ment shutdown. By contrast, others said unfavorable
weather conditions and a higher cost of credit slowed
sales. Growth in online sales was softer than in the last
reporting period, and auto sales weakened. Outlooks
improved slightly, although two contacts said that any
new auto-related tariffs would hurt future sales and/or
business activity.
were six weeks ago; however, bankers remained concerned about the lending impact of uncertainty in U.S.
and global markets.
Energy
Drilling activity in the Eleventh District slowed, with the
rig count declining during the reporting period. Availability of additional pipeline capacity in the Permian Basin,
as early as the end of February, pushed up crude oil
prices in West Texas relative to the Gulf Coast. Firms
were more conservative in their capital spending plans
than in the last report, with most noting that they had
revised down their capital budgets based on WTI crude
priced between $50 and $55. Contacts noted significantly higher uncertainty stemming from U.S.-Iran and U.S.Venezuela policies, softening global demand, and trepidation about OPEC’s willingness to maintain production
cuts.
Nonfinancial Services
Activity in the nonfinancial services sector accelerated in
the reporting period. The increase was widespread and
led by growth in the professional, scientific and technical
services sector. Demand for staffing services strengthened after a deceleration in activity at yearend 2018, and
growth was broad-based geographically and across
industries. Revenues rose in the health care and administrative support services industries. Reports from transportation services firms were mixed, with rail shipments
down year over year, but air and sea cargo volumes up
significantly over the same period. Airlines, accommodation, and food services firms saw slower activity in the
earlier part of the reporting period partly because of the
government shutdown, but demand/revenues in both
industries have firmed up since then.
Agriculture
Prospects for 2019 crops heading into the spring planting season were strong thanks to favorable soil moisture
conditions. Producers were behind in field preparation
work because of soil saturation, with planting expected
to be delayed in some regions. Overall, contacts expect
average to above-average crop yields this year but noted
the financial situation of many producers continued to be
a concern due to generally low crop prices. On the livestock side, grazing conditions were looking better this
year than last and beef demand remained strong. ■
Uncertainty continued to cloud many contacts’ outlooks
in the service sector, and trade policy issues with China
and Brexit were cited as significant potential headwinds.
Construction and Real Estate
Activity in the housing market improved. Contacts noted
an uptick in traffic and new home sales since the start of
the year, following a slowdown at yearend 2018. Builders
remained selective in signing new deals, and housing
starts were expected to be relatively flat in 2019. Outlooks were more optimistic than in the last report, though
a few contacts said it was too early to tell whether the
recent uptick would translate into a good spring market.
Conditions were stable in the apartment market, and the
expectation was for rent growth to remain solid in Austin
and Fort Worth and to firm up in Houston. Industrial
activity generally remained solid, and reports on the
office market indicated that leasing was most active for
new or recently renovated class A space.
Financial Services
Loan volumes increased slightly over the reporting period, led by higher commercial real estate lending. Consumer lending ticked up, which one contact attributed to
loan requests from workers affected by the recent government shutdown. Commercial and industrial and residential real estate loan volumes dipped. Loan pricing
remained competitive, while deposit volumes declined
notably. Outlooks were slightly more optimistic than they
For more information about District economic conditions visit:
www.dallasfed.org/research/texas
K-2
Federal Reserve Bank of
San Francisco
The Beige Book ■ February 2019
Summary of Economic Activity
Economic activity in the Twelfth District continued to expand at a moderate pace during the reporting period of January
through mid-February. Conditions in the labor market remained tight, and wage growth was moderate. Price inflation
was unchanged. Sales of retail goods expanded modestly, while activity in consumer and business services was strong.
Conditions in the manufacturing sector strengthened moderately, and conditions in agriculture deteriorated modestly.
On balance, contacts reported that residential and commercial real estate market activity expanded moderately. Overall
lending activity was flat.
Employment and Wages
better retain and attract experienced loan officers.
Conditions in the labor market remained tight, with persistent worker shortages reported across many industries and skill levels. Hiring picked up moderately on
balance. Employment at a large San Francisco software
and consulting company grew notably as demand for its
services increased. A cattle ranching company in Arizona also increased employment to meet growing demand.
In the Mountain West, a regional bank noted that its
hiring was limited only by a shortage of qualified labor.
The bank hoped to be able to increase employment
further when it expands its lending business later this
year. A steel manufacturer in Oregon reported that hiring
activity was flat. A fruit grower in the Pacific Northwest
noted that weaker profit potential stemming from lower
market prices resulted in excess labor capacity in the
industry and could lead to layoffs.
Prices
Overall, price inflation was unchanged over the reporting
period. A contact in Seattle noted somewhat higher
prices at grocery stores and restaurants due to the robust local economy. A contact in the California utility
sector observed modest upward pricing pressures for
electricity rates due mainly to higher financing costs
following recent wildfires. A contact in Central California
saw slightly higher crop prices, due in part to lower inventories, while elsewhere in the District, pricing pressures for fruit and dairy remained subdued. A contact in
the Mountain West observed that fuel prices fell further.
Lumber prices were stable, but at a noticeably lower
level than last year, and contacts in California and Oregon reported that price inflation of other building materials was weak.
Wage growth continued to increase moderately across
most sectors due to continued brisk labor demand
amidst persistent shortages of qualified workers. Contacts emphasized that wage growth was especially noticeable for higher-skilled workers. Demand for highskilled warehouse workers and truck drivers picked up in
the Mountain West, resulting in wage pressures. Employers continued to raise starting salaries for most
information technology and cybersecurity positions. A
community bank in Central California enhanced its bonus structure and increased its retirement benefits to
Retail Trade and Services
Sales of retail goods expanded modestly. Contacts in the
Mountain West reported that retail sales activity beat
expectations for a moderation following the holiday season and against the backdrop of the government shutdown. A contact in the home goods retail sector in Arizona noted solid sales activity. One contact in the Mountain
West reported that retailers are attentive to ongoing
trade negotiations, as certain product supply chains
depend on inputs from China and could be negatively
L-1
Federal Reserve Bank of San Francisco
impacted if no resolution is reached in the coming
months.
seen a year ago. A California contact noted that the
outlooks for crop yields and inventories improved further
after rainfall beat expectations over the reporting period.
Activity in the consumer and business services sectors
was strong. Demand for software products and consulting services expanded solidly in Northern California, and
one contact noted that, with IPO activity expected to pick
up in the coming year, the outlook for most technology
consulting and financial services businesses was optimistic. A major shipping and logistics business reported
plans to increase investment in automation to meet
growing consumer and business demand more efficiently.
Real Estate and Construction
Real estate markets expanded moderately on balance.
While most contacts continued to acknowledge slower
activity over the past several months, they did not notice
any significant deterioration over the reporting period.
Contacts in the Pacific Northwest and Mountain West
generally noted stable to slightly improved residential
construction activity. A contact in Oregon reported a
modest increase in building and selling activity due in
part to lower mortgage rates, though a few other contacts observed a slight decline in building activity in
some areas due to softer demand. A contact in Central
California observed tepid selling activity, while contacts
in Southern California and Idaho saw solid demand
supporting still-elevated home prices. Contacts generally
noted that residential inventories and time-on-market
had risen slightly but were still low by historical standards.
Manufacturing
Conditions in the manufacturing sector strengthened
moderately overall. A steel manufacturer in Oregon
noted strong activity in the industry due to lower competition from abroad arising from trade policy actions. A
contact in Northern California reported that activity in the
semiconductor industry continued on solid footing. Deliveries of commercial aircraft were flat from the same
period last year, while new orders increased significantly.
A contact in the Pacific Northwest observed that activity
at sawmills ticked down, due in part to poor weather
affecting raw material deliveries and slower growth in the
national housing market. The outlook in the manufactured lumber sector was for solid building activity as
weather conditions improve.
In the commercial real estate market, contacts reported
stable construction activity. Contacts in the Pacific Northwest generally noted that construction activity has not
deviated noticeably from its solid trend. However, in
Oregon, a contact observed that building activity was
down slightly on a year-over-year basis. A contact in
Central California saw commercial leasing and sales
activity slow modestly.
Agriculture and Resource-Related Industries
Conditions in the agriculture sector deteriorated modestly. Many contacts continued to cite trade policy changes
as a source of weaker sales abroad and general uncertainty, though factors such as a stronger dollar and the
moderation in the housing market also played a role. A
contact in Eastern Washington observed that demand
from China for fruit crops declined, and a contact in
California noted that walnut exports declined. A raw
lumber producer in Oregon reported that sales were
significantly lower on a year-over-year basis, due to
moderating construction activity and lower demand from
China. Oversupply in dairy markets persisted, hurting
profitability and forcing some producers in the Mountain
West to exit the market. In Idaho, profitability at beef
producers picked up, though it was still below levels
Financial Institutions
Lending activity was generally flat over the reporting
period. A contact at a national small business lending
service based in California reported that loan demand
significantly beat expectations. However, contacts in the
Mountain West noted that while most business borrowers renewed loans at existing levels, a few reduced
credit lines due to lower demand for their products.
Contacts at community banks in Oregon and Central
California noted that loan growth slowed slightly, while
competition between lenders was brisk. Most contacts
reported that credit quality remained healthy. However, a
contact in the Mountain West reported that the balance
sheets of dairy producers weakened as profitability declined in that market. ■
L-2
Cite this document
Federal Reserve (2019, March 19). Beige Book. Beige Book, Federal Reserve. https://whenthefedspeaks.com/doc/beige_book_20190320
@misc{wtfs_beige_book_20190320,
author = {Federal Reserve},
title = {Beige Book},
year = {2019},
month = {Mar},
howpublished = {Beige Book, Federal Reserve},
url = {https://whenthefedspeaks.com/doc/beige_book_20190320},
note = {Retrieved via When the Fed Speaks corpus}
}