Beige Book
For use at 2:00 PM EDT
Wednesday
October 16, 2019
The Beige Book
Summary of Commentary on Current Economic Conditions
By Federal Reserve District
October 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 Cleveland
based on information collected on or before October 7, 2019. This
document summarizes comments received from contacts outside the
Federal Reserve System and is not a commentary on the views of
Federal Reserve officials.
National Summary
The Beige Book ■ October 2019
Overall Economic Activity
The U.S. economy expanded at a slight to modest pace since the prior report as business activity varied across the
country. Reports from Districts representing states in the southern and western U.S. generally were more upbeat than
Districts representing the Midwest and Great Plains. Household spending was solid on balance: nonauto retail sales
increased modestly, while light vehicle sales were generally robust. Tourism and travel-related spending was up modestly. Housing market conditions changed little. On the business spending side, nonresidential construction increased
at a slightly slower yet still modest pace, while leasing activity advanced at a slow but steady rate. Manufacturing activity continued to edge lower. Contacts in some Districts suggested that persistent trade tensions and slower global
growth weighed on activity. The early impact of a recent auto strike was limited. Freight shipments stabilized after
falling during the previous reporting period. Bankers in many Districts reported moderately rising loan volumes, while
activity in nonfinancial services increased solidly. Agricultural conditions deteriorated further due to the ongoing impacts
of adverse weather, weak commodity prices, and trade disruptions. Business contacts mostly expect the economic
expansion to continue; however, many lowered their outlooks for growth in the coming 6 to 12 months.
Employment and Wages
On balance, employment rose slightly amid reports of persistent worker shortages. Labor market tightness across skill
levels and occupations was widely cited as a factor restraining hiring. Districts often reported relatively stronger demand for workers in the professional services and information technology industries. By contrast, hiring in freight and
manufacturing was weak. A number of Districts reported that manufacturers reduced their headcounts because orders
were soft. However, some firms were more concerned about the longer-term availability of workers and subsequently
chose to reduce hours rather than staff levels. Wages rose moderately in most Districts, with upward pressure noted for
lower-skill workers in the retail and hospitality industries and for higher-skill professional and technical workers. A number of smaller firms reported difficulty matching pay offers from larger firms. Broadly, employers continued to use nonwage approaches such as bonuses and benefits to attract and retain talent.
Prices
Most Districts characterized the recent pace of price increases as modest. Both retailers and manufacturers noted
rising input costs, often for items subject to new tariffs, but retailers had relatively more success passing through these
cost increases to their customers. Despite a recent increase in fuel costs, some reports suggested that shipping rates
remained lower than they were earlier this year because of excess capacity in the industry.
Highlights by Federal Reserve District
Boston
New York
Signs of slowing have become more widespread in recent weeks, although software and IT services firms reported results that exceeded expectations and real estate markets have not weakened. Outlooks have softened; contacts attribute some of the softening to increased uncertainty, not poorer current results.
Regional economic growth slowed to a subdued pace.
Job creation remained sluggish, largely reflecting a
shortage of available workers, as labor markets remained very tight and wage growth picked up. Prices
continued to rise modestly. Service sector activity weakened noticeably, and real estate markets softened somewhat.
1
National Summary
Philadelphia
St. Louis
On balance, business activity continued at a modest
pace of growth during the current Beige Book period.
Further labor market tightening caused “acute pressure,”
described as increased hiring difficulty, constrained
growth, and higher wages. Still, wages grew moderately
and prices rose modestly overall. Most firms expressed a
positive outlook, with ongoing caution amid heightened
uncertainty.
Economic conditions have improved slightly since the
previous report. Contacts from multiple industries noted
a heightened sense of economic uncertainty. Consumer
spending activity ticked up. Local bankers reported
growth in outstanding loan volumes. However, manufacturing activity contracted slightly, and row crop production levels are expected to be well below 2018 levels.
Cleveland
Ninth District activity grew at a slight pace. Employment
was flat. Labor demand remained healthy with some
signs of softness. Manufacturing activity decreased
slightly, with some contacts expecting a further slowdown in the final quarter of 2019. Consumer spending
was mixed, but late-summer tourism was solid. Commercial construction and real estate increased, but residential was mixed. Oil drilling increased slightly.
Minneapolis
District activity was stable on balance. Professional and
business services, auto sales, and home sales rose
while residential construction and freight fell. Manufacturing activity stabilized after a couple periods of decline.
Employment was stable overall, though there were some
scattered reports of softening. Wages increased modestly because of tight labor markets. Selling prices rose
modestly.
Kansas City
Richmond
Economic activity expanded slightly in late August and
September. Consumer spending rose modestly, and
sales in the transportation, professional and high-tech
services, and wholesale trade sectors were solid. Real
estate activity increased, but residential construction activity slowed. However, energy and manufacturing activity declined, and agricultural conditions remained weak.
The Fifth District economy continued to grow at a modest rate. Manufacturers saw declines in shipments and
new orders; however, port and trucking activity rose. Retail, tourism, and nonfinancial service firms generally experienced slight to moderate growth. Residential and
commercial real estate sales, leasing, and construction
picked up, overall. Labor markets remained tight. Wages
and prices rose moderately.
Dallas
Economic activity continued to expand moderately. Energy activity declined, but growth remained solid in manufacturing and services. Home sales increased and loan
demand accelerated. Selling prices were largely flat, as
firms’ ability to pass through cost increases remained
limited. Hiring continued at a steady pace. Outlooks were
mixed and uncertainty remained elevated.
Atlanta
The economy expanded at a modest pace. Labor markets remained tight, and reports of wage pressures were
more widespread among low-skilled positions. Nonlabor
input costs rose for some contacts. Overall retail sales
were mixed. Residential real estate activity improved,
while nonresidential activity was stable. Manufacturing
activity rebounded since the previous report.
San Francisco
Economic activity in the Twelfth District expanded at a
modest pace. The labor market remained tight, and
wage growth was moderate. Reports on price inflation
were mixed. Sales of retail goods increased modestly,
and consumer and business services activity expanded
slightly. The pace of commerce in the manufacturing
sector was little changed, and the agriculture sector
slowed further. Activity in residential and commercial real
estate markets was solid, and lending grew further.
Chicago
Economic activity increased slightly overall. Employment, consumer spending, business spending, and construction and real estate all increased slightly. Manufacturing production declined a bit. Wages and prices rose
slightly and financial conditions improved modestly. The
crop harvest got off to a slow start, as rains delayed
fieldwork.
2
Federal Reserve Bank of
Boston
The Beige Book ■ October 2019
Summary of Economic Activity
Business activity showed signs of slowing in the First District. Retail results were mixed, while restaurants and tourism
contacts cited recent signs of softening. Few manufacturers provided positive reports. By contrast, software and information technology services firms said revenues were up, some strongly. Commercial real estate activity remained
strong in the Boston and Portland metro areas and picked up in Providence. Housing prices across the region continued
to rise. Except for software and IT services, most responding firms had downgraded their outlooks since the last round.
prices. Software and IT services respondents reported
no price increases and no plans to raise prices in the
near future.
Employment and Wages
Labor markets remained tight even as a couple of firms
began layoffs. Retailers said the labor market was tight.
Among manufacturers, however, no contact reported increasing headcount and two – which supply industrial
customers – reported significant layoffs, about 5 percent
of their staff. One also instituted furloughs and shortened
workweeks; another respondent reported a marked increase in unsolicited resumes for skilled machinists. By
contrast, two manufacturing contacts reported that they
still have difficulty finding qualified employees. Software
and IT services contacts indicated that while headcount
and turnover were largely unchanged, most planned to
hire more front-facing sales roles in addition to technical
and R&D staff.
Retail and Tourism
Responding retailers reported sales ranging from down
about 6 percent to up about 2 percent year-over-year;
the outlook was less optimistic than in the last few
rounds. One retailer noted that while the upcoming holiday season may provide a boost, expectations were that
sales growth for 2019 and into 2020 would be pretty flat.
Massachusetts restaurant sales were up 5.5 percent for
the year ending June 30. Much of the overall increase
was driven by sales in the last half of 2018. The slower
first-half trend continued into July and August, as sales
in both months were down year-over-year. A surge in
home delivery services reportedly ate into restaurant
profit margins already under pressure from ongoing increases in operating costs and more competition from an
over-supply of restaurants relative to the customer base.
These factors combined to make the outlook uncertain.
Prices
Diverse influences across markets led to varied price
pressures. Retailers reported prices were fairly steady
while Massachusetts restaurants cited an average 3 percent increase in menu prices year-over-year. Manufacturers indicated that price changes were mixed. On one
hand, declines in activity have reduced pricing pressure.
Two contacts noted significant drops in paper and pulp
pricing due to reduced demand from China. Three contacts said that price and availability of trucking services
improved considerably since last year. On the other
hand, tariffs have raised costs for several manufacturers.
A producer of frozen fish said that tariffs had driven up
Cape Cod had an unexpectedly challenging summer
tourist season. Bookings for overnight accommodations
were down, though day travel to the Cape was up,
judged by an increase in passenger traffic on the bridges
and weekend train service. One theory was that the
strong US dollar prompted more Americans to vacation
abroad this summer. Media attention was “overly” focused on increased shark sightings and (rare) tornados.
A-1
Federal Reserve Bank of Boston
Autumn business on Cape Cod was shaping up to be
good, but a contact worried that tourism may be entering
a slower pattern compared to 2017 and 2018, when
tourist activity reached historic highs.
market in Boston was also strong, with high loan volume
and low interest rates. In the Greater Portland area, both
construction and leasing activity in office, industrial, and
retail markets were up. In the leasing market, vacancies
were low and the average rent rose about 5 percent over
the past year. The investment sales market was also
strong. The outlook remained positive for Boston and
was optimistic for Portland.
Manufacturing and Related Services
Reports from manufacturers were mostly negative. Four
of the seven respondents reported lower sales versus
the same period last year, two reported flat sales and
only one firm, a defense contractor, reported higher
sales. Several contacts attributed declines to trade issues; a manufacturer of filtration membranes said that
chip manufacturers were delaying new plant construction
due to uncertainty about trade policy. The farm-sector recession reduced demand for heavy equipment.
In the Providence area, the office leasing market picked
up as the summer season ended, but demand still remained tepid. Demand for buying industrial buildings
was strong, but supply was limited. As a result, office
rents increased moderately, while industrial rents rose
faster. Market activity was expected to grow in October
and early November. Transaction volume in the Providence investment sales market was limited. According to
a contact, people were hesitant to commit to new construction and investment projects because of uncertainty
about the next recession. In Greater Hartford, leasing
activity as well as construction activity stayed low. The
industrial leasing market flattened as companies gave up
space, and the investment sales market slowed slightly.
The outlook for Connecticut was less upbeat than outlooks for other New England states.
No contacts reported positive revisions to capital spending plans and two reported significant cuts. An industrial
supplier planned to cut capital expenditures versus last
year by as much as 25 percent versus a previouslyplanned 5 percent increase.
Five of seven contacts reported downward revisions to
their 2020 outlook. Three of those remained positive but
less positive than earlier. One industrial firm expected a
recovery to start in the second half of 2020. Several
compared now to 2015 when industrial demand slowed
markedly but the economy as a whole did not.
Residential Real Estate
Residential real estate markets in the First District continued to moderate in August. For single family homes,
closed sales decreased moderately from August 2018 to
August 2019 in Rhode Island, Massachusetts, Boston,
and New Hampshire. Median sales prices rose in all four
reporting areas. Massachusetts, Boston, and New
Hampshire experienced double-digit drops in inventory.
For condos, sales were down in Massachusetts, Boston,
and New Hampshire and up in Rhode Island. Median
sales prices for condos were up in all reporting areas but
Boston. Vermont and Maine – reporting combined statistics for single family homes and condos – cited moderate
price increases, slight drops in closed sales in Vermont,
and modest sales increases in Maine.
Software and Information Technology Services
Growth in demand in the past quarter exceeded expectations for the majority of New England software and IT
services sector respondents. All three contacts experienced positive demand growth. Two noted that market
interest in subscription and cloud-based offerings had
picked up month-to-month. Revenue growth remained
positive and ranged from 2 percent to 24 percent yearover-year. For most firms, capital expenditures were unchanged, but one mentioned considering a switch from
housing their own servers to migrating their operations
onto the cloud, which would significantly change the
structure of their capital expenses. All in all, contacts
were upbeat in light of a third quarter that exceeded
expectations, but many remained wary of political and
macroeconomic uncertainty in the longer-term.
The ongoing shortage of active listings drew attention
from many respondents. According to the Rhode Island
contact, “Regardless of what happens to interest rates
over the next year, we can’t sell what we don’t have
available for sale.” ■
Commercial Real Estate
Commercial real estate activity in the First District continued to strengthen overall, but with inconsistencies in
performance across geographic submarkets. Boston’s
leasing market continued to be strong as all contacts described low vacancy and high absorption. Asking rents in
prime Boston locations increased by 20 percent in the
last 9 to 12 months according to one contact. Construction activity in Boston was robust. The investment sales
For more information about District economic conditions visit:
www.bostonfed.org/regional‐economy
A-2
Federal Reserve Bank of
New York
The Beige Book ■ October 2019
Summary of Economic Activity
Growth in the Second District economy was subdued in the latest reporting period. The labor market remained very
tight, as employment levels were flat, and wage growth picked up slightly. Input price pressures have remained moderate, while selling prices have risen modestly. Manufacturing activity was up marginally, and transportation business
rebounded, while business was reported to be weaker in most service industries. Business contacts generally expressed considerably less optimism about the near-term outlook. Consumer spending was mixed, with strength in auto
sales but weakness in other areas. Tourism has remained fairly robust. Housing markets have been softer, on balance,
though the residential rental market has continued to firm. Commercial real estate markets have been steady to softer,
and new commercial construction has tapered off somewhat. Finally, banks reported a pickup in loan demand from the
household sector, though the financial sector overall showed further signs of weakening.
employment agency notes that finance-sector firms are
largely holding the line on salary increases, and there is
a wide gap between salary offers and job-seekers’ demands.
Employment and Wages
The labor market has remained stable and very tight
across the District, but hiring has been subdued. Business contacts have continued to report trouble finding
workers to fill a wide range of jobs such as construction
contractors, truck drivers, auto mechanics, IT professionals, accountants, retail clerks, and nursing home attendants. A major New York City employment agency noted
that almost all job candidates are merely jumping from
other jobs. However, an upstate contact maintains that
there has been a decrease in job-hopping.
Prices
Businesses in most sectors indicated continued moderate increases in input costs and modest growth in selling
prices. However, retailers have been reporting increasingly widespread hikes in the prices they pay, and, to a
somewhat lesser extent, in the prices they charge. One
contact at a major chain noted that tariffs were raising
costs, particularly on home goods, but that consumers
were resistant to price increases on such merchandise.
Contacts in the leisure & hospitality sector, however,
have held prices steady and, in some cases, lowered
prices. For example, rates on New York City hotel rooms
and Broadway theater tickets have receded.
Businesses overall continued to report little change in
staffing levels. Contacts in real estate, education &
health, and leisure & hospitality reported continued
modest net hiring, while those in manufacturing, wholesale trade, transportation, and information reported
modest declines in employment, on balance. Looking
ahead to the next six months, businesses in manufacturing and most service sectors still plan on adding to staff;
however, wholesale trade and information businesses
anticipate modest declines in employment.
Looking ahead, contacts in retail, wholesale, transportation, and manufacturing expressed a greater inclination
to raise prices than others. Manufacturers and wholesalers anticipated the most widespread hikes in prices paid.
While businesses generally report that wage growth has
remained moderate, there has been more widespread
escalation in some lower-wage industries such as retail
trade and leisure & hospitality. A large New York City
Consumer Spending
Retail sales have softened in recent weeks and were
mostly little changed from a year earlier. A major retail
B-1
Federal Reserve Bank of New York
chain noted that sales were down and somewhat below
plan in September, partly reflecting weak demand for
home goods. On a more positive note, some upstate
New York retailers reported continued modest growth in
both sales activity and shopper traffic. In general, inventories were said to be near desired levels, helped by
increased discounting over the summer.
City, whereas rental markets have continued to strengthen moderately.
Prices of New York City condos and co-ops, which had
been fairly steady through mid-year, slipped noticeably in
the third quarter—most sharply in Manhattan. A local
real estate expert noted that, while the city’s “mansion
tax” (effective July 1) has curtailed high end sales, the
price declines have occurred across the spectrum. Moreover, the inventory of resale inventories has risen noticeably. In contrast, home prices in the suburbs north of
New York City have continued to rise slightly, while sales
volume and inventory levels have been steady.
Sales of both new and used vehicles have remained
solid in recent weeks, according to dealers in upstate
New York. Inventories of new vehicles remained somewhat above desired levels, but there is some concern
about maintaining ample inventories (especially of parts)
if the GM strike drags out. Dealers indicated that service
departments have remained busy and characterized
consumer credit conditions as being in good shape.
The rental market has continued to trend stronger. Residential rents have continued to rise at a 3-5 percent
pace, and the high end of the market has out-performed
in recent months. Rental vacancy rates have declined
further in New York City, and landlord concessions have
continued to recede, though they remain fairly prevalent.
Manufacturing and Distribution
Manufacturers reported steady to slightly rising business
activity. On the distribution side, transportation contacts
indicated a modest pickup in activity, while wholesalers
noted a significant drop-off in business.
Commercial real estate markets across the District have
generally been steady to slightly softer. Office rents have
been mostly flat, while availability rates have been mixed
but up slightly, on balance, while leasing activity has
slowed. Industrial markets have shown some signs of
softening: rents have continued to rise but at a slower
pace, while availability rates have begun to trend up. The
market for retail space has remained soft.
Looking ahead, manufacturers and wholesalers have
grown less optimistic about the near-term outlook, while
transportation firms have become somewhat more optimistic. Contacts in all these sectors have expressed
ongoing concern about tariffs and trade tensions and the
related uncertainty going forward.
New multi-family construction starts have weakened
noticeably across the New York City area, though there
has been a modest pickup in upstate New York. Ongoing
multi-family construction has remained fairly brisk. New
office and industrial construction has weakened slightly
across the District.
Services
Businesses across almost all service industries reported
some weakening in activity, on balance, since the last
report. However, contacts in leisure & hospitality noted a
leveling off in activity, following a substantial pickup in
the last report. Broadway theaters reported that attendance and revenues picked up noticeably in the second
half of September, following a sluggish spell in August
and early September. Hotel occupancy remained solid
across most of the District.
Banking and Finance
Small to medium sized banks in the District reported a
rise in demand for consumer loans and residential mortgages but steady demand for commercial mortgages
and C&I loans. Bankers reported higher refinancing
activity. Banks reported unchanged credit standards and
narrowing spreads across all loan categories. Contacts
also reported widespread decreases in the average
deposit rate. Finally, banks reported lower delinquency
rates for consumer loans, but stable delinquencies
across other categories. ■
Other service industries reported softening activity—
particularly those engaged in information services. Finance and real estate firms reported notable weakening,
while professional & business and education & health
service firms reported flat to modestly declining activity.
Service firms, in general, have grown somewhat less
optimistic about the near-term outlook.
Real Estate and Construction
Housing markets across the District have been mixed
but, on balance, softer since the last report. The home
sales market has weakened, especially in New York
For more information about District economic conditions visit:
www.newyorkfed.org/regional‐economy
B-2
Federal Reserve Bank of
Philadelphia
The Beige Book ■ October 2019
Summary of Economic Activity
Aggregate Third District business activity continued at a modest pace of growth during the current Beige Book period.
Nonauto retail sales accelerated to a moderate pace of growth, and manufacturing continued to grow moderately. Nonmanufacturing and tourism continued at a modest pace of growth. Construction activity for residential and nonresidential
buildings appeared to hold steady this period, as did commercial leasing activity; these three sectors had declined in the
prior period. Sales of new autos and of existing homes continued to decline – at a slight and a moderate pace, respectively. Labor markets tightened further throughout the District, and wages continued to grow moderately. Overall, price
pressures remained modest. The firms’ outlook for growth over the next six months remained positive but softened, with
less than half of all firms anticipating increases in general activity. Contacts frequently noted ongoing caution in the
business plans of their clients and themselves, but most expected current business conditions to continue.
Employment and Wages
services. The share of nonmanufacturing firms reporting
increases in prices edged lower, while the share of manufacturing firms reporting increases rose. Roughly onehalf to two-thirds of the firms reported no change in
prices over the period. Most banking contacts continued
to note no signs of inflation.
Employment growth continued at a modest pace during
the current Beige Book period. About two-thirds of nonmanufacturing firms reported increases in staff – a bit
higher than in the prior period – while the share of manufacturers reporting increases held steady at about onefourth. Average work hours have edged down since the
prior period.
Looking ahead six months, the anticipation of higher
prices broadened further among manufacturers. The
percentage of manufacturing firms that expect to pay
higher prices for inputs rose to above 50 percent, and
the share expecting to receive higher prices for their own
goods increased to almost 45 percent.
Tight labor market conditions continued to be cited as a
factor in slow hiring by nearly all firms. Staffing firm
contacts described “acute pressure” in recent months,
which has resulted in still fewer job applicants, more
difficulty signing prospective job candidates and retaining
current employees, and ongoing wage pressures.
Manufacturing
On balance, manufacturers continued to report moderate
growth in activity. Although nearly half of all the firms
reported no change in shipments and in new orders, the
percentage of firms noting increases significantly outstripped those noting decreases for each metric.
Wage growth continued at a moderate pace, with contacts reporting wage increases ranging from above 3
percent to 6 percent on a year-over-year basis. Reports
were further mixed, with some contacts noting that wage
growth had steadied and others noting an acceleration.
The share of nonmanufacturing contacts who reported
increases in wage and benefit costs edged down further
to 40 percent; only 4 percent reported decreases.
The makers of lumber products, paper products, chemicals, fabricated metal products, and industrial machinery
tended to note gains in new orders and shipments. Electronics producers reported little change, and the makers
of primary metal products reported mixed results. Overall, these trends are not substantially different compared
with the same period one year ago.
Prices
The firms reported overall modest increases for both
input prices and prices received for their own goods and
C-1
Federal Reserve Bank of Philadelphia
Comments have been mixed. Several firms noted slowing activity, heightened uncertainty, and ongoing concerns over tariffs; a primary metals producer noted that
“customers were hesitant.” However, others noted product segments with strong demand and mixed effects
from tariffs.
somewhat. Meanwhile, credit card lending also continued at a moderate pace but appeared to edge slower.
During the current period (reported without seasonal
adjustments), volumes appeared to grow robustly in
home mortgages, commercial real estate loans, and
other consumer loans (not elsewhere classified). Home
equity lines and auto lending grew moderately, while
commercial and industrial loans grew modestly.
Manufacturers’ expectations of activity over the next six
months were mostly unchanged. Expectations of shipments and of new orders edged lower but remained
above long-term nonrecession averages. Expectations of
future employment and planned capital spending also
remained above average but rose a bit.
Most banking contacts described incremental growth of
the overall economy, constrained by a tight labor market
and low housing inventories, with little shift in low delinquency rates. Banking contacts noted ongoing uncertainty and more widespread talk of a (mild) recession risk in
2020. However, most indicated that they and their clients
felt that the U.S. economy was fundamentally sound and
that they were planning (cautiously) for ongoing growth
next year.
Consumer Spending
Contacts for malls and convenience stores reported
moderate growth in nonauto retail sales – a somewhat
faster pace than during the prior period. Mall store operators noted “solid traffic” and moderate year-over-year
growth during the back-to-school season. Convenience
store contacts continued to report strong sales – boosted
by job stability among consumers and great weather.
Real Estate and Construction
Homebuilders reported no change in contract signings in
the current period, on balance, although reports ranged
somewhat from “continued strength” to “slightly off” from
the prior period. To varying degrees, builders are shifting
their product offerings to capture lower price points;
however, production costs remain a challenge.
Auto sales edged lower but remained near high levels –
sustained by fleet sales, even as consumer demand
continued to decline, according to contacts. Pennsylvania dealers noted that year-over-year sales had started
to slow, while New Jersey dealers reported lower August
and September combined sales. However, year-overyear sales growth through September year to date remained positive in both states.
Existing home sales continued to decline moderately on
a year-over-year basis across most local markets, as
exceedingly low inventories continued to constrain sales.
A large Philadelphia-area broker noted that the trend
continued through September and is not expected to
shift much in 2020.
Tourism activity continued to grow at a modest pace. A
Delaware shore contact reported strong visitor traffic,
aided by excellent weather, and noted record levels of
spending at local shops and restaurants, even as three
new restaurants opened. Atlantic City casino revenues
continued growing modestly.
On balance, commercial real estate construction and
leasing activity seemed to hold steady at relatively high
levels. Most contacts were bullish about current activity
and noted that while the project pipeline has thinned,
groundbreakings, project planning, and new inquiries
remained relatively steady. One design firm noted it is
struggling to keep pace with demand. Management firms
noted positive net absorption, falling vacancy rates, and
rising rents in many office and industrial segments. ■
Nonfinancial Services
On balance, activity at service-sector firms continued at
a modest pace of growth. The percentage of firms reporting increases in current revenues and in new orders
remained positive but edged lower. One large firm noted
continued improvement in the already low delinquent
accounts receivables of its consumer base. This improvement was observed throughout the Third District
and the country. Nearly one-half of the firms – slightly
less than in the prior period – expect growth over the
next six months.
Financial Services
Financial firms reported continued moderate growth in
overall loan volumes (excluding credit cards) on a yearover-year basis, although the rate seemed to strengthen
For more information about District economic conditions visit:
www.philadelphiafed.org/research‐and‐data/regional‐
economy
C-2
Federal Reserve Bank of
Cleveland
The Beige Book ■ October 2019
Summary of Economic Activity
Overall economic activity in the District was stable on balance, though reports varied by sector. A still favorable economic environment continued to boost demand for professional and business services generally, but some firms indicated
that heightened uncertainty also contributed to the increase as customers sought more consulting services. Home sales
and auto sales rose over the period, while consumer spending on nondurable goods was flat. Slowing global growth and
trade tensions continued to weigh on manufacturing, but output stabilized as some customers rebuilt inventories after
allowing them to run too low. Lenders suggested that overall loan demand was unchanged, even as lower interest rates
boosted lending for homes and autos. Nonresidential construction remained strong, while residential construction softened modestly. Freight activity continued to fall. Employment was stable on balance, though reports by sector were
mixed. Still, wages rose modestly because of persistently tight labor markets. Selling prices increased modestly on
balance as firms sought to compensate for higher labor costs as well as increased pressure from rising nonlabor costs.
Employment and Wages
raised starting pay relative to wages of existing staff.
Many real estate firms increased wages, citing a “war for
talent.” By contrast, most construction contractors did not
raise wages in this period, nor did most freight haulers.
Employment was generally stable in the Fourth District,
although there were scattered reports of softer demand
for labor. Firms in the professional and business services
sector continued to add staff in response to robust demand. Most apparel and general merchandise stores
held headcounts steady, as did construction contractors.
Some bankers curbed hiring to focus on operational
efficiencies and to reduce expenses. By contrast, some
firms reduced employment levels as a direct result of
softer demand for goods and services. Specifically,
some manufacturers froze hiring and reduced hours, and
planned to keep payrolls and hours at lower levels until
product demand picked up again. Freight haulers (both
trucking and rail) reduced headcounts to “align [human]
resources to reduced volume levels.”
Prices
On balance, selling prices rose modestly. Most changes
in this period resulted from firms’ adjusting output prices
to account for changes in input prices rather than from
firms’ trying to increase their margins. Apparel and general merchandise retailers reported upward pressure on
clothes and food costs, pressure which was exacerbated
by the September 1 tariff increases. Most retailers
passed through these higher costs to consumers, although a couple of retailers absorbed them into their
margins, rather than raising prices, to preserve market
share. Many trucking companies reported recent cost
increases because geopolitical factors and new diesel
taxes have increased prices at the pump. Some freight
haulers were able to negotiate higher rates to account
for these costs, but others remarked that the freight
market was not robust enough to be able to push for
higher rates. Manufacturers’ prices, which had been
falling in the past couple of periods, stabilized in this
period. Most construction contractors held prices steady
because costs for construction materials were relatively
Wages grew modestly on the whole in the Fourth District. Manufacturers continued to increase wages and
enhance benefits offerings amid persistently tight labor
markets. Higher wages were also reported by general
merchandise and auto retailers. Retailers cited difficulty
finding qualified workers and heightened competition for
labor from distribution centers as contributing factors.
Some professional and business services firms increased skill requirements for new hires and therefore
D-1
Federal Reserve Bank of Cleveland
stable. Professional and business services firms held
pricing steady, as well, because stiff competition limited
individual firms’ ability to raise prices.
By contrast, homebuilders reported softening demand,
which may suggest that households are uncertain about
the medium-run economic outlook.
Consumer Spending
Financial Services
Retailers’ reports on consumer spending were mixed.
Reports from auto dealers were generally more upbeat
than those from other segments. Some auto dealers
reported that light vehicle sales were up substantially,
while others indicated that sales were flat. Apparel
spending was relatively flat, and merchants noted that
unseasonable weather adversely impacted sales. Contacts in the restaurant industry reported that sales were
down in this period because of increased competition
from new restaurants.
Loan demand was relatively unchanged. Lower interest
rates spurred an increase in demand for auto loans,
home mortgage originations, and loan refinancings.
Some bankers noted that the pipeline for commercial
loans remained strong, while others had noticed a slight
softening. Core deposits ticked down, mostly as a result
of falling interest rates, although one banker commented
that competition had decreased because most banks are
facing “not enough loan demand to go after deposits.”
Manufacturing
Activity in professional and business services strengthened. Contacts reported an increase in demand for a
variety of products and services, pointing to strong business conditions for their customers. Firms in consulting
services suggested that global issues such as international security concerns and worries of future economic
volatility have increased demand for their services. The
majority of professional and business services contacts
anticipate that favorable economic conditions will carry
into the first quarter of next year, although a few expect
growth to slow.
Professional and Business Services
Overall manufacturing conditions appeared to stabilize
following a few periods of slowing, although reports from
contacts varied. A few manufacturers suggested that
their customers let inventories run too low in anticipation
of a more significant manufacturing slowdown than has
materialized. As a result of the need to restock, demand
for these manufacturers’ products picked up in recent
months. Other manufacturers reported that demand
continued to soften, citing a global slowdown in industrial
activity and persistent trade-related uncertainties. Twothirds of contacts reported that capacity utilization was
within a normal range, although several noted that labor
shortages persist. Some manufacturers had existing
capacity that was going unused for lack of workers, a
situation which damped plans for further capital spending.
Freight
Freight activity softened further since the last report.
Most contacts reported flat or lower demand for freight
services. Contacts cited as contributing to lower freight
volumes declines in manufacturing activity, lower volumes of coal shipments, and structural changes to transpacific shipping supply chains. One freight executive
summarized the situation as "our customers have informed us they front-loaded much of their business to Q1
2019 due to perceived or impending tariffs placed on
goods to and from China." Despite the recent softness,
contacts were more optimistic than during last period
that freight volumes will pick up in the near future. ■
Real Estate and Construction
Nonresidential construction and real estate saw strong,
steady demand over the period. Some nonresidential
contractors noted an uptick in contracts for office and
healthcare-related buildings. Most nonresidential contractors expected construction to remain strong excepting winter slowdowns. However, some commercial real
estate contacts expressed concern about slower demand in the near future; one remarked that he would
“expect increased trepidation as the election draws
near.”
Residential real estate agents reported moderately higher home sales and expected demand to continue to
increase modestly in the near future. Real estate agents
pointed to lower interest rates as the primary factor
spurring stronger sales. Real estate agents also remarked on growth in the first-time homebuyer segment
and in the ratio of homeowners to renters as lower interest rates helped younger adults become homeowners.
For more information about District economic conditions visit:
www.clevelandfed.org/region/
D-2
Federal Reserve Bank of
Richmond
The Beige Book ■ October 2019
Summary of Economic Activity
On balance, the Fifth District economy grew modestly in recent weeks. Manufacturers saw a modest decline in shipments and new orders, overall, as trade policies continued to reduce sales and raise raw materials costs. Port activity
grew robustly in recent weeks, particularly import volumes. Trucking companies reported a modest increase in demand
and a rail company saw continued strength in auto and construction-related shipments. Travel and tourism picked up
modestly despite some disruptions from hurricane evacuations in North and South Carolina. Retail sales rose moderately, overall, but some retailers expressed concerns that economic uncertainty could hamper fourth quarter sales. Home
sales, although hampered by low inventories, rose modestly. Meanwhile, shortages of labor and buildable lots restrained
new home construction. Commercial real estate leasing, sales, and construction picked up, although some softness was
reported in retail and office construction. Loan demand picked up for real estate purchases and refinancing, but was flat
for business and auto lending. Nonfinancial services firms saw a slight increase in demand in recent weeks and remained cautiously optimistic about future growth. Labor markets remained tight and wages increased at a moderate rate.
Overall, price growth remained moderate.
Employment and Wages
Fifth District manufacturers reported a modest decline in
shipment and new orders. Several firms indicated that
trade policy was reducing their foreign sales and raising
raw materials costs. An electrical equipment manufacturer reported raising prices to cover tariff-related cost
increases, while another firm looked to cut costs in other
areas of the supply chain. A Virginia furniture manufacturer said that trade issues could lead to jobs losses if
not resolved. Meanwhile, a food manufacturer cited the
rapidly rising price of chicken as a concern, and a Virginia manufacturer reported looking for new suppliers over
concerns about the possible effects of Brexit.
The demand for labor strengthened moderately in recent weeks. Employment agencies reported a seasonal
pick-up in new job openings. Also, employers continued
to report very tight labor markets and difficulties finding
qualified workers. In particular, firms reported shortages
of construction workers, engineers, IT professionals,
accounting and finance professionals, manufacturing
plant workers, mechanics, and truckers. Wages increased moderately, overall, with some larger increases
reported for jobs in high demand. Some employers said
they were using non-wage compensation, such as signon and stay-on bonuses, to attract and retain workers.
Ports and Transportation
Prices
Ports in the Fifth District saw robust growth since our last
report. Import volumes continued to exceed export volumes, but both showed healthy growth. Multiple ports
saw record volumes in recent weeks. One executive
reported an increase in vehicles going to Thailand and
Russia for assembly to avoid Chinese tariffs. A Fifth
District airport reported that cargo volumes continued to
increase, although at a somewhat slower rate. Ports
continued to hire and make new investments for expansion.
Price growth remained moderate overall since our
previous report. Manufacturers indicated that growth in
prices paid was little changed in recent weeks and
remained slightly above growth in selling prices. Raw
materials prices rose for steel plates, scrap metal, and
electricity and remained elevated for some tariffed
goods, while other materials prices were generally flat
to down slightly. Service sector firms also reported
moderate growth in prices paid that outpaced growth in
selling prices.
Fifth District trucking demand increased modestly, after
softening in the previous months. One executive reported turning away some business but not as much as a
Manufacturing
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Federal Reserve Bank of Richmond
year ago, while another reported having some excess
capacity. Both were fairly content with the current level
of demand. Another contact reported a slight disruption
from Hurricane Dorian but business remained solid,
overall. Meanwhile, a rail company saw some shipments
move back to trucks but noted that auto and construction-related shipments remained strong. Some transportation contacts delayed investments over concerns
about economic uncertainty.
across most sub-markets, although some slight increases in retail were reported. Contacts reported that rental
rates were flat to increasing slightly. On the commercial
sales side, brokers reported modest increases in prices
and sales.
Banking and Finance
Loan demand rose moderately in recent weeks. Residential mortgage demand was generally described as
stable to increasing modestly. On the commercial side,
real estate loan demand strengthened modestly. Business and automotive lending were flat, on balance.
Bankers noted an uptick in residential and commercial
refinancing due to lower interest rates. Deposits grew
moderately since our last report and bankers continued
to report heightened rate competition. Measures of credit
quality remained stable at high levels.
Retail, Travel, and Tourism
Travel and tourism in the Fifth District were modest
since our last report. On the outer banks of North Carolina, hotels and restaurants saw strong business and
increased receipts despite a temporary disruption from
Hurricane Dorian evacuations. However, some restaurants had to close an extra day a week because of labor
shortages when students went back to school. Charleston, South Carolina, also saw fairly solid tourism despite
a hurricane evacuation. Meanwhile, hotels in the District
of Columbia reported a decline in rates and occupancy
in recent weeks.
Nonfinancial Services
On balance, demand for nonfinancial services picked up
slightly in recent weeks. Many service providers continued to report difficulties finding workers and rising labor
costs, particularly for health insurance. In some cases,
those firms faced profit margin compression since they
were not able to pass along cost increases to customers.
Overall, businesses remained cautiously optimistic about
growth prospects over the next several months. There
were several remarks about investing in software and
technology. A few firms, on the other hand, were holding
back on capital spending due to uncertainties around
labor constraints and trade. ■
On balance, retail sales rose moderately in recent
weeks. A Virginia auto dealer reported strong sales of
trucks and SUVs. However, a few firms reported declines. A North Carolina home furnishing store reported
a drop in sales instead of the normal seasonal uptick.
Meanwhile, a hardware store said that lumber mills
recently reduced production, which affected availability
and prices. Several retailers said that they planned to
reduce inventories and scale back capital spending over
concerns that economic uncertainty could limit consumer spending in the fourth quarter.
Real Estate and Construction
Home sales rose modestly in recent weeks and buyer
traffic was steady, although inventories remained low.
Most agents continued to see multiple offers in specific
areas, especially for homes selling in the $250,000 to
$400,000 price range. District home prices increased
slightly, while average days on the market remained low.
New home construction remained limited and was constrained by labor shortages and lot availability.
Commercial real estate leasing rose moderately in recent weeks. District brokers continued to report strong
demand for industrial space and office leasing was
described as healthy in most locations. Reports on retail
leasing were mixed, as demand for smaller inline spaces
remained steady, but demand for larger spaces declined. Multifamily leasing remained healthy. Overall,
industrial construction remained strong, while retail and
office construction slowed. Vacancy rates remained low
For more information about District economic conditions visit:
www.richmondfed.org/research/regional_economy
E-2
Federal Reserve Bank of
Atlanta
The Beige Book ■ October 2019
Summary of Economic Activity
Reports from Sixth District business contacts indicated that economic activity expanded modestly from mid-August
through September, and most contacts expect a similar pace to continue for the remainder of the year. The labor market
remained tight, and a growing number of contacts shared reports of wage pressures increasing among lower-skilled
positions. Some firms noted rising nonlabor costs and several contacts impacted by tariffs reported the ability to pass
along price increases. Retail sales levels remained unchanged since the previous report and automobile dealers noted
sales were up for trucks and SUVs. Tourism activity was reported as mixed heading into the fall season. Residential real
estate market activity improved since the previous report, and commercial real estate activity was stable. Manufacturing
activity improved with purchasing managers noting increased new orders and production since the previous report.
Bankers indicated that activity was steady, on balance.
Employment and Wages
year-over-year unit costs were up 1.9 percent in September. Survey respondents indicated they expect unit costs
to rise 2.0 percent over the next twelve months.
Most firms reported that staffing levels were in line with
expectations for flat to slightly higher growth in payrolls
compared with the prior year. Exceptions emerged in
industry sectors directly related to export logistics and
freight, where some labor force reductions were noted.
Overall, however, business contacts continued to observe tightening in several labor market segments, sharing that many positions remained unfilled for long periods of time, encouraging some employers to lower hiring
standards. Labor availability challenges were broadly
viewed as firms’ biggest constraint to growth. As a result,
firms continued to explore recruiting and retention options.
Consumer Spending and Tourism
District retail sales levels were unchanged since the
previous report. Retailers remained concerned that
heightened uncertainty among consumers due to the
geo-political environment would negatively impact consumer confidence and spending behavior during the
upcoming holiday season. Light trucks and SUV units
drove the month-over-month increase in new vehicles
sales in August while sales of used vehicles also rose.
District tourism activity remained mixed, and uncertainty
remained elevated since the last report. On balance, the
start of the fall season was softer than expected with a
year-over-year decline in hotel occupancy and average
daily rates in Louisiana and Florida. Strong leisure travel
and business conference bookings were reported in
Alabama and Georgia.
Annual wage increases, on average, remained in the 3-4
percent range; however, wage growth continued to
accelerate for lower-skill positions. Across industry sectors, there was growing dialog about increasing minimum
hourly wages to $15 per hour.
Prices
Construction and Real Estate
Some firms reported rising nonlabor input costs, particularly for products impacted by tariffs. Overall pricing
power remained limited and some businesses were
considering alternative approaches to maintaining margins. However, several contacts impacted by tariffs were
more successful in passing along increases. The Atlanta
Fed’s Business Inflation Expectations survey showed
Low mortgage rates improved housing affordability and
led to increased demand for housing throughout the
District. Overall, home sales increased on a month-overmonth and a year-over-year basis. Demand remained
strongest in the more affordable price segments, where
inventory remained limited. Declining inventory levels led
F-1
Federal Reserve Bank of Atlanta
to strong upward pressure on home prices. New home
sales improved as builders sought to ramp up construction levels while offering incentives and discounts to
increase sales traffic.
and chemical processing segments has necessitated
additional power plants and transmission lines. Utilities
contacts described growing investment in natural gas
pipeline infrastructure. Renewables activity was steady
from the prior reporting period, as solar energy facility
installations continued across Florida.
Overall, the pace of activity in the commercial sector
remained steady during the reporting period. Most sectors experienced positive dynamics as vacancies continued to trend downward. Despite growing construction
costs, contacts reported healthy construction activity. A
robust amount of concentrated new multifamily construction continued to dominate specific metro submarkets
leading to increased concerns of possible oversupply.
Industry participants noted continuing strength in the
industrial sector. Contacts reported capital was readily
available, and that greater amounts of financing along
with loosening underwriting standards were creating
strong tailwinds and risks for some projects.
Agriculture
Agricultural conditions remained mixed. Reports indicated much of the District was drought-free, although parts
of Alabama, Georgia, the Florida panhandle, and Tennessee continued to experience abnormally dry to moderate drought conditions. The USDA designated several
counties within the District as natural disaster areas due
to damages and losses attributed to several inclement
weather events this year. Cotton, corn, and peanut production forecasts were ahead of last year’s production
while rice and soybean production forecasts were below.
On a year-over-year basis, prices paid to farmers in July
were up for corn and beef but down for cotton, rice,
soybeans, broilers, and eggs. However, on a month-over
-month basis, prices increased for corn, cotton, rice, and
soybeans but declined for beef, broilers and eggs. ■
Manufacturing
District manufacturing contacts reported a moderate
rebound in overall business activity since the last reporting period. New orders and production levels increased
notably and purchasing managers indicated that supply
delivery times were slightly longer. Finished inventory
levels were reported to have increased somewhat, while
optimism for future production was unchanged, with
close to one-third of contacts expecting higher levels of
production over the next six months.
Transportation
On balance, transportation activity was little changed
since the previous report. Total rail traffic fell, and intermodal volumes declined substantially. Trucking companies saw decreased shipments compared with yearearlier levels. Air cargo contacts reported weakness in
international freight volumes. Port contacts continued to
report record levels of growth in container traffic.
Banking and Finance
Conditions at financial institutions were steady. Margins
at banks were stable as higher loan yields offset increased funding costs. Total loan growth was positive
but slowing, especially for smaller community banks.
Asset quality remained strong with fewer loans transitioning from 30-89 days delinquent to 90 days or more.
Energy
Energy manufacturing continued to expand across the
District in order to meet growing domestic and global
demand for chemicals, natural gas, and refined products.
Business contacts reported continued investment in
pipeline infrastructure, as demand for transportation
outlets for products to be processed remained elevated.
Investment persisted in utilities, where growth in refining
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 ■ October 2019
Summary of Economic Activity
Economic activity in the Seventh District increased slightly overall in late August and September, and contacts expected
growth to continue at a similar pace over the next 12 months. Employment, consumer spending, business spending,
and construction and real estate all increased slightly. Manufacturing production declined a bit. Wages and prices rose
slightly and financial conditions improved modestly. The crop harvest got off to a slow start, as rains delayed fieldwork.
Employment and Wages
Consumer Spending
Employment increased slightly over the reporting period
and contacts expected a similar-sized increase over the
next 12 months. Hiring continued to be focused on professional and technical, sales, and production workers.
As they have for some time, contacts indicated that the
labor market was tight and that it was difficult to fill positions at all skill levels. One auto supplier facing a decline
in sales due to the GM strike planned to cut workers’
hours rather than making layoffs because he felt that in
the tight labor market, it would be too difficult to find new
workers after the strike ended. A staffing firm reported
little change in billable hours. Wages increased slightly
overall. Contacts were most likely to report wage increases for professional and technical, administrative,
and production workers. Many firms reported rising
benefits costs.
Consumer spending increased slightly on balance over
the reporting period. Nonauto retail sales moved up a bit,
with reports of gains in the appliances, outdoor, and lawn
and garden sectors, but declines in apparel. Contacts
expected holiday spending to be similar to or slightly
higher than last year. Contacts reported lower tourism
volumes. New light vehicle sales increased at a moderate pace and dealers reported that margins on new
vehicles continued to shrink. Used vehicle sales remained at a strong level, surprising some dealers. Contacts said that the strike at GM hadn’t yet hurt new vehicle sales, but believed that it would if the strike continued
into November. The strike had created parts shortages
though, which resulted in extended wait times for some
repairs. In addition, there were reports of dealers providing only basic services for GM vehicles such as oil
changes and tire rotations.
Prices
Business Spending
Prices rose slightly in late August and September,
though contacts expected prices to rise somewhat faster
over the next 12 months. Retail prices moved up slightly,
with reports of increases related to both realized and
potentially higher tariffs. Producer prices edged up, with
contacts reporting stable freight costs and slower increases in labor and materials costs.
Business spending increased slightly in late August and
September. Retail inventories were a little high overall,
with reports that sales of fall merchandise were below
expectations. Contacts said that the strike at GM was
slowly depleting inventories of GM vehicles, but that
inventories at GM suppliers were expected to keep growing until the strike ends. Most manufacturers reported
G-1
Federal Reserve Bank of Chicago
comfortable inventory levels, though there were reports
of shortages of stainless steel. Capital spending moved
up slightly, and contacts expected that pace to continue
over the next 12 months. Outlays were primarily for
replacing industrial and IT equipment and renovating
structures. Contacts continued to note that elevated
uncertainty about international trade policy was holding
back investment and spurring efforts to diversify supply
chains. Demand for transportation services declined
modestly. Commercial and industrial energy demand
was little changed, with increases in commercial consumption offset by declines in industrial consumption.
little changed, but noted that strong competition was
creating pressure to loosen them. Consumer loan demand increased modestly, with reports of higher mortgage refinancing and home purchasing volumes. Loan
quality and standards were little changed.
Agriculture
The corn and soybean harvest got off to a slow start in
the District, as rains delayed fieldwork. In addition, the
harvest started later than usual because heavy spring
rains had delayed planting and crops were up to a month
behind in maturity. Contacts had mounting concerns
about how much of this year’s crop would be able to fully
mature before a hard frost hits. Overall, contacts expected the harvest to be well below those of recent
years. Corn and soybean prices moved higher, especially toward the end of the reporting period. Egg and dairy
prices were up, but hog and cattle prices drifted down.
Contacts noted that although there was still uncertainty
about the size of China’s purchases of agricultural products, there was positive news for farmers in the newly
announced trade deal with Japan and in recent adjustments to the implementation of the Renewable Fuels
Standard that will support demand for biofuels. ■
Construction and Real Estate
Construction and real estate activity increased slightly
over the reporting period. Residential construction rose
modestly, with increased starter home construction
outweighing lower high-end homebuilding. Contacts
indicated that rising costs continued to put a damper on
building. Residential real estate activity was little
changed on balance, with higher sales of low- and moderately-priced homes offset by fewer sales of high-priced
homes. Overall, home values rose slightly. Nonresidential construction activity was little changed. Nonresidential builders also noted that rising costs were slowing
activity. Commercial real estate activity increased slightly. Contacts reported that demand from investors for
buildings with tenants already in place continued to be
strong. Rents, vacancies, and the availability of sublease
space were little changed.
Manufacturing
Manufacturing production decreased slightly in late
August and September. Demand in the automotive industry decreased some, but remained at a solid level.
Contacts noted that the halt in production at GM plants
due to the strike was starting to affect auto suppliers’
order books. Demand for steel decreased slightly. Heavy
machinery manufacturers also reported a slight drop in
orders, led by declines in demand from the oil and gas
sector. Orders fell for specialty metals manufacturers as
well, driven by decreased demand from the auto industry. Demand for heavy trucks increased, though contacts
expected demand to slow through the rest of the year.
Banking and Finance
Overall, financial conditions improved modestly over the
reporting period. Participants in the equity and bond
markets reported a slight improvement in conditions.
Business loan demand rose modestly, with growth
spread across sectors. There were numerous reports of
increased refinancing volumes for commercial real estate loans. Loan quality remained solid across most
sectors. Contacts again said that lending standards were
For more information about District economic conditions visit:
chicagofed.org/cfsbc
G-2
Federal Reserve Bank of
St. Louis
The Beige Book ■ October 2019
Summary of Economic Activity
Reports from contacts suggest economic conditions have improved slightly since our previous report. Contacts from
multiple industries noted a heightened sense of economic uncertainty. Labor market conditions remained tight, although
there were indications of declines in manufacturing employment. Contacts noted a strengthening of price pressures, but
remained mixed as to their ability to pass higher costs on to their customers. Consumer spending activity increased
slightly. Outstanding loan volumes at District banks continued to expand, but growth slowed compared with three
months ago. Row crop conditions remained poor; production levels are expected to be well below those of last year.
Employment and Wages
Prices
Employment conditions have been mixed since the
previous report. The number of posted job vacancies for
nonfinancial services occupations increased from July to
August. Contacts continued to report labor market tightness and difficulty hiring and retaining qualified employees; one St. Louis area hospitality firm reported that
some candidates were not even showing up for scheduled interviews. Several firms reported taking additional
steps to compete for workers, such as increasing benefits, relaxing hiring standards, and increasing outreach.
Other firms described creative attempts to adapt their
business practices to a worker shortage, such as retraining existing employees to work other positions. Conversely, survey-based measures of employment showed
declines in some sectors, particularly manufacturing. An
Arkansas grocer reported that the state’s increase in the
minimum wage has forced them to rethink the number of
employees they can deploy per store.
Price pressures have increased modestly since the
previous report. Business contacts largely noted positive
growth in nonlabor input costs. Construction contacts, in
particular, reported moderate growth, with some of these
price increases attributed to new tariffs. This trend
comes despite recent declines in steel prices, which
have fallen 8 percent since the previous report and 33
percent from one year ago. The ability of firms to pass
higher input costs on to consumers was mixed. Contacts
generally reported increasing prices charged to consumers, but some cited difficulties doing so due to price
competition from online competitors and inflexible pricing
agreements with large buyers.
Consumer Spending
Reports from general retailers, auto dealers, and hospitality contacts indicate that consumer spending activity
has increased slightly since our previous report. August
real sales tax collections increased in Missouri, Arkansas, Tennessee, and Kentucky relative to a year ago.
Consumer sentiment in West Tennessee has increased
since June, but future expectations about the economy
six months from now have declined. Auto dealers in
Arkansas reported stronger sales in the past few months
compared with earlier in the year, especially for used
vehicles. Hospitality contacts in the St. Louis region
Wages have grown moderately since the previous report, in part due to continued upward pressure from the
tight labor market. Wage growth at smaller firms has
been more modest. Several local contacts at such companies reported struggling to match wage increases
offered by larger firms.
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Federal Reserve Bank of St. Louis
remained optimistic about tourism growth in the coming
months despite some uncertainty and downside risk.
Banking and Finance
Banking conditions in the District have improved modestly since the previous report. Outstanding loan volumes at
District banks grew by 3 percent in the third quarter
relative to year-ago levels, which was a slight decrease
from the second quarter of 2019. This slowdown continued the nearly steady downward trend in loan growth
since the end of 2016. District growth remained slower
than the national rate for the fourth consecutive quarter.
Commercial and industrial lending maintained a positive
growth rate, growing by 2 percent year over year,
although growth has slowed significantly in this category
over the past two quarters. Commercial real estate lending grew at the same rate as the prior quarter. However,
residential real estate lending contracted slightly.
Manufacturing
Overall manufacturing activity has declined slightly since
our previous report. Survey-based indexes suggested
that manufacturing activity decreased slightly in both
Arkansas and Missouri from August to September. Production levels were down slightly in Missouri but relatively unchanged in Arkansas. New orders fell in both states.
Several companies announced new capital expenditures
and hiring plans, but others announced operation reductions or facility closures.
Nonfinancial Services
Activity in the transportation sector has improved modestly since the previous report. Barge activity along the
Arkansas and Mississippi rivers continued to recover
from the slowdowns caused by months of high water
conditions earlier in the year. Passenger traffic at District
airports remained above year-ago levels while cargo
traffic declined slightly. Contacts in Arkansas reported
that commercial trucks and rail cars are in good supply.
Logistics firms announced plans to expand operations
and increase their workforce within the District.
Agriculture and Natural Resources
District agriculture conditions have declined modestly
compared with the previous report. Production and yield
forecasts fell for corn and soybeans from August to
September but improved for cotton. Expected rice production also declined over the same period, but expected yields ticked up. Relative to 2018, corn, rice, and
soybean production levels are projected to decrease
sharply, largely due to the unusually wet weather and
flooding during the planting season. However, cotton
production levels are expected to improve compared
with last year. The outlook among contacts remained
relatively pessimistic due to depressed commodity prices
and trade uncertainty. Farmers in southern Indiana also
expressed concern over the recent lack of rain.
Real Estate and Construction
Residential sales activity has been unchanged since the
previous report. Seasonally adjusted home sales increased slightly in Little Rock but were unchanged in
Louisville, Memphis, and St. Louis. Inventory levels in
the District continued to be depressed.
Natural resource extraction conditions have declined
slightly from July to August, with seasonally adjusted
coal production decreasing about 1 percent. August coal
production was nearly 2 percent higher than a year ago.
■
Residential construction activity increased slightly. There
was a slight uptick in August permit activity across District MSAs relative to the previous month. Contacts from
Louisville and Little Rock reported that landlords have
become less inclined to renovate older buildings because of rising labor and material costs.
Commercial construction activity was mixed. The number of commercial construction projects fell slightly from
July to August across most of the states in the District.
Multiple contacts reported increased uncertainty surrounding projects due to the ongoing trade dispute with
China. A contact from Little Rock reported that rising
costs have limited speculative construction. However,
there were multiple reports of healthy demand for commercial construction and infrastructure development in
the District, and local contacts continued to note labor
shortages.
For more information about District economic conditions, visit:
https://research.stlouisfed.org/regecon/
H-2
Federal Reserve Bank of
Minneapolis
The Beige Book ■ October 2019
Summary of Economic Activity
The Ninth District economy grew at a slight pace since the last report. Employment was flat, while wage pressures were
moderate overall and price pressures remained modest. The District economy saw growth in tourism, services, commercial construction and real estate, and energy. Consumer spending and residential construction and real estate were
mixed. Manufacturing decreased slightly, while agricultural conditions remained weak.
Employment and Wages
Wage pressures were moderate overall. A solid majority
of human resources poll respondents in Minnesota and
Montana said that wages rose by 3 percent or less over
the past 12 months, and wage expectations for the
coming 12 months were softer. Wage growth was
stronger among construction and staffing contacts in
Minnesota, but each group also expected wage pressure
to lessen somewhat in the coming year. A staffing
contact in Montana said wages for entry-level positions
continued to rise, and those who raised wages last year
to stay competitive were re-evaluating additional
increases. A North Dakota staffing contact noted that
while wages were rising overall, some clients were
intentionally not raising wages for unskilled labor
because it “does not make much difference” in the
workers they attract or retain, “unless they raise pay
scales significantly.”
Employment was flat since the last report. August
employment rose over the previous month in three
District states, but fell in two others. Hiring demand
remained healthy, but there were some signs of
softness. Separate polls of human resources contacts in
Minnesota and Montana showed that the large majority
of firms were hiring, and virtually none were cutting staff.
Construction firms in Minnesota reported strong demand
for skilled trades workers, but lower demand for other
staffing needs. Staffing contacts in Minnesota saw slight
growth in job orders overall in the third quarter compared
with last year, but several reported significant decreases.
Expectations for the fourth quarter were mostly flat, with
many expecting an increase in unfilled job orders due to
very tight labor conditions. A strong majority of
respondents to a survey of Ninth District firms indicated
that they planned to leave employment unchanged or
increase it slightly over the coming three months. August
job postings were lower in Minnesota, Montana, and
North Dakota; flat in Michigan’s Upper Peninsula; and up
slightly in South Dakota. Hiring sentiment in two regional
indexes fell notably for respondents in Minnesota and
the Dakotas; one index fell into contraction for all three
states. Initial unemployment claims rose slightly overall
among District states over the most recent six-week
period (ending mid-September) compared with a year
earlier, with Wisconsin and the Dakotas seeing the
largest increases.
Prices
Since the previous report, price pressures remained
modest. Most respondents to a survey of firms across
the Ninth District indicated only flat or slight increases in
input costs over the previous quarter, with a similarly
subdued outlook for the final three months of the year.
However, firms continued to note faster growth in health
insurance premiums. Retail fuel prices in District states
as of early October were roughly unchanged relative to
the previous reporting period. Prices received by farmers
in August increased from a year earlier for corn,
I-1
Federal Reserve Bank of Minneapolis
potatoes, hogs, cattle, milk, and turkeys, while prices for
wheat, soybeans, hay, eggs, and chickens decreased.
and active projects in the District over the most recent
six-week period (ending September 27) were roughly on
par with the same period a year earlier. A number of
subcontractors in Minnesota reported large backlogs.
Industry contacts in Montana also reported healthy
activity. Residential permitting for single-family units in
August was flat or lower across the large majority of
metros in the District compared with a year earlier. While
single-family construction lagged, however, some
regions continued to see strong multifamily permitting,
including Minneapolis-St. Paul.
Consumer Spending
Consumer spending was mixed since the last report.
South Dakota gross sales in August grew by 5 percent
compared with a year ago, and the state’s gaming
handle was almost 4 percent higher. Conversely, gross
sales in Wisconsin were flat, and North Dakota sales tax
collections were 5 percent lower than a year earlier.
Assisted by good weather, the Minnesota State Fair in
late August and early September saw record attendance.
A vehicle dealership with multiple outlets in the western
Dakotas and Montana saw new-vehicle sales grow by 4
percent in August, while used cars fell by 4 percent.
Another dealership with outlets across the eastern
portion of the District saw strong sales over the summer,
including August and September, with sales slightly
stronger in used versus new vehicles. According to
industry sources, marine and recreational vehicle sales
in District states have been lower this summer compared
with last year, but powersport sales have been on par.
Commercial real estate grew modestly since the last
report. Despite steady delivery of new units, multifamily
housing vacancy rates in Minneapolis-St. Paul remained
among the lowest in the country for major metropolitan
regions, leading to rent increases. Industrial space in the
region continued to see low vacancy rates and healthy
expansion. New retail construction in Minneapolis-St.
Paul has declined, although grocery has continued its
expansion in the region, and vacancy rates remained
fairly stable. Residential real estate was mixed. Closed
home sales in August fell compared with a year earlier
across Minnesota, as well as in Missoula, Mont., Sioux
Falls, S.D., Grand Forks, N.D., and northern Wisconsin.
However, closed sales rose in Bozeman and Helena,
Mont., Fargo, N.D., and western Wisconsin.
Tourism saw growth overall in the most recent period. In
northern Wisconsin, tourism businesses reported strong
activity at the end of the summer, with lodging facilities
seeing solid bookings through mid-September. A large
campground in the region reported modestly more
summer bookings and higher average customer
spending. Hotel occupancy rates in Minnesota were
slightly higher in August compared with a year earlier,
and revenue per room was 3 percent higher. Total
passengers at District airports increased compared with
a year earlier: August passengers through MinneapolisSt. Paul were up 3 percent, and seven other regional
airports saw increases ranging from 4 percent to 20
percent. However, among nine major national parks in
District states, only two registered an increase in August
visitors compared with a year earlier.
Manufacturing
District manufacturing activity decreased slightly relative
to the previous report. An index of manufacturing
conditions indicated decreased activity in September
compared with a month earlier in Minnesota and South
Dakota and flat activity in North Dakota. Multiple
contacts in custom manufacturing and metal fabrication
reported a slowdown in new orders, and several said
they expect a slower fourth quarter. In contrast,
producers of heavy equipment and building materials
noted increased demand from the construction sector.
Services
Agriculture, Energy, and Natural Resources
Activity in the professional services sector increased
moderately. Several engineering firms reported large
backlogs of work. Regional hospital systems and clinics
continued to plan large capital expenditures for
expansions over the medium term. In contrast, contacts
in the trucking and rail transportation sector reported a
slowdown in freight volumes.
District agricultural conditions remained weak. Heavy
rains that hampered crop planting this season have
persisted into the fall and may complicate harvests in
some areas, according to sources. Recent forecasts
indicated that corn and soybean production in District
states may decrease 10 percent and 20 percent,
respectively, in 2019 compared with last year. District oil
and gas exploration activity increased moderately
relative to the previous report. The number of active
drilling rigs rose as of September from a month earlier,
but industry contacts reported that demand for workers
and materials was little changed. District iron ore mines
continued to operate at near capacity. ■
Construction and Real Estate
Commercial construction rose moderately since the last
report. A construction database showed that August
construction starts in the District were higher than a year
earlier. A second industry database showed that new
I-2
Federal Reserve Bank of
Kansas City
The Beige Book ■ October 2019
Summary of Economic Activity
Economic activity in the Tenth District rose slightly in late August and September, with gains in consumer spending,
professional and high-tech services, transportation and wholesale trade driving overall growth. Consumer spending rose
modestly, led by solid retail and auto sales. Manufacturing activity edged down, driven by continued declines in durable
goods plants, but was expected to expand slightly in the coming months. District real estate activity increased, but contacts expected conditions to soften this fall. Energy activity declined in the District as the number of active rigs fell and
oil and gas production levels also eased. The agriculture sector remained weak, while crop and cattle prices remained
relatively stable. Bankers reported modestly higher loan demand and an improvement in loan quality. Employment
levels rose in most services sectors, but contacts in the energy and manufacturing sectors noted a decline. District
manufacturing and services firms expected employment to increase by 3 percent on average in 2020. Wages grew
modestly, and the pace of gains was anticipated to accelerate in the months ahead. District input and selling prices also
rose modestly since the previous survey period.
Employment and Wages
period and the same period one year-ago, and expectations were for similar increases moving forward. In contrast, restaurants reported steady input and selling prices
compared to the previous survey period, although both
were moderately above year-ago levels. Respondents in
the manufacturing and transportation sectors reported
modestly higher input and selling prices compared to a
year ago and anticipated similar gains in the months
ahead. Selling prices in the construction supply sector
rose modestly since the previous survey but remained
modestly lower than year-ago levels.
District employment rose since the last survey as a
majority of services sector contacts noted increasing
employment levels, while contacts in the manufacturing
and energy sectors reported a slight decline. Employment levels were above year-ago levels in both the
services and manufacturing sectors, but slightly below in
the energy sector. Expectations for employment growth
were positive across most sectors, and survey respondents in the manufacturing and services sectors expected
employment in their firms to rise by 3 percent on average
in 2020.
Consumer Spending
A majority of contacts continued to report labor shortages across all skill levels. Specifically, contacts noted
shortages for truck drivers, hourly retail and foodservices positions, auto-technicians, pilots, IT personnel,
nurses, and skilled construction workers. Wages were
modestly higher than the previous survey period, and
wage gains were expected to accelerate at a faster pace
moving forward.
Consumer spending climbed modestly compared to the
previous survey period, and contacts anticipated additional sales growth heading into the winter months. Retail sales rose modestly since the previous survey period, and expectations were for sales to rise in the next
few months but at a slower pace. Lower-priced items
continued to sell well, while sales of higher-priced items
lagged. Auto sales expanded robustly compared to the
previous survey period and year-ago levels, and contacts anticipated modest increases in the coming
months. Unlike retail and auto contacts, restaurant contacts reported a strong decline in sales in late August
and September. However, restaurant sales remained
slightly above year-ago levels and were expected to hold
steady in the months ahead. Tourism sales were flat
Prices
District selling and input prices increased modestly in
late August and September and were moderately above
year-ago levels. Contacts expected additional gains in
the coming months. Retail input and selling prices were
strongly above levels from both the previous survey
J-1
Federal Reserve Bank of Kansas City
compared to the previous survey period, and contacts
anticipated a modest decline in the coming months.
quality over the next six months. Credit standards remained largely unchanged in all major loan categories,
and deposit levels were stable.
Manufacturing and Other Business Activity
Energy
Manufacturing activity edged lower compared to the
previous survey and year-ago levels, driven by continued
declines at durable goods plants. Manufacturers expected activity to expand slightly in the months ahead.
New orders and the backlog of orders declined, while
factory production and shipments increased slightly.
Factory production, shipments, and volume of new orders were expected to increase moving forward. Capital
spending remained modestly above year-ago levels, but
contacts anticipated much slower growth in the months
ahead. One contact attributed delayed capital spending
to high tariffs that could not be passed along to customers.
District energy activity decreased since the previous
survey period, and expectations for future drilling and
business activity also declined. The number of active rigs
continued to fall across most District states in both the oil
and gas sectors. Oil and gas production levels also
eased in the third quarter, and District energy firms reported drilling and business activity levels were below
those from this time last year. Firms reported that total
revenues, profits, employment levels, and access to
credit also declined. Sixty percent of regional energy
contacts indicated that current low prices for oil and
natural gas were the main constraint limiting near-term
growth in activity among areas where their firms were
active. Additionally, a majority of District energy contacts
expressed negative impacts from trade tensions and
tariffs over the past year, and most firms anticipated
negative business effects from trade policy to continue in
2020.
Outside of manufacturing, firms in the transportation
sector experienced moderately higher sales, while sales
increased strongly in both the wholesale trade sector
and professional and high-tech services sector. Expectations for all three sectors were for strong growth moving
forward.
Agriculture
Real Estate and Construction
Agricultural economic conditions in the Tenth District
generally remained weak. Major row crop and cattle
prices were generally stable following sharp declines in
the prior period. U.S. corn and soybean production was
expected to decline slightly in 2019, but not enough to
materially reduce large outstanding supplies. In contrast
to other areas of the U.S., a slight increase in corn production was expected throughout the region and could
contribute to a slight improvement in revenues. Conversely, soybean production was expected to be moderately lower, and prices continued to be damped by ongoing trade disputes. In the livestock sector, recently
disrupted beef production channels continued to put
downward pressure on cattle prices, but stronger pork
exports drove a moderate increase in hog prices. In
addition, the distribution of 2019 USDA trade relief payments could provide additional short-term support to
farm cash flows. ■
District real estate activity increased since the last survey, but residential construction activity declined and
contacts expected a slower pace of overall real estate
activity moving forward. Contacts in the residential real
estate sector reported modestly higher home sales and
inventories since the previous survey, and inventories
were projected to hold steady in the months ahead.
Residential real estate respondents continued to note
that sales of low- and medium-priced homes outpaced
sales of higher-priced homes. Residential construction
activity fell modestly in late August and September and
was projected to decline further this fall. Commercial real
estate activity rose slightly as sales increased, construction underway was flat, and vacancy rates fell. Commercial real estate contacts projected activity to continue to
expand but at a slightly slower pace in the next few
months.
Banking
Bankers reported a modest increase in overall loan
demand across several categories. Respondents indicated a modest increase in demand for residential real
estate loans. Demand for agricultural and consumer
installment loans increased slightly from previous levels,
while the demand for commercial real estate and commercial and industrial loans declined slightly. Bankers
indicated modest improvement in loan quality compared
to a year ago, but expected a slight decrease in loan
For more information about District economic conditions visit:
www.KansasCityFed.org/Research/RegionalEconomy
J-2
Federal Reserve Bank of
Dallas
The Beige Book ■ October 2019
Summary of Economic Activity
Moderate expansion continued in the Eleventh District economy. Growth continued in manufacturing and nonfinancial
services and resumed in retail after flat sales in the previous period. Home sales increased and loan demand accelerated. Energy activity declined and agricultural conditions deteriorated due to hot and dry weather. Employment growth
was solid while wage pressures continued. Selling prices were largely flat, as firms’ ability to pass through cost increases remained limited. Outlooks improved in manufacturing and nonfinancial services, were unchanged in retail and financial services, and softened in energy. Uncertainty generally remained elevated, driven by trade tensions, the political
climate, recession concerns, and weaker global growth.
ceived for oil and gas support services declined. Several
contacts reported squeezed profit margins.
Employment and Wages
Employment continued to expand at a solid pace. Hiring
picked up in manufacturing, while headcounts fell in the
oil and gas sector. A staffing services firm noted that
direct hires have been increasing while demand for
contract workers has abated. A majority of firms trying to
hire reported they were having difficulty finding qualified
workers. Labor shortages continued to span most industries, skill levels, and regions. Contacts in retail, leisure
and hospitality, and professional and business services
cited difficultly hiring and retaining workers as a leading
issue. A manufacturing contact expressed plans to invest
more in capital equipment to reduce their dependence
on labor in expanding their business.
Manufacturing
Expansion in the manufacturing sector continued at a
moderate pace. Growth in September was slightly slower
than what was seen in August, but still stronger than the
first half of the year. The modest deceleration in September output growth was fairly broad based, led by machinery and fabricated metals manufacturing. Refiners and
chemical producers indicated softening global demand
growth was putting downward pressure on production
this year. Some recent strength was seen in transportation equipment manufacturing.
Outlooks among manufacturers remained positive, although several contacts pointed to increased uncertainty
stemming from tariffs and trade tensions, the political
climate, and the global economy.
Wage pressures continued but retreated slightly to more
average levels.
Prices
Input prices continued to rise at a moderate pace, with
an uptick seen in prices paid for raw materials among
manufacturers. Several contacts pointed to tariffs and
trade policy as a driver of higher costs. Firms’ ability to
pass higher costs on to customers was somewhat
mixed, but reports of difficulty were more common than
reports of ease. Selling prices were largely flat in the
manufacturing and services sectors while prices re-
Retail Sales
Retail sales strengthened slightly over the reporting
period, although some weakness was seen in autos and
in sales at stores located near the Mexico border. Contacts in Austin noted very healthy retail activity, with
national chains and local retailers eager to expand in the
region but rather limited by lack of available retail space.
One contact noted a negative impact from Tropical
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Federal Reserve Bank of Dallas
Storm Imelda. Outlooks were largely unchanged, an
improvement from the deterioration noted so far this
year.
al loans edged up, while consumer loan volumes declined modestly. Credit standards tightened in all loan
categories. Nearly half of contacts noted declining margins. Bankers reported that business activity improved
further over the past six weeks, and outlooks were unchanged. Bankers cite concerns regarding lower interest
rates, the uncertain business climate, and political and
trade tensions.
Nonfinancial Services
Nonfinancial services activity expanded moderately over
the reporting period. Growth in professional and technical services continued to lead the expansion, while
administrative and support services also picked up pace.
Staffing services contacts reported high demand in all
markets, with particular strength in IT, accounting, banking, and healthcare. Activity in the transportation and
warehousing sector remained mixed, with strong airline
passenger demand and rising sea cargo volumes but
some weakness in air and rail cargo volumes. Both rail
and sea cargo contacts reported declines in trade with
China, in some cases offset by stronger trade with
Southeast Asia.
Energy
Drilling activity in the Eleventh District continued to
erode, contributing to notable weakness in oilfield services. However, oil and gas production continued to rise
and well completion continued to increase in the Permian Basin.
Service-sector outlooks were slightly positive. Contacts
cited uncertainty as a serious issue hampering future
demand and business expansion plans. Tariffs, the
presidential election, and national or global recession
fears were among the drivers of increased uncertainty.
According to contacts, the attacks on Saudi Arabian oil
facilities did not change capital spending expectations in
the oil and gas sector—it would take a lasting increase in
the price of oil to influence those plans. Firms were
slightly more pessimistic in their outlooks for the remainder of the year than they were during the previous reporting period thanks to spending cuts and a weaker
economic outlook.
Construction and Real Estate
Agriculture
Home sales continued to trend upward. The increase
was broad based, with some contacts noting that sales
were better than expected. New-home sales appeared to
be the strongest in Austin. Recent flooding in the eastern
parts of Houston may impact housing starts in coming
weeks. Margins improved slightly, and outlooks were
cautiously optimistic, with some builders concerned
about an impending U.S. recession.
Hot and dry weather continued across most of the District, with some parts of Texas entering severe to extreme drought. As a result, crop and pasture conditions
deteriorated over the reporting period, though harvest
was already well underway for row crops. Yields were
favorable for much of the 2019 corn and sorghum crop,
which at current crop prices has allowed many producers
to cover their costs. Wheat and cotton yields were good
but prices were below break-even levels. Contacts report
a bearish outlook for cotton prices as export and domestic demand estimates are being cut due to slower economic growth, and supply estimates are not being cut as
much as anticipated. Trade issues were still very prominent on the minds of agricultural producers, however
some contacts reported more optimism regarding a
resolution. ■
Apartment demand was strong in Dallas-Fort Worth
(DFW) and Houston in the third quarter. Rent growth
firmed up close to its long-term average rate in DFW
while rent increases in Houston remained sluggish.
Apartment leasing stayed solid in Austin, with rent
growth in the metro well above the U.S. average.
Healthy demand along with a slowing pace of deliveries
boosted rents in San Antonio. Apartment construction
remained elevated, particularly in DFW.
Reports on the office market indicated leasing continued
to be active for new Class A space. Industrial demand
and construction remained solid, although there was
some concern about the high levels of construction in
Houston.
Financial Services
Growth in loan demand and volumes picked up pace
over the reporting period, led by particular strength in
real estate lending. Volumes for commercial and industri-
For more information about District economic conditions visit:
www.dallasfed.org/research/texas
K-2
Federal Reserve Bank of
San Francisco
The Beige Book ■ October 2019
Summary of Economic Activity
Economic activity in the Twelfth District expanded at a modest pace during the reporting period of mid-August through
September. The labor market remained tight, employment growth was modest, and wages grew moderately. Reports on
price inflation were mixed. Sales of retail goods increased modestly, and activity in consumer and business services
expanded slightly. The pace of commerce in the manufacturing sector was little changed, and agriculture sector slowed
further. Activity in residential and commercial real estate markets was solid. Lending grew further.
Employment and Wages
benefit packages and higher wage offers. In California,
newly enacted legislation about the designation of independent contractors as employees is expected to increase labor costs for impacted companies significantly
in the new year.
The labor market remained tight, and employment levels
grew modestly on balance. Some contacts explicitly
pointed to growing customer demand as the impetus for
adding employees. In general, labor demand continued
to outpace supply in sectors such as construction, finance, and hospitality. However, some businesses
observed that they were able to add workers because
labor shortages abated somewhat over the reporting
period. In Washington, large e-commerce companies
continued hiring to staff new distribution centers. A community bank in Oregon added positions in response to
swifter lending activity. A restaurateur in Southern California reported that a shortage of qualified workers resulted in some restaurants reducing operating hours. A
contact in Oregon reported that retail job growth was
slightly negative year-on-year and that some manufacturers were unable to fill positions due to skills gaps.
Prices
Reports on prices were mixed, but suggested that inflation was stable or up slightly on balance. Contacts in a
variety of sectors reported no noticeable change in pricing over the reporting period. Some attributed this to
brisk competition among businesses, which limited the
ability to pass on higher labor costs to customers. Selling
prices for some businesses in the logistics and professional services industries picked up moderately due to
solid product demand, while inflation for health-care
services jumped slightly. A few contacts observed higher
fuel prices following supply disruptions in the Middle
East. Building materials costs rose across the District,
with some reports attributing this to a pickup in demand
in the residential real estate market. However, lumber
prices continued to run well below historical averages
due to weak export demand, and some local areas saw
declines in building material costs in response to limited
construction activity. In the agriculture sector, crop prices
softened overall due to weaker demand from abroad,
though some products saw higher selling prices on net
due to lower yields following poor growing conditions.
Wages continued to rise moderately across sectors.
Labor shortages in construction boosted wages in that
sector and resulted in longer lead times for projects.
Contacts reported rising salaries for skilled information
technology and software development personnel. A
business services provider reported that wage growth
has decelerated since last year, but is still very high by
historical standards. Several contacts emphasized that
rapid employee turnover continued to be a key challenge
and was a driver of more generous retention-focused
L-1
Federal Reserve Bank of San Francisco
Retail Trade and Services
oversupply of fruit in the market, and contacts in California noted that cherry and nut exports to China were
down noticeably. Demand from abroad for various meat
products was also weak due to tariffs, though a negative
supply shock in the Chinese pork industry continued to
drive stronger-than-usual demand for swine exports. A
contact in California reported that demand for farmland
has fallen recently due to realized and potential effects of
trade policy developments, resulting in moderating land
prices.
Sales of retail goods increased modestly. Across the
Mountain West, retailers reported that sales volumes
rose moderately and margins were healthy even though
consumer confidence about the outlook waned slightly
on rising uncertainty. Sales at home improvement stores
in Oregon were robust. In Arizona, retail sales were
stable, while in Alaska, sales continued to decline and a
large apparel retailer left the state. Businesses continued
to observe consumer demand shift to e-commerce outlets from brick-and-mortar locations.
Real Estate and Construction
Activity in the consumer and business services sectors
expanded slightly. Health-care service providers in the
Mountain West noted solid customer demand and the
capacity to meet it. The restaurant industry in the Pacific
Northwest was generally strong, with local tourism and
rising incomes supporting spending. In Seattle, a contact
noted that a new restaurant opened about every day, on
average, though another contact at a quick service beverage company in the area observed flat sales growth
across locations. The tourism industry in Southern California slowed somewhat, with a hotel owner reporting
lower occupancy rates for that type of lodging.
Residential real estate activity was strong. Permitting for
single- and multi-family homes picked up in most areas,
though construction starts were constrained by a lack of
labor and higher material costs, which led inventories to
fall noticeably and lead times to increase. Accordingly,
selling prices ticked up across the District as demand
outpaced supply. An exception was in the Central Valley
of California, where a contact reported that permitting
was down and inventory levels increased more than
expected. In areas such as eastern Washington and
central Oregon, sales activity was brisk due to new buyers arriving from higher-cost areas. A contact in the
Mountain West reported that mortgage rates lower than
earlier in the year spurred an increase in demand from
formerly tepid levels.
Manufacturing
Activity in the manufacturing sector was little changed. A
metals manufacturer in the Pacific Northwest reported
steady activity across various product lines, while a
contact in the semiconductor industry in California reported that sales and inventory levels were normal. The
slowing trend in both housing and global growth along
with the stronger dollar generally constrained sales at
domestic wood product manufacturers, though some
noted that a recent tick up in the housing market stabilized demand somewhat.
Activity in commercial real estate markets was also solid,
and vacancy rates were generally low. In the Pacific
Northwest, commercial permitting was especially brisk,
and contacts there noted that construction would be
centered on transportation infrastructure, health-care
services, and public schools. In eastern Washington,
rising demand for industrial space from the cannabis
industry boosted leasing rates. In central Oregon, three
of the largest commercial construction contractors were
booked for projects through next year.
Agriculture and Resource-Related Industries
Activity slowed further in the agricultural sector. Poor
weather in Idaho damaged wheat harvests, while potato
yields were lower than last year due to poor growing
conditions earlier in the season. The outlook for Idaho’s
corn crop was similarly weak due to colder-than-usual
conditions. Demand for agricultural exports continued to
run soft, with contacts generally citing tariffs and slower
global growth as reasons for the decline in exports. A
lumber producer in Oregon noted that lumber exports to
China have dropped so much that the industry has started scaling back harvesting capacity to preserve domestic prices. An apple grower in Washington reported an
Financial Institutions
Lending activity grew solidly over the reporting period.
Across the District, loan demand was brisk, supported by
lower interest rates. Some banks reported that home
mortgage refinancing activity increased further. Venture
capital funding was strong in Seattle. Lenders to the
agriculture sector in the Mountain West were concerned
about weakness in that industry leading to loan defaults
down the road. Generally, however, contacts reported
that credit quality was healthy, with a few bankers noting
slightly tighter underwriting standards. ■
L-2
Cite this document
Federal Reserve (2019, October 29). Beige Book. Beige Book, Federal Reserve. https://whenthefedspeaks.com/doc/beige_book_20191030
@misc{wtfs_beige_book_20191030,
author = {Federal Reserve},
title = {Beige Book},
year = {2019},
month = {Oct},
howpublished = {Beige Book, Federal Reserve},
url = {https://whenthefedspeaks.com/doc/beige_book_20191030},
note = {Retrieved via When the Fed Speaks corpus}
}