Beige Book
For use at 2:00 PM EDT
Wednesday
March 4, 2020
The Beige Book
Summary of Commentary on Current Economic Conditions
By Federal Reserve District
February 2020
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 Richmond
based on information collected on or before February 24, 2020. This
document summarizes comments received from contacts outside the
Federal Reserve System and is not a commentary on the views of
Federal Reserve officials.
National Summary
The Beige Book ■ February 2020
Overall Economic Activity
Economic activity expanded at a modest to moderate rate over the past several weeks, according to the majority of
Federal Reserve Districts. The St. Louis and Kansas City Districts, however, reported no change during this period.
Consumer spending generally picked up, but growth was uneven across the nation, including mixed reports of auto
sales. Overall, growth in tourism was flat to modest. There were indications that the coronavirus was negatively impacting travel and tourism in the U.S. Manufacturing activity expanded in most parts of the country; however, some supply
chain delays were reported as a result of the coronavirus and several Districts said that producers feared further disruptions in the coming weeks. Transportation activity was generally flat to up slightly aside from some Mid-Atlantic ports
that saw strong volume growth. U.S. nonfinancial services firms generally experienced mild to moderate growth. Overall loan growth was flat to up modestly, according to most Districts; notable exceptions were St. Louis, New York, and
Kansas City, where declines were reported. On the whole, residential home sales picked up modestly. Nonresidential
real estate sales and leasing activity varied across Districts. Agricultural conditions were little changed in recent weeks
while some declines in natural resource extraction were reported. Outlooks for the near-term were mostly for modest
growth with the coronavirus and the upcoming presidential election cited as potential risks.
Employment and Wages
Employment increased at a slight to moderate pace, overall, with hiring constrained by a tight labor market. Insufficient
labor lowered growth for many firms and led to delays in construction projects. Several employers changed from temporary to permanent workers in order to attract talent, and firms made efforts to retain workers such as keeping seasonal workers on staff in the off-season. While employment grew across most sectors, manufacturers, retailers, and
transportation companies reported lower demand for labor in some Districts. Wages grew at a modest to moderate rate
in most Districts, similar to last period, and contacts expected wage growth to continue in this range. Firms reported
that the tight labor market and minimum wage increases were putting upward pressure on wages. Companies also
spent more on benefits, as the cost of benefits rose and as employers expanded benefits to attract and retain workers.
Prices
Most Districts reported modest growth in selling prices, as well as in nonlabor input prices. Some firms, particularly
manufacturers, were optimistic that the Phase One trade deal with China would reduce goods prices, but some still
struggled with tariffs and were concerned about how the coronavirus might affect prices. Oil and gas prices decreased
across the country, which was largely attributed to weak demand from China because of the coronavirus. Retail prices
were up in much of the country although some retailers had lower costs due to improved trade conditions. Meanwhile,
agriculture price changes varied.
Highlights by Federal Reserve District
Boston
New York
The regional economy continued expanding in early
2020. A majority of manufacturers and retailers reported
revenue increases from a year earlier. Staffing firms also
reported revenue growth; some said growth was slower
than in recent past periods and some said it was faster
than expected. Business contacts continued to mention
tight labor markets but little wage pressure. Prices
stayed flat to up slightly. Outlooks remained positive.
Growth in the regional economy picked up to a moderate
pace. With tight labor markets, wage growth picked up
but job creation remained sluggish. Both input prices and
selling prices rose moderately. Housing markets firmed,
while commercial real estate markets weakened further.
Business contacts have grown somewhat more optimistic about the near-term outlook.
1
National Summary
Philadelphia
St. Louis
On balance, business activity resumed a modest pace of
growth during the current Beige Book period after a lull
last period. Tight labor markets continued to constrain
employment growth to slight increases, but wage pressures ebbed to a modest pace. Price increases remained modest, and firms optimistic, but the coronavirus
has increased uncertainty about future growth.
Reports from contacts indicate that overall economic
conditions have been mixed but are generally unchanged since our previous report. Overall inflation
pressures increased slightly, although there were some
signs of further softening. Reports from manufacturing
contacts indicate somewhat of a rebound in activity after
consecutive reports of slowing growth.
Cleveland
Minneapolis
Economic activity in the Fourth District increased modestly thanks to growth in retail and professional and
business services. Manufacturing demand held steady,
but firms noted weaker demand because of the Boeing
737 Max production halt and concern about COVID-19’s
impact on supply chains. Home and auto demand increased. Employment and wages rose modestly overall.
Inflation pressures remained modest.
Ninth District economic activity grew at a moderate pace.
Employment and wages increased moderately. Following a slowdown in 2019, manufacturing activity appears
to have increased recently. Favorable snow conditions
across much of the District boosted winter tourism, with
some exceptions. Commercial and residential construction and real estate increased. Agricultural conditions
were stable at low levels.
Richmond
Kansas City
The Fifth District economy grew moderately in recent
weeks. Manufacturing activity picked up, as did port
volumes and retail sales; however, some concerns were
expressed about the coronavirus lowering imports of
inputs and retail goods from China in coming months.
Also, employment increased and wages continued to
rise. Price growth for inputs and selling prices, on the
other hand, slowed to a modest rate.
The District economy was largely unchanged in January
and February, but activity levels were above year-ago
levels in most sectors. Consumer spending slowed
slightly and construction activity held steady, while manufacturing activity edged up in February for the first time
since last summer. Energy activity continued to decline
due primarily to low oil and natural gas prices, while the
agriculture sector remained weak.
Atlanta
Dallas
Economic activity grew modestly. The labor market
remained tight and wages were steady, on balance.
Nonlabor costs continued to rise. The pace of retail and
auto sales growth was flat. Home prices were steady,
and commercial real estate activity continued to grow.
Manufacturing declined, as new orders and production
levels fell. Banking activity was stable.
Economic activity expanded moderately, with broadbased growth seen in services (excluding retail) and
manufacturing but declining activity in the energy sector.
Housing demand continued to rise broadly. Employment
growth slowed to a modest pace. Input prices continued
to rise while selling prices were mixed. Outlooks generally improved, though the coronavirus introduced new
uncertainty into the business environment.
Chicago
San Francisco
Economic activity increased modestly. Consumer spending and employment increased modestly, while construction and real estate activity increased slightly. Business
spending and manufacturing were little changed. Wages
increased modestly, prices increased slightly, and financial conditions were unchanged. Farmers’ income prospects deteriorated some. The coronavirus outbreak has
had little effect to date.
Economic activity in the Twelfth District expanded at a
modest pace. Employment increased some and wages
rose further. Price inflation was stable. Sales of retail
goods increased markedly, and consumer and business
services activity was up somewhat. The manufacturing
sector contracted minutely on net, but activity in the
agriculture sector increased slightly. The residential real
estate market expanded modestly, while commercial real
estate activity was mixed. Lending grew further.
2
Federal Reserve Bank of
Boston
The Beige Book ■ February 2020
Summary of Economic Activity
First District firms continued to report increases in economic activity heading into 2020. Retailers reported mixed but
mostly positive results, while restaurateurs saw solid revenue gains. Most manufacturers experienced revenue increases ranging from mid single-digit percentages to more than 20 percent, but two respondents cited revenue declines, both
attributed in part to disruptions related to the coronavirus outbreak in China. Staffing firms continued to report moderate
to strong revenue gains, although a couple cited slowing growth or fewer job requests compared with last year. Residential real estate markets remained tight in the region, with inventories of both homes and condos decreasing as sales
and prices rose. Commercial real estate markets were mixed across sectors and locations. Outlooks continued to be
positive, with the coronavirus and the presidential election cited as risk factors.
turing firms stayed level since last quarter, and were flat
or up in the very low single digits year-over-year. One
notable exception was a dairy producer who reported
increased input costs of 6 percent over the past quarter,
following a 9 percent increase the prior quarter; they
expect prices to level off into 2020.
Employment and Wages
Labor markets in the First District remained tight. Retailers noted that minimum wages went up in some states;
those increases, in combination with a generally tight
labor market, have pushed up operating costs. Employment increased year-over-year at five contacted manufacturing firms; headcount was down modestly year-over
-year at one manufacturer and flat at four. Almost all the
manufacturers who were actively hiring reported difficulties finding workers for nearly all positions ranging from
skilled executive assistants to experienced woodworkers and engineers; competition was said to be
particularly fierce for higher skilled jobs in northern New
England. Staffing firms reported that low unemployment
rates gave workers less incentive to look for new temporary or permanent positions; at the same time, a dearth
of fresh college graduates and young workers with two to
three years of experience further limited the available
pool of qualified talent. A majority of contacted staffing
firms reported bill and pay rates that were either holding
steady or rising only modestly in line with inflation or
increases in benefits costs.
Retail and Tourism
First District retail respondents reported comparablestore sales ranging from a decrease of a few percentage
points to increases in the mid-single digits year-overyear. Two retail contacts plan significant business expansion, as reflected in their capital spending plans for
2020. One retailer noted that their inventory levels were
impacted by the coronavirus in China, which slowed
production at some manufacturing plants. Consumer
sentiment remained strong.
Anecdotally, Massachusetts restaurant sales through the
first seven weeks of 2020 have been good, fueled by the
redemption of gift cards and mild winter weather.
Through December—the latest month with hard data on
state meals-tax receipts—Massachusetts restaurants
saw total sales increase 4.2 percent year-over-year. But
when adjusting for the record number of restaurant units
in operation, the underlying sales trend is likely a much
more modest 1.1 percent increase. Industry contacts
remained concerned that the intense competition for
customers amid rising operating costs means that the
current number of restaurant units is not sustainable.
Prices
Prices were mostly unchanged or up modestly. Retailers
said prices largely remained steady in recent months.
Restaurateurs noted that menu prices were up 3.1 percent year-over-year, while wholesale food prices rose
1.6 percent, a spread that caused some consumers to
reduce spending on eating out. Prices at most manufac-
A-1
Federal Reserve Bank of Boston
The outlook for 2020 is cautionary, as the higher advertising costs associated with a presidential election year
increase operating expenses.
tion activity, and in Rhode Island the combination of
robust demand and scarce inventory contributed to
increases in industrial property values on the order of 40
percent in the past two years. Office leasing activity
varied across markets: stable but very limited in the
Hartford area, resulting in slightly negative absorption for
2019, moderate but slowing in greater Providence, and
robust in Boston. A Boston contact reported with astonishment that office rents had increased by up to 50 percent in just the past 3 to 4 years and office vacancy rates
are as low as 4 percent in some urban neighborhoods.
Manufacturing and Related Services
Reports from manufacturers were mostly positive, with
seven of ten respondents reporting increased sales
compared to the same period last year. Two semiconductor-related manufacturers reported the greatest
gains: driven primarily by a buildup in 5G-related technology, revenues were up more than 20 percent compared to last year. A veterinary care supplier and a dairy
manufacturer both reported revenue growth around 11
percent year-over-year. Two other contacts reported low
double-digit growth from a year ago, including a furniture
manufacturer, who cited large hotel orders as well their
most successful Presidents’ Day weekend in several
years. A biotech firm saw sales and revenue growth in
single digits. On the down side, a textile manufacturer
reported flat sales, and two firms, in advanced sensors
and chemicals, pointed to disruptions related to uncertainty and supply chain challenges from the coronavirus
as factors leading to their slower 2020 start. Seven of ten
manufacturers did not mention disruptions from the virus
to date. A handful of contacts pointed to uncertainty
related to the election as a potential risk factor later in
the year.
Investment sales demand was seen as stable throughout
the District and remained stronger in Boston than in
other areas. Speculative office construction activity increased further in the Boston area—although completions are still a few years off; in other parts of the District,
construction activity was dominated by multifamily and
mixed-use developments. Contacts expected conditions
to remain stable for the most part, although the retail
sector is expected to see further weakness and downside macroeconomic risks were cited in relation to the
coronavirus outbreak and the presidential election.
Residential Real Estate
Residential real estate markets in the First District ended
the year of 2019 on a strong note. Rhode Island, Massachusetts, and Boston reported year-over-year changes
from December 2018 to December 2019, while New
Hampshire and Maine reported January statistics. Connecticut and Vermont data were unavailable.
Staffing Services
New England staffing firms ended 2019 on a positive
note: some contacts reported higher-than-projected
revenue growth; one firm cited a year-over-year growth
rate of 47 percent. Some companies saw declines in
revenue growth; they indicated the slowdowns were
within a tolerable range. Most contacts cited a steady
and healthy demand for labor, still outweighing labor
supply. Two firms cited a slight drop in the total number
of job requests compared to a year ago. One contact
shared anecdotally that help-wanted signs were prevalent at a range of local businesses. A number of firms
shared favorable projections and most are guardedly, if
not highly, optimistic going into the second quarter.
Closed sales increased by double-digit percentages in all
reporting areas for both single-family homes and condos.
Median sales prices generally increased. Inventories of
both homes and condos decreased in all reporting areas,
with home inventories dropping sharply.
Contacts noted that 2019 was a strong year for real
estate, citing a favorable interest rate environment and
positive economic conditions as the main reasons. However, low inventory and high demand pushed prices up.
Looking forward, contacts expressed optimistic outlooks.■
Commercial Real Estate
Commercial real estate contacts in the First District
reported mixed performance across market sectors, with
strong demand for industrial space, mixed office leasing
activity across locations, and troubles in the retail sector.
Evidence of the latter is coming partly from value writedowns for national mall operators, but contacts also saw
rising retail vacancy rates in both the greater Boston and
greater Hartford areas. Industrial space remains in high
demand throughout the region: the Hartford area saw
significant large-format warehouse leasing and construc-
For more information about District economic conditions visit:
www.bostonfed.org/regional‐economy
A-2
Federal Reserve Bank of
New York
The Beige Book ■ February 2020
Summary of Economic Activity
The Second District economy picked up to a moderate pace of growth in the latest reporting period. The labor market
remained tight, and wage growth picked up somewhat, though hiring activity was sluggish. Businesses report that both
input prices and selling prices picked up somewhat and rose at a moderate rate. Manufacturing activity picked up noticeably, while most service industries reported some pickup. Consumer spending has remained sluggish, following a
mixed holiday season, while auto dealers reported a fairly good start to the year. Tourism has weakened more than the
seasonal norm in early 2020. Home sales markets have picked up somewhat so far this year, and the residential rental
market has remained tight. Commercial real estate markets have weakened further. New commercial construction has
largely dried up, while new multi-family residential construction has been steady at a moderate pace. Banks reported
some pickup in loan demand and little change in delinquency rates, while financial sector contacts more broadly noted
flat to slightly declining activity. Finally, business contacts in most sectors have grown a bit more sanguine about the
near-term outlook.
Employment and Wages
Prices
The labor market has remained stable and tight across
the District, while hiring has been restrained. Employment agencies have noted ongoing trouble finding workers in occupations ranging from IT workers to customer
service reps. A major payroll firm noted that job growth
at small businesses has slowed across New York State.
Reports from business sectors were mixed. Retail, finance, and transportation firms reported declining employment, on balance, but contacts in manufacturing,
wholesale trade, professional & business services, and
information reported modest net hiring.
Businesses mostly reported that both input costs and
selling prices picked up somewhat, rising at a moderate
pace. In terms of prices paid, much of this pickup was
reported in manufacturing, transportation, information
and retail trade. In terms of prices received, the most
widespread acceleration was reported from contacts in
transportation, information, and leisure & hospitality.
Broadway theater ticket prices have receded slightly in
early 2020 and were little changed from a year ago.
Looking ahead, businesses in all sectors except finance
plan to raise their selling prices, on net, in the months
ahead.
Looking ahead, businesses in almost all major industry
sectors indicated that they planned to add staff, on net.
The one sector anticipating job reductions was retail
trade. Businesses in most service sectors, as well as
employment agencies, reported that wage growth has
picked up a bit. Only in finance did contacts report flat
wages. A number of businesses in both the manufacturing and service sectors noted that the latest rise in New
York’s minimum wage has had ripple effects, boosting
wages even for workers well above the minimum.
Consumer Spending
Retailers reported that sales were mostly flat thus far in
2020, and contacts generally expected lackluster sales
for the months ahead. Some upstate New York retailers
offered a more favorable assessment, characterizing
customer traffic and sales as solid, helped by mild
weather. Retailers generally indicated that inventories
were in fairly good shape, aside from an overhang of
cold-weather outerwear.
B-1
Federal Reserve Bank of New York
New York City’s residential rental market has been
mixed: Manhattan’s market has continued to strengthen—especially at the higher end, as apartment-seekers
have shied away from the sales market. In the outer
boroughs, however, excess inventories of new rental
developments have held back rents. Overall, rents have
risen at a roughly 2-3 percent pace, while concessions
have receded, except at the high end. An industry contact noted concern among real estate professionals
about recent efforts to ban charging fees to new renters.
Sales of both new and used vehicles have remained
fairly strong in early 2020, helped by mild winter weather.
Consumer confidence in the Middle Atlantic States (NY,
NJ, PA) rebounded in early 2020, after falling to a nearly
two-year low in December.
Manufacturing and Distribution
Manufacturers reported a fairly brisk pickup in business
activity and especially in new orders. On the distribution
side, reports were also fairly positive: wholesalers reported continuing moderate growth in activity, while transportation contacts noted a rebound in business.
Commercial real estate markets across the District have
softened further. Office availability rates have climbed
modestly across most of New York State, while they
have been steady in northern New Jersey, Fairfield
County, CT, and the Lower Hudson Valley. Office rents
have held steady, on balance, across the District. Industrial markets have been mixed, with both rents and vacancy rates on the rise. The market for retail space has
continued to soften, though asking rents have remained
somewhat elevated, especially in New York City.
Looking ahead, manufacturers indicated that they project
moderate growth in the months ahead, while wholesalers
and transportation firms foresee more subdued growth.
Contacts in these sectors have expressed concern about
the latest round of minimum wage hikes, and there has
been ongoing concern about tariffs. One manufacturing
contact noted problems with supply disruptions and
shipment delays related to the coronavirus.
Services
New multi-family construction starts have remained fairly
robust across the District, and ongoing multi-family construction activity has remained brisk. By contrast, new
office construction has weakened, while industrial construction has been mixed, picking up in upstate New
York but remaining flat or falling elsewhere.
Service industry contacts generally noted a pickup in
activity following flat business in late 2019. However,
contacts in the education & health service sector indicated that activity was flat. Tourism activity was mixed. A
few contacts reported that the coronavirus has deterred
visitors, though New York City hotels have continued to
report good business. Broadway theaters reported that
business slowed by more than the seasonal norm, following a brisk December. Both attendance and revenues
fell well below comparable year-ago levels.
Banking and Finance
Financial sector contacts reported flat to weaker activity,
and expressed ongoing concern about the business
outlook. Small to medium-sized banks in the District
reported lower demand for consumer loans but higher
demand for residential mortgages, including refinancing,
as well as commercial loans and mortgages. Bankers
reported unchanged credit standards for all loan categories, narrowing spreads on residential mortgages and
commercial mortgages, and widespread decreases in
the average deposit rate. Finally, bankers reported little
change in delinquency rates across the board. ■
Looking ahead to the first half of 2020, contacts in most
major service industries were fairly upbeat, though businesses in education & health were more guarded in their
optimism.
Real Estate and Construction
Home sales markets across the District have been mixed
but, on balance, a bit firmer since the last report. Prices
of New York City condos and co-ops leveled off but
remained below a year ago. In particular, a sizable inventory glut at the high end of the market, most notably
for new development, has continued to depress prices.
However, prices at the lower to middle segments of the
market have been steady to up modestly. Suburban
markets, in both downstate and upstate New York, have
been more robust, with low inventories boosting prices.
Sales activity has picked up somewhat across the District.
For more information about District economic conditions visit:
www.newyorkfed.org/regional‐economy
B-2
Federal Reserve Bank of
Philadelphia
The Beige Book ■ February 2020
Summary of Economic Activity
Aggregate Third District business activity resumed a modest pace of growth during the current Beige Book period, after
a lull last period. Growth for manufacturing and nonfinancial services firms picked up to a modest and moderate pace,
respectively. Financial services and residential construction continued to grow modestly, as did nonauto consumer
spending; however, auto sales and tourism slowed from a slight pace of growth to a modest decline and to no change,
respectively. Residential construction and existing home sales grew modestly, while nonresidential construction and
leasing activity held steady. Labor markets remained tight throughout the District, generating slight employment increases, while wage growth appeared to ebb to a modest pace. Overall, price pressures remained modest. A positive outlook
for modest growth over the next six months tended to narrow among nonmanufacturing firms and broaden among manufacturers; however, contacts expressed concerns about potential supply chain disruptions from the coronavirus.
Employment and Wages
Prices
Employment continued to grow slightly during the current
Beige Book period; however, a slower pace is evident,
as the share of firms reporting staff cuts edged up. Nearly two-thirds of the firms reported no change in staff.
Average work hours held steady at manufacturing firms
and edged up at nonmanufacturing firms.
Most firms continued to report modest increases for both
input prices and prices received for their own goods and
services. The share of nonmanufacturers reporting higher prices paid retreated after a sharp rise in the prior
period. The share of firms reporting no change in prices
remained near three-fourths for manufacturers and rose
to about three-fifths for nonmanufacturers.
Difficulty hiring and retaining qualified workers remained
a common thread from many firms as they continued to
report tight labor market conditions, but the comment
was less frequent. Some firms reported offering more
competitive wage and salary packages; many firms are
automating where possible.
Looking ahead six months, the anticipation of higher
prices lessened somewhat among manufacturers. About
40 percent of the firms expected higher prices; about 5
percent expected prices to fall. This was true for prices
firms expected to pay as well as for prices firms expected to receive for their own goods.
Staffing firms continued to report demand for new job
placements from clients and an insufficient supply of
qualified labor to fill the orders. One staffing contact
noted that many clients were converting current temporary workers to permanent staff and not placing new
temp orders.
Manufacturing
On balance, manufacturers reported modest growth, with
steadily improving reports throughout the period versus
the slight growth reported during the prior period. The
percentage of firms reporting increases in shipments and
new orders rose to nearly one-half, and the percentage
reporting decreases in new orders edged down.
On balance, firms reported modest wage growth – slower than the prior period’s moderate pace. The share of
nonmanufacturing firms reporting wage and benefit
increases fell. One contact noted raising staff wages in
January – earlier than the firm’s typical March adjustment.
Positive expectations of activity over the next six months
broadened among manufacturers. Nearly three-fifths of
the firms expected shipments and new orders to increase. However, expectations diminished for future
C-1
Federal Reserve Bank of Philadelphia
employment and held steady for planned capital spending.
Financial Services
Financial firms continued to report modest growth in
overall loan volumes (excluding credit cards) on a yearover-year basis. Credit card lending also remained at a
modest pace.
Despite the growth and bullish expectations, several
firms cautioned that the emerging coronavirus may disrupt supply chains in the near future. Two firms have
already reported delays in receiving needed production
inputs. Inquiries and orders to source parts domestically
were increasing because of tariff uncertainty and are
continuing because of the coronavirus. However, contacts explain that it can take three months to get a part
into production, and longer for testing and redesign.
During the current period (reported without seasonal
adjustments), volumes appeared to grow robustly for
commercial real estate and other consumer loans (not
elsewhere classified). Home mortgages grew moderately, commercial and industrial loan volumes grew modestly, and auto lending appeared flat. No major category
was negative on a year-over-year basis.
Consumer Spending
Banking contacts continued to express few concerns
over credit quality and lending standards at their own
institutions, but some were critical of “crazy deals,” especially from nonbank competitors. One large bank noted
that loan quality was “eerily quiet.” Most banking contacts were optimistic about the overall health of the U.S.
economy going forward but expressed concerns over the
potential impact of the coronavirus.
Retail contacts continued to report modest growth in
restaurants and other nonauto retail sales. Most contacts
noted that consumers remained confident but suggested
that low gas prices and unseasonably warm weather had
also helped sales. Retailers noted no supply disruptions
because of the coronavirus.
New car sales appear to have declined modestly on a
year-over-year basis. In New Jersey, sales fell modestly
through mid-February, although sales had been so unseasonably strong in January 2019 that sales through
mid-February 2020 were negative by comparison. Pennsylvania auto dealers (of new and used cars) reported
modest gains in January.
Real Estate and Construction
Homebuilders continued to report modest growth in
contract signings, but with some improvement. One
builder noted that traffic through the company’s showrooms was normal but that more people were deciding to
buy. Contacts cited low interest rates, warm weather,
and a strong stock market as factors spurring purchases.
Current sales should keep contractors busy well into
September.
Tourism activity appeared to hold steady – after growing
slightly in the prior period. A tourism analyst noted that
most metrics for the Philadelphia area were positive for
2019, but that national travel was slowing a bit, and the
coronavirus was causing headwinds. In addition to fewer
tour groups from China, local customers have been
avoiding some of Philadelphia’s Asian restaurants and
shops, as unfounded fears spread. Area ski resorts have
managed with manmade snow, while Atlantic City casino
revenues appear to have benefited from unseasonably
warm weather in January.
Inventory levels for existing home sales dropped to two
months – less in the Lehigh Valley. The constrained low
level of sales appears to have hit a bottom, as most local
markets reported modest increases in year-over-year
sales – central Pennsylvania sales were strong. Still, an
area broker noted that a lack of new single-family home
construction and high student debt were constraining
supply and demand, respectively.
Nonfinancial Services
On balance, commercial real estate construction appeared to hold steady at relatively high levels, as did
sales and leasing activity. Contacts noted that multifamily development was as busy as ever, architects noted a
year-end pickup, and accountants to the industry reported no emerging problems. Construction activity is somewhat constrained by available labor. ■
On balance, activity at service-sector firms grew moderately – a substantial pickup from the prior period. The
share of firms reporting increased revenues and new
orders rose, and the share reporting decreases in both
measures fell significantly. The coronavirus has entered
the list of concerns, which still includes tariffs and tight
labor markets. One business services firm has already
noted disruptions to its vendor’s supply chain. A bank
contact was aware of delays that a customer had faced
for key production equipment. Over one-half of the firms
– less than in the prior period – expect growth over the
next six months.
For more information about District economic conditions visit:
www.philadelphiafed.org/research-and-data/regionaleconomy
C-2
Federal Reserve Bank of
Cleveland
The Beige Book ■ February 2020
Summary of Economic Activity
Economic activity in the Fourth District increased modestly, albeit at a slightly slower pace than in the prior round. Manufacturing demand held steady, although some producers noted weaker demand because of the Boeing 737 Max production halt. Others expressed concern about supply-chain implications of factory shutdowns in parts of China caused
by the outbreak of COVID-19. Retail demand was relatively strong thanks to mild weather, strong consumer confidence,
and low interest rates. Professional and business services, a long-standing bright spot in the District, continued to report
strong demand for legal, IT, and advisory services. Loan demand was stable, with some improvement in mortgage
lending because of low interest rates. Freight haulers said that cargo volumes remained low. On balance, contacts
expected that customer demand will improve slightly in the near term. Hiring and wage growth continued at about the
same modest pace as in the previous survey period. Contacts indicated that labor was still in short supply, while often
noting that they do not believe larger wage increases will attract more applicants. Both nonlabor input costs and selling
prices rose modestly.
Employment and Wages
tors. Despite low unemployment, contacts cite modest
inflation as a reason for not granting larger wage increases. Contacts often noted that they do not believe
larger wage increases will attract more applicants. Many
firms that were hiring workers with general skills were
concerned they would not be able to pass through the
higher costs to customers. Among firms that were hiring
skilled or professional workers, many were enhancing
other benefits in lieu of more substantial wage increases.
District employers increased staff levels slightly, and
firms expect a similar pace of hiring in the near term.
Employment gains were concentrated in services. The
majority of professional services firms added workers to
meet growing customer demand, as has been the case
for a number of months. Banking employment edged up
after several periods of losses thanks to a few pockets
where loan demand had increased. Retail reports were
mixed. Warmer weather led a few food and hospitality
firms to increase staff levels. However, one large department store reduced employee numbers as part of a
restructuring. Transportation firms continued to pare
payrolls because of weak cargo volumes and increased
operational efficiencies. Most manufacturers held staff
levels steady, and the few that added workers added
finance and sales analysts and engineers to design new
products.
Prices
Inflation pressures remain modest. Upward pressure on
manufacturers’ input costs softened somewhat, in part
because of lower contract prices for steel. Also, a number of manufacturers reported that weaker demand from
China weighed on commodity prices, with one global
capital goods manufacturer pointing to the factory shutdowns caused by COVID-19 as a cause. Transportation
firms reported lower diesel fuel prices. Clothing and
department store retailers commented that a reduction in
incremental tariffs on Chinese imports eased cost pressures.
Wages rose modestly and in line with the trend during
the past several periods. A greater share of professional
and business services raised wages to attract and retain
talent. Retail wages moved up in line with an increase in
Ohio’s minimum wage. However, a number of freight
haulers held wages flat and reduced hours and benefits.
Wage growth did not change meaningfully in other sec-
District firms raised selling prices modestly. On balance,
manufacturers nudged their prices higher, with producers raising prices modestly on select customers or select
D-1
Federal Reserve Bank of Cleveland
products or mixing increases on some products with
decreases on others. On the consumer side, competition
kept retail, food, and hospitality price increases minimal.
expect the growth rate of commercial building may slow
somewhat after a few years of exceptional growth.
Consumer Spending
Overall, loan demand was stable. On the consumer side,
while some bankers reported that lower interest rates
spurred growth in mortgage demand, others noted the
usual first-quarter decline in consumer credit card balances. On the commercial side, loan demand was balanced. One banker noted that some new capital projects
were initiated at the beginning of the year, while others
reported slower demand for commercial credit as trade
tensions and weakness in the manufacturing sector
weighed on business activity. Some contacts noted a
sense of caution among their commercial clients; a few
mentioned that the typical first quarter decline in deposits
was less severe than usual. Contacts speculated there is
a possibility that businesses are holding more cash
reserves because of uncertainty about the outlook.
Financial Services
On balance, retailers reported relatively strong demand.
Contacts highlighted mild weather relative to last year as
keeping activity strong after the holiday shopping season. Auto dealers reported strong sales thanks to elevated consumer confidence and low interest rates, although
used-vehicle sales were rising more quickly than newvehicle sales. Apparel retailers reported steady customer
demand. One discount food and drug store noted that
competition from online retailers had led to lower sales.
Retailers were upbeat that strong economic conditions
would continue to buoy customer demand in the near
term.
Manufacturing
Conditions in the manufacturing sector remained stable.
One steel producer noted that the bottoming of steel
prices led to an increase in demand. Also, for some
manufacturers, demand improved because of a usual
seasonal pickup that follows a quiet holiday season.
Aerospace parts manufacturers and those who serve
them noted dampened demand as a result of the Boeing
737 MAX production halt. Many contacts commented on
general sluggishness in the global economy and voiced
concern about the outlook given the spread of COVID-19
and the resulting effective shutdown of many commercial
centers in China. Just more than a quarter of respondents reported that capacity utilization was lower than
normal, citing slower demand and excess capacity in the
market as the reasons.
Professional Business Services
Activity in the professional and business services sector
remained strong but has moderated somewhat from that
of recent months. Contacts noted that favorable economic conditions were encouraging firms to spend on legal,
advisory, and IT services. Contacts expect demand for
their services to remain strong going into the second
quarter.
Freight
Overall demand for freight services was stable after
declining slightly in the previous period. One logistics
firm reported that its customers were replenishing inventories after a successful holiday shopping season. However, some freight executives reported that excess truck
capacity and weakness in manufacturing had negatively
affected their markets. One contact remarked that new
entrants with significant amounts of capital have been
taking market share. Transportation firms expressed
concern about the potential for supply-chain bottlenecks
as a result of COVID-19. The virus aside, transportation
firms expect conditions to improve slightly in the near
future as rising consumer spending leads to increases of
merchandise shipments. ■
Real Estate and Construction
Construction and real estate contacts indicated that
overall demand continued to increase at a modest and
slightly slower pace in recent weeks. At least part of the
slower growth was attributed to typical seasonal effects.
On the residential side, contacts cited a generally strong
economy, low mortgage interest rates, and confident
customers as contributing to ongoing housing demand.
Looking forward, residential realtors and builders suggested that these solid fundamentals would continue to
bolster housing demand in the coming months.
Nonresidential building activity remained strong, and
firms expected strong conditions to persist well into
2020. A few contacts said that investment capital continued to flow into commercial real estate and development, and one commercial builder indicated that he had
seen more bid opportunities in recent weeks as developers began planning for the spring. That said, contacts
D-2
Federal Reserve Bank of
Richmond
The Beige Book ■ February 2020
Summary of Economic Activity
The Fifth District economy grew at a moderate pace since our previous Beige Book report. Manufacturers’ shipments and
new orders increased modestly. They were encouraged by recent trade negotiations with China, but expressed some
concerns about the coronavirus delaying some shipments of inputs. This sentiment was echoed by port contacts despite
their reporting strong growth in volumes over the past several weeks. Meanwhile, trucking volumes rose slightly and
shipping rates remained soft. Retail sales grew moderately, while travel and tourism strengthened further in recent
weeks. Realtors said that 2020 was off to a stronger start than 2019 and that existing home sales picked up modestly.
Also, a low inventory of homes for sale along with low interest rates reportedly contributed to the strong demand for new
residential construction. In addition, commercial real estate leasing improved moderately while construction of industrial
and multifamily properties remained strong. Bankers reported a slight increase in loan demand, overall, with more activity
coming from residential real estate and consumer lending than commercial lending. Nonfinancial services firms reported
moderate growth in revenues and demand in recent weeks. Employment increased at a modest rate, overall, while wages grew moderately. Prices of finished goods decelerated, as raw materials price growth eased and competition and
pricing transparency made it difficult for firms to raise prices.
Employment and Wages
Manufacturing
Overall, employment increased at a modest rate in
recent weeks. Firms indicated that the demand for labor
was strong and turnover rates declined slightly; however, employment growth was being restrained by a tight
labor supply. Difficulties filling open positions were cited
by employers across a wide variety of industries. One
employment agency said that they encouraged clients
to seek direct hires because it was harder to recruit
workers without a guarantee of a full-time job. Wage
growth remained moderate, overall, with higher wage
growth reported for certain occupations in high demand.
In addition, there were continued reports of firms offering non-wage benefits, such as flexible work schedules,
to recruit and retain workers.
On balance, manufacturers in the Fifth District reported a
modest increase in shipments and new orders in recent
weeks. Food, auto parts, and furniture manufacturers
reported stable, strong demand. Several manufacturers
were encouraged by trade negotiations with China.
However, many firms noted that while conditions were
improving, their markets remained soft. Some manufacturers were able to raise prices. Others reported higher
costs of inputs in some cases due to tariffs that
squeezed profit margins. Also, the coronavirus led to
concerns about delays in the arrival of inputs.
Ports and Transportation
Fifth District ports had strong growth in shipment volumes in recent weeks. Growth of export volumes was
particularly strong, with notable increases in plastic,
meat, and auto exports. Import volumes also increased,
but more modestly, as several ports saw an increase in
blank sailings—that is shippers cancelling ports of call—
particularly from China. Port officials were optimistic
about recent trade negotiations with China but expressed concern over the potential impact of the coronavirus on imports, although they were currently uncertain
about the magnitude of that impact.
Prices
Since our previous Beige Book report, price growth
slowed to a modest rate. According to our most recent
surveys, growth slowed for prices paid and for prices
received in both the manufacturing and service sectors.
A few service firms said that it was difficult to raise
prices because of competition and because customers
can go online and compare prices. In contrast, a metals
manufacturer said that steel prices had risen in recent
months and a landscaping company raised prices after
keeping them flat for several years.
E-1
Federal Reserve Bank of Richmond
Trucking volumes increased slightly since our last report
but remain lower than a year ago. This trend was consistent across industrial and retail shipments. Spot market activity rose slightly, while rates remained fairly soft.
Most firms were optimistic about the coming year. One
company looked to invest in new equipment and another
considered hiring after a year of reducing staff. A few
firms expressed concerns about market competition, low
profit margins, and uncertainty associated with an election year.
family construction. Demand for retail space was fairly
stable, although one contact noted that many large chain
restaurants were closing and were replaced by new
restaurants that occupied less space.
Banking and Finance
Overall, loan demand grew slightly since our previous
Beige Book. Bankers indicated that commercial real
estate and commercial and industrial lending improved
slightly, though several banks mentioned that much of
commercial borrowing now is outside the traditional
banking system and that most of their new lending was
for refinancing existing debt rather than new capital
expenditures. Residential mortgage lending, auto loans,
and demand for other consumer credit grew moderately,
attributed in part to low rates. Meanwhile, credit standards, delinquencies, and credit quality were reportedly
unchanged at good levels. Despite several bankers
citing fierce competition, deposits increased modestly in
recent weeks.
Retail, Travel, and Tourism
Retail sales in the Fifth District grew moderately since
our last report. While customer traffic was soft in some
places, demand, sales, and profitability were generally
higher. Some retailers continued to struggle with higher
costs of products resulting from tariffs, but others saw
relief after trade negotiations. Sales of both new and
used autos were strong, although dealers expressed
uncertainty from elections and the coronavirus.
Travel and tourism strengthened slightly in recent
weeks. Hotel occupancy and room rates increased. In
Asheville, North Carolina, growth in hotel revenue surpassed growth in short-term rental revenue. In contrast,
a Virginia ski resort struggled with slow business resulting from warm weather. The greatest concern among
most tourism contacts was lack of staffing, which in
some cases led services to be cut. In the District of
Columbia, some groups canceled travels because of the
coronavirus. Firms around the Fifth District were fairly
optimistic about continued strength in the coming year.
Nonfinancial Services
On the whole, nonfinancial services firms indicated a
moderate increase in revenue and demand in recent
weeks. There were some reports of strong growth from
firms engaged in construction-related services, legal
services, advertising, and IT consulting services. Contacts in the healthcare sector also saw solid growth. One
hospital administrator said that they were investing in
brick and mortar facilities to meet demand, and in IT
infrastructure for productivity gains. Also, a product
design firm said that entrepreneurship was at a 20-year
high, and the number of patents issued last year was up
considerably. ■
Real Estate and Construction
Fifth District home sales increased modestly since our
last report. Realtors said that 2020 was off to a stronger
start than 2019 and noted particularly strong demand in
the low to mid-price range but a low inventory of these
homes. Buyer traffic remained strong, but days on the
market increased slightly in some areas, returning to
more normal averages. Single family construction was
strong amid low inventories. One contact noted that a
low inventory of rentals was causing difficulties for people looking for somewhere to live while waiting to close
on homes. Home prices were fairly stable but growth
rates varied across locations and home types.
The Fifth District commercial real estate leasing increased moderately in recent weeks. Demand for industrial space was high across the District, with little vacant
space in some markets. Both speculative and built to
suit construction for industrial spaces were solid. Office
occupancy rates were high, leading to low supply and
increasing rental rates. Brokers reported strong multi-
For more information about District economic conditions visit:
www.richmondfed.org/research/regional_economy
E-2
Federal Reserve Bank of
Atlanta
The Beige Book ■ February 2020
Summary of Economic Activity
Sixth District business contacts reported that economic activity grew modestly from January to mid-February, and the
outlook remained positive, on balance. Reports of tightness in the labor market persisted. A majority of firms noted a
steady pace of wage growth outside of specialized jobs and those in high demand. Nonlabor costs continued to increase modestly. Retail and automotive contacts noted flat sales growth over the reporting period. Hospitality contacts
saw year-over-year increases in the number of visitors to the region. Residential home prices remained steady and
demand was healthy. Commercial real estate conditions were solid. Overall manufacturing activity weakened as new
orders and production levels declined. District financial institutions reported stable conditions; loan growth, while positive, moderated somewhat.
Employment and Wages
Consumer Spending and Tourism
A majority of firms continued to report tight labor market
conditions. A shortage of workers for lower-skilled positions, as well as for some specialized occupations such
as software developers, nurses, and engineers, was
noted. The continued lack of available construction labor
was said to be lengthening project timelines. Many employers noted productivity concerns as the lack of available skilled labor required more in-house training and
supervision.
On balance, retail contacts and auto dealers reported flat
sales growth since the last report. Contacts from both
segments expect an increase in uncertainty in their
industries over the next few months due to sourcing
constraints for merchandise and auto parts from China.
Most contacts expect overall wage growth to remain
steady, with larger wage increases going to positions in
high demand or those deemed critical.
District travel and hospitality contacts reported a healthy
start to the year, with an uptick in the number of visitors
to the region over the first five weeks of the year compared with the same period last year. Although no material impacts have yet been seen, tourism contacts are
closely watching for potential negative effects on the
industry resulting from the coronavirus outbreak.
Prices
Construction and Real Estate
Most contacts continued to report modest increases in
nonlabor costs while tariff concerns lessened over the
reporting period. Some contacts noted having pricing
power with select goods and services, but most reported
difficulty in passing through rising costs. The Atlanta
Fed’s Business Inflation Expectations survey showed
year-over-year unit costs were up 1.5 percent in February. Over the next twelve months, survey respondents
indicated they expect unit costs to rise 1.7 percent, and
the majority of firms expect overall costs to put moderate
upward pressure on prices.
Low mortgage rates and heathy job growth continued to
support demand for housing in the District. Price appreciation was firm while single-family sales activity was
constrained by limited inventory and lower levels of
housing starts. Despite low interest rates, concerns over
affordability remained as many expect price appreciation
to continue and inventories to remain limited. Although
mortgage loan quality remained stable, some markets
saw a slight uptick in delinquencies over the past year
and a rise in the share of mortgages with higher debt-toincome ratios.
Commercial real estate (CRE) contacts reported steady
leasing and sales activity throughout the District during
F-1
Federal Reserve Bank of Atlanta
the reporting period. Data indicated that sector vacancy
rates increased slightly across most major markets in the
District; however, contacts noted a recent acceleration in
leasing and sales inquiries. Local market conditions,
such as growth in population and jobs, continued to
positively influence CRE activity. Overall, most CRE
segments experienced positive dynamics as rents continued to grow at a modest pace. Contacts noted that
growing construction costs were impacting the start of
some new projects, although capital was readily available via banks and non-bank entities for financing CRE
projects. Non-bank entities remained aggressive in financing both construction and stabilized CRE projects.
Modestly growing amounts of leverage and some loosening in underwriting standards were reported.
Energy
The continued rise in global supplies of crude oil and
liquefied natural gas (LNG) was further augmented by
slowing demand from China in the wake of the coronavirus outbreak. Chemical plant and refinery expansions
continued to pick up across the District. Utilities companies reported steady demand in commercial and industrial segments, as well as increased infrastructure investments, largely in electric segments, but also in renewables units and nuclear projects. Solar plant construction
projects, particularly in Florida, continued to develop.
Agriculture
Agricultural conditions remained mixed. Most of the
District remained drought free, but recent heavy rain
resulted in some flooding conditions. On a month-overmonth basis, the February production forecast for Florida's orange crop was down while the grapefruit production forecast increased; both forecasts remain ahead of
last year's production. On a year-over-year basis, prices
paid to farmers in December were up for corn, soybeans,
beef, and milk but down for cotton, rice, broilers, and
eggs. On a month-over-month basis, prices increased for
corn, cotton, soybeans, beef, broilers and milk but declined for rice and eggs. ■
Manufacturing
Manufacturing firms reported a decline in overall activity.
Contacts indicated that new orders and production levels
decreased since the last reporting period, while purchasing managers indicated little to no change in supply
delivery times. Finished inventory levels continued to
decline, but at a somewhat slower pace since the previous report. Optimism for future production levels was
reflected, however, in over one-half of contacts expecting higher levels of production over the next six months.
Transportation
District transportation firms reported varying levels of
activity since the previous report. Air cargo contacts
noted healthier year-over-year volumes and revenues
from increased exports. However, due to the coronavirus, cancelled flights to China have reduced air cargo
capacity significantly, which is expected to negatively
affect first quarter revenues. Port contacts saw continued
strength in container traffic, but weakness in breakbulk
cargos, particularly steel and aluminum, owed to tariffs.
Railroad contacts reported sustained declines in shipments of industrial freight, mostly non-metallic minerals,
metallic ores and coal; intermodal shipments were also
down from year-earlier levels. Most transportation contacts remain somewhat confident in their outlook, despite
geopolitical uncertainties.
Banking and Finance
Conditions at financial institutions remained stable. Margins at banks were steady as lower loan yields were
offset by a decline in interest expense. Loan growth was
positive but continued to moderate as demand for commercial and industrial loans weakened, and banks tightened underwriting standards for credit cards and vehicle
lending. Loan growth was lowest among smaller community banks. Asset quality remained strong, as there was
little change in the level of nonperforming assets.
For more information about District economic conditions visit:
www.frbatlanta.org/economy-matters/regional-economics
F-2
Federal Reserve Bank of
Chicago
The Beige Book ■ February 2020
Summary of Economic Activity
Economic activity in the Seventh District increased modestly overall in January and early February, and contacts expected growth to continue at a similar pace over the next 12 months. Consumer spending and employment increased
modestly, while construction and real estate activity increased slightly. Business spending and manufacturing production
were little changed. Wages increased modestly, prices increased slightly, and financial conditions were unchanged. The
outlook for crop farmers’ incomes deteriorated some. Few contacts indicated that the coronavirus outbreak had affected
their business operations to date, but there were concerns about supply chain issues going forward.
Employment and Wages
prices were flat. Contacts indicated little change in producers’ input costs on net; for example, one said that
increased shipping costs had offset decreased raw materials costs.
Employment increased modestly over the reporting
period, but contacts expected a slightly faster rate of
growth over the next 12 months. Hiring was focused on
professional and technical workers and managerial
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. Manufacturers facing slow
demand again reported cutting hours rather than laying
off workers because they were worried the tight labor
market would make it too difficult to hire when demand
recovered. A staffing firm that primarily supplies manufacturers with production workers reported no change in
billable hours. Wage growth increased modestly overall,
and contacts expected a similar growth rate over the
next 12 months. Contacts reported wage increases
across most occupations, with multiple contacts again
highlighting growing wage pressures for entry-level
workers. Benefit costs increased slightly.
Consumer Spending
Consumer spending increased modestly over the reporting period, and contacts expected a similar pace of
growth over the next 12 months. Nonauto retail sales
rose modestly, led by gains in the grocery, apparel, and
general merchandise sectors. Contacts again reported
solid growth in e-commerce and slow growth for brick
and mortar general merchandise stores. New light vehicle sales were flat, while sales of used light vehicles
moved higher and leasing activity remained robust.
Business Spending
Business spending was little changed in January and
early February. Retail inventories were generally comfortable, though GM dealers indicated that inventories
were still not fully replenished following the run-offs that
occurred during the UAW strike. Most manufacturers
said that inventories were at comfortable levels. Some
manufacturing contacts reported low inventories of inputs produced in China due to disruptions from the coronavirus outbreak; while most said the impact had been
minimal so far, many expected a larger effect if the dis-
Prices
Prices increased slightly on balance in January and early
February, and contacts expected prices to rise modestly
over the next 12 months. Retail prices ticked up, and one
contact noted that retailer margins had tightened some,
largely due to higher shipping costs. There were again
reports of an increase in grocery price inflation. Producer
G-1
Federal Reserve Bank of Chicago
ruptions continued much longer. Similarly, one retail
industry contact believed that if not resolved soon, the
outbreak could affect inventories in the sector during the
second half of 2020. Capital spending declined some,
though contacts expected spending to increase modestly
over the next 12 months. Outlays were primarily for
intellectual property and IT equipment. About half of
contacts reported that their newly purchased capital was
intended to increase capacity. Demand for transportation
services was little changed, though there were reports of
decreased international trade related to the coronavirus.
Energy consumption was slightly lower for both commercial and industrial users, with reports of weakness in
manufacturing, particularly in the auto sector.
impact of the coronavirus outbreak. Business loan demand increased slightly overall. Contacts reported increased volumes in the commercial real estate, trucking,
construction, and auto sectors, though some of the increase appeared to reflect greater borrowing needs due
to lower revenues. Loan quality was little changed overall, though one contact said that the warm winter had led
to greater delinquencies for natural gas producers. Lending standards were generally unchanged. Consumer
loan demand increased modestly, led by growth in mortgage volumes for home purchases and refinancing; loan
quality and standards were little changed.
Agriculture
The outlook for crop farmers’ incomes deteriorated some
in January and early February. Corn and soybean prices
moved lower, though they remained higher than a year
ago. There were reports of farmers holding onto their
stocks of crops with hopes of higher prices later in the
year. Contacts expressed frustration that Chinese purchases of US agricultural goods had not yet materialized
following the announcement of the Phase One trade deal
and were concerned that the coronavirus outbreak would
be used as an excuse for missing future trade targets.
Contacts reported that the Market Facilitation Program
was providing crucial income support to cushion the
effects of the trade challenges with China and poor 2019
yields in much of the District. Milk and hog prices were
down over the reporting period but were up compared to
a year ago. Egg prices rebounded some, but cattle prices moved lower. ■
Construction and Real Estate
Construction and real estate activity increased slightly
overall over the reporting period. Residential construction edged up across all price segments. Contacts in
southeast Michigan noted that the price gap between
new and existing homes continued to widen. Residential
real estate activity increased modestly, with growth
primarily coming from homes at low to moderate price
points. Home prices and rents moved up modestly.
Nonresidential construction increased slightly. Contacts
again indicated that rising costs were holding back
growth, emphasizing a shortage of skilled workers and
rising land development costs. Commercial real estate
activity ticked up, led by the office and industrial sectors.
Contacts noted that new office space absorption rates
had slowed, but remained healthy. In contrast, the retail
sector continued to struggle. Overall, commercial rents
were unchanged, while vacancies and the availability of
sublease space edged up.
Manufacturing
Manufacturing production was little changed overall in
January and early February. Auto production was unchanged, but continued at a solid level. Steel production
also was flat. Heavy machinery demand decreased
overall, as a slowdown in demand in China—apparently
due to the coronavirus—more than offset robust demand
in the US. Heavy truck demand decreased, but contacts
expected a turnaround in growth as the year progressed.
Specialty metals orders were flat overall, with reports of
lower sales to the auto and aerospace industries. Manufacturers of construction materials reported a slight increase in shipments, in line with growth in home building.
Banking and Finance
Financial conditions were unchanged over the reporting
period. Participants in the equity and bond markets
reported little change in conditions on balance, citing the
positive impact of low interest rates but the negative
For more information about District economic conditions visit:
chicagofed.org/cfsbc
G-2
Federal Reserve Bank of
St. Louis
The Beige Book ■ February 2020
Summary of Economic Activity
Reports from District contacts indicate that overall economic conditions have been mixed but generally unchanged since
our previous report. Labor market conditions continued to show improvement with modest employment gains and
steady wage gains. Overall inflation pressures increased slightly, although there were some signs of softening. Reports
from manufacturing contacts indicate a modest rebound in activity after consecutive reports of slowing growth. Reports
on consumer spending, real estate, and construction were all mixed. District banking contacts reported slightly weaker
loan demand. Overall, the outlook among contacts improved after steadily weakening for seven consecutive quarters.
On net, contacts expect conditions in 2020 to be better or somewhat better than in 2019. Contacts were uncertain
about the impact of coronavirus on their business; no contacts reported a significant impact, but some have experienced
travel and shipment delays.
Employment and Wages
Prices
Employment has increased modestly since the previous
report. On net, 18 percent of survey respondents reported that employment was higher than a year ago. Firms
spanning several industries—including healthcare, information technology, and manufacturing—reported difficulty hiring workers due to the tight labor market. Employers reported lowering their hiring expectations and coordinating with educational programs to increase their
applicant pools. One nursing program in Arkansas recently doubled its student enrollment but characterized
the expansion as a “drop in the bucket” compared with
employer demand. Smaller employers particularly continued to struggle to hire, with survey-based measures
showing more mixed employment trends among small
firms.
Prices have increased slightly since the previous report.
On net, just 6 percent of business contacts reported that
prices charged to consumers were higher in the current
quarter relative to the same time last year. Two-thirds of
contacts reported that their price changes over the past
three months met expectations. The remaining contacts
who had to deviate from their pricing plans were equally
split between increasing prices less than planned or
cutting prices more than planned. In addition to the slight
price growth, business contacts noted that the cost of
obtaining funds was lower in the current interest rate
environment. On net, 22 percent of contacts reported
increasing nonlabor costs. This is below average for the
past two years. Several contacts in the manufacturing
sector noted tariffs as a source of increased cost. Coal
prices are down slightly since the previous report and
modestly since last year.
Wages have increased moderately since the previous
report, though small-firm wage growth has been more
muted. On net, 39 percent of survey respondents indicated that wages were higher than a year ago, with multiple
contacts ascribing this to the scarcity of workers; contacts reported improving benefits and increasing variable
compensation for similar reasons.
Consumer Spending
Reports from general retailers, auto dealers, and hospitality contacts indicate consumer spending activity has
increased slightly since our previous report. January real
sales tax collections increased in Kentucky, Arkansas,
and West Tennessee and decreased in Missouri relative
to a year ago. District general retailers reported that
sales were flat or slightly higher compared with the same
H-1
Federal Reserve Bank of St. Louis
time last year. District auto dealers also reported flat or
slightly stronger sales in comparison with the same time
last year. The overall outlook among general retailers
was optimistic for the coming quarter, and the outlook
among auto dealers was generally pessimistic. Dealers
cited higher new vehicle prices and credit constraints as
potential deterrents to consumer confidence. Hospitality
contacts indicated mixed tourism activity over the past
two months.
mained unchanged since the previous month. Survey
respondents reported slightly higher construction activity
relative to the same time last year and expect continued
growth in the next quarter.
Commercial real estate activity has increased slightly
since the previous report. Contacts reported a slight
increase in the demand for office and industrial space
and a slight decrease in demand for retail space relative
to one year ago. Contacts noted slightly higher demand
for multifamily properties. A contact in Louisville stated
that the increase in remote workers was hurting office
building demand.
Manufacturing
Manufacturing activity has rebounded after a period of
weakening growth, which started last summer. In a recent survey, contacts reported a modest improvement in
manufacturing conditions. On net, production, new orders, and capacity utilization improved relative to one
year ago. Most contacts were optimistic about the next
quarter, with net majorities expecting growth in production, new orders, and capacity utilization. Other surveybased indexes indicate that Arkansas and Missouri
manufacturing activity expanded moderately from December to January. New orders and production grew at a
moderate rate in both states.
Commercial construction activity was mixed. Contacts
reported slightly higher demand for office and industrial
property construction and slightly lower demand for retail
property construction. On net, 30 percent of respondents
reported that quarterly sales fell short of expectations. A
contact in St. Louis noted a positive effect of low interest
rates on construction demand and consumer confidence.
Banking and Finance
Banking conditions in the District have weakened slightly
since the previous report. Demand for mortgages, commercial and industry loans, and auto loans all decreased
slightly relative to one year ago. Bankers expect no
change to overall loan demand in the second quarter of
2020. Credit standards were little changed compared
with year-ago levels but are expected to tighten slightly
in the next quarter. Delinquencies increased on a yearover-year basis and are expected to remain unchanged
in the second quarter.
Nonfinancial Services
Activity in the services sector has slightly improved since
the previous report. On net, 51 percent of contacts reported similar or greater dollar sales over the past quarter. Also, 68 percent of respondents expect similar or
improved sales in the next quarter. In the transportation
industry, major logistics firms are conducting job fairs to
fill a wide array of positions for existing and planned
distribution centers. Overall labor conditions are improving, as professional service job vacancies have risen
year-to-year District-wide. In particular, contacts in IT
services expect stronger revenue growth due to improving labor supply. In healthcare, expansion and consolidation of hospitals in the District point to favorable conditions, but shortages in personnel continues to be an
issue.
Agriculture and Natural Resources
District agriculture conditions have declined slightly from
the previous reporting period. The number of acres of
winter wheat planted this season declined slightly from
acreage planted in 2019. Farmers continue to emphasize the importance of Market Facilitation Program payments for supporting the industry. Contacts raised questions and expressed concerns regarding trade with China, including when the trade agreement provisions will
apply and what impact coronavirus will have on commodity prices and agricultural purchases.
Real Estate and Construction
Residential real estate activity has been mixed since the
previous report. Seasonally adjusted home sales decreased slightly in January across the four largest MSAs
in the District. However, most real estate contacts reported an increase in demand for single-family homes relative to a year ago. Contacts indicated that expectations
for first-quarter sales had been met. Inventory levels in
the region increased slightly relative to the previous
month but remained well below levels from a year ago.
Natural resource extraction conditions declined modestly
from December to January, with seasonally adjusted
coal production falling 4 percent. January production
decreased nearly 16 percent from a year ago. ■
Residential construction activity increased slightly. December permit activity across District MSAs have re-
For more information about District economic conditions, visit:
https://research.stlouisfed.org/regecon/
H-2
Summary of Economic Activity
Employment and Wages
-
-
Prices
-
I-1
Consumer Spending
-
-
-
-
Manufacturing
-
Agriculture, Energy and Natural Resources
Construction and Real Estate
-
-
-
-
I-2
Federal Reserve Bank of
Kansas City
The Beige Book ■ February 2020
Summary of Economic Activity
Tenth District economic activity was largely unchanged in January and February, but was expected to expand in the
months ahead outside of the energy and agriculture sectors. Consumer spending slowed slightly since the previous survey, but retail, restaurant and tourism sales were well above year-ago levels. After declining for several months, manufacturing activity appeared to be stabilizing with a slight uptick in activity in February, despite nearly half of firms noting some
negative effect from the coronavirus spread. Transportation and wholesale trade contacts reported higher revenues and
sales, while professional and high-tech sales rose in January but slowed slightly in February. District real estate conditions continued to hold steady, but contacts expected activity to edge higher moving forward. District energy activity declined further, and expectations were generally downbeat about the months ahead. The agriculture sector also remained
subdued, but showed signs of stabilizing as farmland values rose slightly. District employment held steady since the
previous survey period, while employee hours expanded modestly. Wages continued to rise at a modest pace, but gains
were expected to increase in the months ahead. Both services and manufacturing contacts reported modestly higher
input and selling prices.
Employment and Wages
prices rose modestly in the restaurant sector, and both
were strongly higher than year-ago levels. Similarly,
manufacturers reported modestly higher prices for both
finished products and raw materials, and anticipated
modest gains in the next few months. Construction supply respondents noted a slight increase in selling prices
after a slight decline during the previous survey period.
However, transportation contacts noted moderate declines in both input and selling prices, with continued
decreases expected in the coming months.
Overall District employment held steady since the previous survey period, while employee hours increased
modestly. All reporting sectors, with the exception of
manufacturing, retail trade, auto sales, and professional
and technical services, noted higher employment levels,
and a majority of contacts expected a faster pace of
employment gains in the months ahead. Employee hours
picked up modestly across most sectors.
A majority of contacts continued to report labor shortages across all skill levels. Specifically, respondents noted
shortages for truck drivers, auto-technicians, hourly foodservices positions, IT personnel, nurses, accountants,
and skilled-construction and machinist trades. Additionally, a majority of respondents reported that they had to
raise wages more than normal to attract or retain workers for some positions. Overall wages rose at a modest
pace, and strong gains were expected in the months
ahead.
Consumer Spending
Consumer spending declined slightly compared to the
previous survey period, but sales were well above yearago levels in most sectors. Retail sales grew slightly
compared to the previous survey period but were strongly above year-ago levels. In addition, contacts expected
sales to increase at a faster pace in the coming months.
Auto sales edged down compared to the previous survey
period and declined modestly compared to year-ago
levels. Respondents anticipated auto sales to continue to
decline in the months ahead. Small SUVs sold well,
while sedans and large SUVs sold poorly. Restaurant
sales were down modestly compared to the previous
survey period, but were strongly above year-ago levels.
Tourism sales fell slightly compared to the previous
survey period, but also remained well above year-ago
levels. Both restaurant and tourism contacts expected
Prices
Input and selling prices continued to grow modestly in
January and February in the services and manufacturing
sectors, and contacts in both sectors expected prices to
rise further in the months ahead. Retailers noted strong
growth in input prices and moderate growth in selling
prices since the previous survey period. Input and selling
J-1
Federal Reserve Bank of Kansas City
strong sales growth in the coming months.
Energy
Manufacturing and Other Business Activity
District energy activity continued to decline since the
previous survey period. Expectations for future drilling
and business activity remained negative, with many firms
not expecting rig counts or employment levels to pick up
in the near term. While the number of active oil rigs in
the District was unchanged, the number of active gas
rigs eased slightly. Production levels remained high, but
regional oilfield services firms have begun to feel the
effects of fewer rigs operating across the District. Low
prices for oil, natural gas, and natural gas liquids continued to negatively affect firms and were listed as a primary factor driving future business plans. Energy contacts
also listed sluggish credit conditions, smaller profit margins, and less drilling and business activity as concerns.
Manufacturing activity was mostly unchanged in January, followed by a slight uptick in February. The increase
in recent activity was across both durable and nondurable goods factories, despite nearly half of firms reporting
some negative effect from the coronavirus spread. Expectations for future activity also remained positive.
Order backlogs declined for District manufacturers, but
new orders improved in February, especially for durable
goods firms. Capital spending was above year-ago levels, with positive growth expected over the next six
months.
Outside of manufacturing, firms in the transportation and
wholesale trade sectors reported increased revenue and
sales. Sales for professional and high-tech services
sectors grew in January but slowed somewhat in February. Sales for all three sectors remained above year-ago
levels. Contacts in the transportation sector anticipated
sales to edge down in the coming months, whereas
sales were expected to rise in the wholesale trade and
professional and high-tech services sectors.
Agriculture
The District farm economy remained subdued but
showed signs of stabilizing. Farmland values strengthened slightly in the most recent survey period, providing
some stability for the sector. Regional contacts reported
that farm income and agricultural credit conditions generally remained weak, but deteriorated at a slower pace
than previous survey periods. However, despite some
signs of stabilization, geographic disparities persisted
across the region. Farm real estate values increased
modestly on the eastern side of the District, while farm
income and credit conditions were moderately weaker in
the western portion. Some bankers commented that
trade relief payments provided notable support to farm
finances, but many also indicated that ongoing financial
challenges continued to be driven by low agricultural
commodity prices. ■
Real Estate and Construction
District real estate activity held steady in January and
February, and contacts expected activity to inch up in the
months ahead. Residential sales increased compared to
the previous survey period and year-ago levels. However, residential construction activity was mixed as housing
starts and traffic of potential buyers both rose slightly
while construction supply sales continued to fall. Contacts in the residential construction sector expected
activity to increase in the months ahead. Commercial
real estate activity continued to edge up as absorption,
completions, construction underway and sales increased
while vacancy rates remained flat. Commercial real
estate contacts anticipated overall activity to continue
expanding at a slow pace over the next few months.
Banking
Overall loan demand declined modestly in the District
since the previous survey due to modest decreases in
the demand for consumer, commercial real estate, and
commercial and industrial loans. Bankers indicated less
movement in the demand for agricultural and residential
real estate loans, with a slight downtick in the demand
for agricultural loans and a slight uptick in the demand
for residential real estate loans. Loan quality improved
modestly over the past year, and bankers expected a
slight increase in loan quality in the next six months.
Compared to the previous survey period, credit standards remained stable and deposits increased modestly.
For more information about District economic conditions visit:
www.KansasCityFed.org/Research/RegionalEconomy
J-2
Federal Reserve Bank of
Dallas
The Beige Book ■ February 2020
Summary of Economic Activity
The Eleventh District economy expanded moderately over the reporting period. Solid growth continued in nonfinancial
services, and expansion in the manufacturing sector picked up to a more moderate pace. Housing demand continued to
rise broadly, and sharply higher residential real estate lending boosted overall loan growth. Retail sales growth stalled
out over the reporting period, and activity in the energy sector eroded slightly. Employment growth slowed to a modest
pace, with a majority of hiring firms noting difficulty finding qualified workers. Upward wage pressures remained elevated. Input prices continued to rise while selling prices were mixed—holding steady in manufacturing but increasing in the
service sector. Outlooks generally improved, though the coronavirus introduced new uncertainty into the business environment.
materials costs remained below average. Selling prices
were largely flat in manufacturing but have started rising
again in the service sector after stalling out late last year.
Particularly strong price increases were seen in retail in
February. Airline ticket prices were up compared to a
year ago, partially due to the grounding of the Boeing
737 Max, which has constrained capacity.
Employment and Wages
Employment growth slowed to a modest pace overall.
Hiring continued at a moderate pace in the services
sector but stalled in manufacturing, and layoffs continued
in the oil and gas sector. Most energy contacts expect
headcounts to fall further, albeit only slightly. A February
Dallas Fed survey of roughly 375 Texas businesses in
the services and manufacturing sectors showed that
nearly two-thirds were currently trying to hire. However,
80 percent of those trying to hire were having problems
finding qualified workers. Some contacts noted that lack
of labor availability was a drag on business growth.
However, there were scattered reports that softness in
the energy sector has alleviated some labor pressures in
the low-skilled and contract worker segments.
Manufacturing
Expansion in the manufacturing sector picked up to a
moderate pace in January and February. Several firms
reported a stronger than expected start to the year, and
the acceleration spanned both durables and nondurables. Refinery utilization increased over the reporting
period. Machinery manufacturing was a weak spot, with
declining output over the reporting period. Also, softness
continued at cross-border manufacturing plants in the El
Paso area, with contacts saying they don’t expect significant increases in activity or capital spending plans following the ratification of the USMCA.
Wages continued to increase, with upward wage pressures holding slightly above average. The energy sector
is an exception, as contacts report no wage pressure.
Some contacts said they implemented cost of living
adjustments to supplement their recruitment and retention efforts, and one contact said labor costs increased
due to overtime pay for existing staff.
Several contacts noted that the coronavirus was negatively impacting their supply chain, particularly in hightech and chemical manufacturing. While companies’
outlooks were slightly more optimistic than they had
been over the past few months, uncertainty picked up.
Prices
Input prices continued to rise outside the energy sector.
However, in manufacturing, upward pressure on raw
K-1
Federal Reserve Bank of Dallas
Retail Sales
contacts contend that activity is likely at or near a soft
bottom. The industry remained distressed with limited
access to capital. Contacts noted that the coronavirus
has pushed oil prices down and is a big source of uncertainty. Most contacts expect that oilfield activity will hold
roughly near December 2019 levels through the end of
2020, and they express modest optimism about 2021.
Retail sales growth stalled out over the reporting period,
with weakness led by autos and sales among nondurable goods wholesalers. An auto dealer remarked that
maintaining a positive margin on new vehicle sales is
impossible. Overall retail outlooks weakened slightly,
with some contacts voicing concern over the coronavirus
and its impact on supply chains and overall demand.
Agriculture
Nonfinancial Services
More than a third of Texas remained abnormally dry or in
drought, though recent rainfall in some areas prompted
optimism among producers heading into the new crop
season. Row crop prices declined over the reporting
period while cheese and milk prices trended higher.
Agricultural lenders said farmers generally came out of
2019 in pretty good shape with the help of government
support payments, but that there is some concern going
forward as income from government assistance has
been on the rise the past couple of years, making farmers more vulnerable to policy changes. Contacts said
uncertainty regarding demand and prices for agricultural
commodities was discouraging, and while producers
were optimistic about trade developments, there is still a
fair amount of concern about follow through in the Phase
One deal with China as well as the impact of the coronavirus on commodity prices. ■
Solid expansion continued in the nonfinancial services
sector, with many contacts reporting strong momentum
at the start of 2020. Growth was led by professional and
business services. Staffing services contacts noted solid
broad-based demand, though most reported weak demand growth year over year. Multiple staffing contacts
said that companies are slowing down hiring due to
election uncertainty. In transportation services, airline
demand remained strong and air and ground cargo
volumes increased. A railroad contact voiced concern
that the coronavirus could reduce shipments from China.
Outlooks continued to improve, though the coronavirus
and the upcoming presidential election were noted as
increasing uncertainty.
Construction and Real Estate
Housing demand continued to rise broadly, with contacts
noting that sales were off to a good start this year and
ahead of year-ago levels. Some builders were able to
push through price increases to cover higher construction costs, though this exacerbated affordability problems
in some metros. Rain delayed development and building
activity in some areas. Outlooks remained favorable.
Conditions in the apartment market were stable, though
contacts noted ongoing rent concessions due to supplydriven softness in Class A properties. Industrial demand
remained robust and construction elevated. Office demand stayed solid in Dallas but was mixed in Houston.
Financial Services
Growth in loan demand increased moderately over the
reporting period. Overall, loan volumes increased, driven
primarily by a sharp rise in residential real estate loans.
Commercial and industrial loan volumes decreased over
the reporting period. Loan pricing continued its marked
decline, and a majority of bankers continued to report no
change in credit standards. Growth in general business
activity picked up notably, and expectations for activity in
the next six months improved significantly.
Energy
Drilling and well completion activity in the Eleventh District eroded slightly over the reporting period, but most
For more information about District economic conditions visit:
www.dallasfed.org/research/texas
K-2
Federal Reserve Bank of
San Francisco
The Beige Book ■ February 2020
Summary of Economic Activity
Economic activity in the Twelfth District continued to expand at a modest pace during the reporting period of January
through mid-February. The labor market remained tight, employment increased somewhat, and wages rose further.
Reports on prices suggested inflation was largely stable. Sales of retail goods increased markedly, and activity in consumer and business services was up somewhat. On balance, commerce in the manufacturing sector contracted minutely, and activity in the agriculture sector picked up slightly. While the residential real estate market expanded modestly,
commercial real estate activity was mixed. Lending grew further.
Employment and Wages
packages requested by candidates. A health-care provider reported being unable to attract individuals from
outside the labor force and into entry-level positions due
to unattractive wages. A hotelier in Southern California
raised concerns about wage compression resulting from
new minimum wage legislation, highlighting smaller
wage increases for middle-level staff than those for
either entry-level or top-level workers. A few employers
in the finance sector noted slightly lower wage pressures
for specific sets of expertise due to improved labor availability in those particular skill areas.
The labor market remained tight, with persistent worker
shortages reported across various skill levels and industries. Hiring increased somewhat, despite limited availability of workers. Businesses in several sectors, including
information technology, finance, payment processing,
and legal services, reported larger payrolls. Other contacts in the construction, utilities, manufacturing, and
health-care sectors reported that the pace of hiring was
flat. They attributed the lack of additional hiring primarily
due to continued difficulties in finding and employing
workers. Some businesses mentioned seeking new hires
to fill only positions vacated due to retirements or voluntary departures. A few contacts highlighted their firms’
efforts to avoid having to rehire workers in the future,
with a manufacturer in the aerospace sector reducing
layoffs to a minimum despite weakened activity, and a
transportation services provider keeping typically seasonal employees on the payroll during the off-season.
Others reported increasing their investment in offshoring
and automation to combat labor shortages. Some employers characterized low worker availability as a significant deterrent to business expansion.
Prices
Business contacts suggested that price inflation was
mostly unchanged from the previous reporting period, on
balance. Many reports mentioned no significant changes
in prices, including those from the finance, energy,
health-care, and professional services sectors. Other
businesses, such as builders, hotels, and food service
providers, experienced some uptick in prices due to
increases in input costs. In the agriculture and natural
resources sectors, some grape and lumber producers
reported a more noticeable rise in prices over the reporting period, while grain and potato prices remained stable. A contact in Washington highlighted double-digit
price increases for professional landscaping services. A
banker in California mentioned negotiating with vendors
to lower automatic price increases, specifically to bring
those increases more in line with the national inflation
rate.
Wages continued to rise over the reporting period, as
companies tried to attract and retain qualified workers.
The reported main drivers behind increased compensation pressures were heightened labor market competition
and increased minimum wage requirements. Some
employers mentioned failing to match wage and benefit
L-1
Federal Reserve Bank of San Francisco
Retail Trade and Services
tively affect exports of nuts and other California crops.
One contact in central California mentioned that precipitation levels so far this year are lagging somewhat relative to historical averages, which could affect future
almond and cherry yields. In the energy sector, reports
noted generally flat sales, expectations for increased
capital expenditure to bolster resiliency, and low capacity
utilization apart from renewable sources.
Sales of retail goods increased markedly. Most reports
indicated that consumer demand was robust over the
reporting period. Retailers continued to note that online
sales grew faster than brick-and-mortar sales. Auto
dealers reported a brisk rise in activity, especially in the
used vehicle market. Specialized retailers focused on
home improvement products, pet care items, or pharmaceuticals also reported continued solid activity. One
contact in California mentioned some difficulty in replenishing inventory due to lingering trade tensions.
Real Estate and Construction
Residential real estate activity grew modestly. Contacts
from most areas within the District continued to report
brisk buyer demand, low inventories for single-family
homes, and high occupancy rates for multi-family units.
Construction activity increased on the back of agreeable
weather, but at a somewhat slower pace than the previous reporting period due to labor and land costs constraints. A financier from the Pacific Northwest noted that
construction activity in rural areas also expanded recently. A few other areas within the District reported less
robust sales and flat construction activity. Home prices
accelerated in many regions, intensifying affordability
concerns.
Activity in consumer and business services increased
somewhat. Food service providers reported continued
solid activity but noted that the rate at which new restaurants opened has decelerated somewhat due to higher
input costs. Tourism was mixed, with some decline in
airline travel associated with the COVID-19 outbreak.
Nonetheless, a hotelier in Southern California reported
modest growth expectations for early 2020. A legal practitioner in Hawaii and a health-care provider in Nevada
highlighted generally stable conditions within their respective sectors.
Manufacturing
Conditions in commercial real estate markets were
mixed. Some contacts continued to highlight sluggish
demand for retail and office space. Reports out of California pointed to higher retail vacancies, as well as longer periods in between leases. A building materials supplier mentioned the conclusion of large construction projects connected to the technology sector in the San
Francisco Bay Area, leading to expectations of slower
activity in the immediate future. Industrial construction
and warehouse leasing activity in some other areas
increased somewhat. One contact in the Pacific Northwest noticed brisk commercial construction activity in the
area.
Activity in the manufacturing sector contracted minutely,
on balance. Energy use by manufacturers in the Pacific
Northwest increased, and across the District, production
and sales of manufactured wood products and building
materials accelerated due to increased construction of
residential units. However, activity in the aerospace
sector weakened following the announcement of delays
in planned production from a large Northwestern manufacturer. Additionally, the COVID-19 outbreak led to
decreased aircraft demand from China and Southeast
Asia, with one supplier reporting no orders received in
January. Solar energy equipment manufacturers also
experienced delayed order fulfillment due to supply chain
disruptions related to the COVID-19 outbreak.
Financial Institutions
Lending activity grew further. Reports noted stronger
demand for new mortgages, refinancing credit, and auto
loans. Lending to the commercial sector also increased
relative to the previous reporting period, especially for
industrial real estate. Agricultural lending weakened in
the Pacific Northwest. Overall, capital levels and asset
quality remained high. Tighter competition for loans
narrowed net interest margins and profitability. Credit
availability was generally stable, and underwriting standards tightened somewhat. An investment financier in
California reported stable private equity conditions. ■
Agriculture and Resource-Related Industries
Activity in the agriculture sector increased slightly, on
net, with domestic sales remaining at healthy levels. Log
and lumber sales benefited from attractive mortgage
rates and a pickup in residential construction across the
District. Export sales continued to falter somewhat due to
international developments. On the one hand, contacts
welcomed international trade deals and the prospects of
easing tariffs on products including dairy sold to the
Chinese market. On the other hand, reports mentioned
that the COVID-19 outbreak has already started to nega-
L-2
Cite this document
Federal Reserve (2020, March 14). Beige Book. Beige Book, Federal Reserve. https://whenthefedspeaks.com/doc/beige_book_20200315
@misc{wtfs_beige_book_20200315,
author = {Federal Reserve},
title = {Beige Book},
year = {2020},
month = {Mar},
howpublished = {Beige Book, Federal Reserve},
url = {https://whenthefedspeaks.com/doc/beige_book_20200315},
note = {Retrieved via When the Fed Speaks corpus}
}