Beige Book
For use at 2:00 PM EDT
Wednesday
October 21, 2020
The Beige Book
Summary of Commentary on Current Economic Conditions
By Federal Reserve District
October 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 St. Louis
based on information collected on or before October 9, 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 ■ October 2020
Overall Economic Activity
Economic activity continued to increase across all Districts, with the pace of growth characterized as slight to modest in
most Districts. Changes in activity varied greatly by sector. Manufacturing activity generally increased at a moderate
pace. Residential housing markets continued to experience steady demand for new and existing homes, with activity
constrained by low inventories. Banking contacts also cited increased demand for mortgages as the key driver of overall loan demand. Conversely, commercial real estate conditions continued to deteriorate in many Districts, with the
exception being warehouse and industrial space where construction and leasing activity remained steady. Consumer
spending growth remained positive, but some Districts reported a leveling off of retail sales and a slight uptick in tourism activity. Demand for autos remained steady, but low inventories have constrained sales to varying degrees. Reports on agriculture conditions were mixed, as some Districts are experiencing drought conditions. Districts characterized the outlooks of contacts as generally optimistic or positive, but with a considerable degree of uncertainty. Restaurateurs in many Districts expressed concern that cooler weather would slow sales, as they have relied on outdoor
dining. Banking contacts in many Districts expressed concern that delinquency rates may rise in coming months, citing
various reasons; however, delinquency rates have remained stable.
Employment and Wages
Employment increased in almost all Districts, though growth remained slow. Employment gains were reported most
consistently for manufacturing firms, although firms continued to report new furloughs and layoffs. Most Districts continued reporting tight labor markets, attributing it to workers’ health and childcare concerns, with many firms consequently
offering increased schedule flexibility; a few Districts, however, noted some firms were finding it easier to hire workers.
Wages increased slightly in most Districts, often tied to firms’ difficulty finding workers, especially for low-wage or highdemand jobs. Some firms reported returning wages (and raises) to normal levels, but many reported more stable
wages.
Prices
Prices rose modestly across Districts since the previous report. Input costs generally increased faster than consumer
prices; however, some sectors—notably construction, manufacturing, retail, and wholesale—passed along the higher
costs to consumers. Overall, consumer prices across Districts rose modestly, with the notable exceptions of food,
automobiles, and appliances, which increased significantly. Retail gasoline prices declined. Input costs increased at
varying degrees, mostly led by increases in materials costs, particularly steel and lumber. Multiple Districts reported
continued additional costs for firms due to COVID-19, including personal protective equipment, sanitation equipment,
testing equipment, and technology needed for remote work. Changes in row crop prices were mixed, while Districts
reported declines in prices for animal proteins.
Highlights by Federal Reserve District
Boston
New York
Economic activity continued to improve during the end of
August through September. Revenues of responding
firms were generally ahead of the year-earlier period,
albeit not strongly. Housing markets saw strong demand
and limited supply, leading to home price increases.
Outlooks were mostly positive, but contacts expressed
considerable uncertainty.
The regional economy has grown slightly in recent
weeks, with activity still well below pre-pandemic levels.
Manufacturing, housing markets, and tourism have all
picked up somewhat, while consumer spending has
leveled off. Employment and wages have held steady.
Selling prices have been little changed, on balance,
though more firms plan to raise their prices in the months
ahead.
1
National Summary
Philadelphia
St. Louis
Business activity grew slightly during the current Beige
Book period but remained well below levels attained
prior to the onset of COVID-19. Employment sustained a
modest rebound, while wages rose slightly and firms
struggled to attract workers. Prices also rose modestly
amid price spikes. With the pandemic ongoing and the
stimulus ended, uncertainty remained extremely high in
anticipation of layoffs, foreclosures, and bankruptcies.
Reports from contacts suggest economic activity has
increased slightly but remains highly variable across
sectors. Auto dealers continued to report strong sales
despite inventory shortages. Restaurants reported some
improvement but expect activity to decline due to cooler
weather. Most District crop yields and production are up
significantly over the prior year, with only cotton production lower.
Cleveland
Minneapolis
The Fourth District economy expanded at a moderate
pace, and more firms increased staffing to keep up with
rebounding demand. However, labor shortages persisted, with many workers sitting out of the labor force.
While firms expect conditions to improve further in coming months, elevated uncertainty resulted in many firms’
opting to hold cash and forgo capital expenditures.
Ninth District economic activity grew slightly. Employment was flat overall, but volatile, with many firms either
adding or cutting workforce. Labor availability tightened,
and wages gained some traction. Growth continued in
manufacturing and residential construction and real
estate. But most other sectors were either flat or down;
agriculture conditions improved thanks to a good crop
outlook, but remained weak due to low prices.
Richmond
Kansas City
The Fifth District economy expanded modestly in recent
weeks, but economic activity was below pre-pandemic
levels. Employment rose, as demand for part-time and
temporary workers increased, but wages and prices held
fairly steady. Shipments and manufacturing activity
increased, and the housing market was strong, but commercial real estate and lending were soft, and the hospitality market remained weak.
Economic activity continued to increase in September,
albeit at a slower pace than during the summer months.
Consumer spending declined modestly, with drops in
retail, auto, restaurant, and tourism sales. However,
activity rose in the manufacturing, residential real estate,
wholesale trade, and transportation sectors. In addition,
the energy sector stabilized somewhat and the agriculture sector improved slightly.
Atlanta
Dallas
Economic activity improved somewhat. Labor market
conditions improved modestly, and nonlabor costs were
generally stable. Retail activity was soft. Activity in tourism and hospitality remained muted. Residential real
estate demand increased, and home prices rose. Commercial real estate conditions stabilized. Manufacturing
activity improved. Conditions at financial institutions
stabilized.
Growth in the Eleventh District economy picked up pace,
particularly in services and manufacturing, though activity remained well below normal levels. The housing market continued to perform well. Energy activity remained
depressed but started to show some signs of improvement. Outlooks were largely positive but highly uncertain, particularly with regard to the presidential election
and the unknown trajectory of the COVID-19 pandemic.
Chicago
San Francisco
Activity increased robustly, but growth slowed and activity remained below pre-pandemic levels. Employment
and consumer spending increased robustly; manufacturing increased moderately; construction and real estate
increased modestly; and business spending increased
slightly. Wages increased slightly and prices rose modestly. Financial conditions were little changed. Rising
prices lifted farm income.
Economic activity in the Twelfth District expanded moderately. Employment levels increased modestly, while
price inflation rose marginally. Sales of retail goods rose
noticeably, while conditions in the consumer and business services sectors improved somewhat. Manufacturing expanded moderately, and conditions in the agriculture sector improved modestly. Residential real estate
activity increased further, while the commercial market
was broadly unchanged. Lending picked up at a fair
pace.
2
Federal Reserve Bank of
Boston
The Beige Book ■ October 2020
Summary of Economic Activity
Business contacts in the First District reported activity continued to improve from mid-August through September, amid
ongoing pandemic disruptions. Although overall activity levels were still below average, most responding manufacturers
and retailers reported increased revenues compared with a year ago. Revenues at contacted software firms were also
up modestly from 2019. Commercial real estate markets continued to diverge, with industrial and lab space doing well,
and retail and office in the doldrums. Residential real estate contacts cited strong demand and limited inventory, causing
home and condo sales prices to rise. Outlooks were mixed, although mostly somewhat positive, with uncertainty the
watchword.
Employment and Wages
Retail and Tourism
Reports on hiring varied. One retail contact still has
workers on furlough but also reported difficulty hiring
warehouse workers; they have permanently increased
warehouse worker pay as well as adding additional
temporary pay increases from September through December to support added holiday demands. Two-thirds
of manufacturing contacts said they were hiring. Several
indicated labor market pressure had eased in recent
weeks and they were getting more job applicants. One
software firm reported its headcount up 5 percent yearover-year reflecting a recently finalized acquisition; they
will finalize another acquisition in the coming weeks.
That firm also continued hiring for all business functions.
By contrast, another software contact noted that while
scheduled retirements continued, they were not hiring
replacements for any roles, so headcounts were down
slightly. Software respondents said annual wage increases continued on schedule and they implemented no
wage cuts or layoffs due to COVID-19.
Retail respondents continued to report major disruptions
related to COVID-19, though several retailers cited
strong recoveries through the summer and into fall. One
clothing seller said store foot traffic was down 30 percent
compared to the same period last year, but a higher
conversion rate and strong online sales led to an increase in total September sales of almost 15 percent
from year-earlier. An online retailer noted sustained year
-over-year growth, albeit decelerating compared to the
spring. This contact expects strong e-commerce holiday
sales but is concerned about delivery delays, as many
couriers are already strained by the increased volume of
online shopping. Automobile sales remained strong; a
northern New England contact reported the strongest
summer on record for sales of automobiles, RVs, and
power sports equipment.
Travel industry contacts reported that in one coastal
area, hotels reported their best August on record, and for
the season they were down a better-than-anticipated 12
percent; short-term rentals were up 5 percent compared
to 2019. Restaurants there reported that September was
close to normal, although many restaurants that usually
close for the winter closed earlier than usual this year
due to added restrictions and slimmer profit margins.
Restaurants staying open reported difficulty sourcing
winterized tents and propane heating units to continue
serving outside. Airline passenger counts into Boston
Prices
Contacts again said little about prices. Manufacturers
reported that pricing pressure was limited. Two contacts
in the paper business said the cost of inputs and their
selling prices had both gone up. A drug manufacturer
said they were postponing an annual price increase
because of COVID. Software firms do not anticipate any
changes in prices in the coming months.
A-1
Federal Reserve Bank of Boston
remained down more than 80 percent into the start of
fall, an improvement from earlier this spring. International
passenger counts were down 90 percent; only half the
international routes are currently operating.
plans. Contacts reported that shopping centers with
essential businesses such as grocery and home improvement stores, were doing well in terms of rent collection, but malls and lifestyle stores were doing much
worse, with rent collection as low as 20 percent in some
cases. The retail vacancy rate has increased.
Manufacturing and Related Services
Five of six firms responding this cycle reported sales
growth from a year ago. The one exception was a paper
producer reporting that gains in grocery and mail order
offset a slowdown in orders from retailers. A drug firm
reported increased sales but said they were held back by
people’s continued reluctance to get medical care during
the pandemic. A producer of frozen fish said sales remained extremely strong and that it was contracting
some production to frozen fish producers who sold mostly to restaurants and now have excess capacity. A toy
producer said that limits on production of new movies
hurt demand for their products.
Office market activity was still only as-needed, mainly
renewing expiring leases. Tenants requested short-term
extensions; while they received some concessions, facevalue rents remained mostly unchanged. Most contacts
estimated that about 20 percent of workers are working
from offices now; while this is an increase from August’s
10 percent estimate, the post-Labor Day rise was not as
large as anticipated.
No contacts reported significant revisions to capital
spending plans. The toy maker said they were reassessing their need for office space because of the success of remote work arrangements. Outlooks were generally positive among manufacturing respondents. A
diversified manufacturer with substantial military business said their COVID slowdown was more or less over.
Contacts were mostly pessimistic regarding the outlook
for the rest of 2020 and the beginning of 2021, largely
citing political uncertainty and confusion around future
stimulus measures. Many contacts said that without
further stimulus measures, landlords may not be able to
continue covering for their more-affected tenants, so
evictions and vacancy rates may increase. Some contacts also noted that in order for older office spaces to
recover post-COVID, many infrastructure improvements
will be needed.
Software and IT Services
Residential Real Estate
High prices and substantial inventory shortages characterized residential real estate markets in the First District.
(Connecticut data were unavailable. Vermont reported
changes from July 2019 to July 2020; all other areas
reported year-over-year changes to August 2020.) The
inventory of homes for sale dropped by double-digit
percentages from a year ago in all reporting markets
except Boston condos. In Massachusetts and New
Hampshire, the inventory of single family homes decreased by over 55 percent. The median sale price rose
in all markets, with double-digit increases for single
family homes. Changes in closed sales varied by market,
largely reflecting available inventory. Contacts said they
did not expect the usual fall and winter slowdown this
year. Pent-up demand from the delayed spring market
as well as the desire to take advantage of historically low
interest rates have fueled the current buying frenzy.
While there has been some increase in seller activity, it
is failing to match demand. Both the Boston and Massachusetts contacts continued to observe movement from
urban areas to suburban and rural locations, with workfrom-home arrangements becoming longer term.■
Software firms responding this round saw slight positive
growth in the last quarter; most contacts anticipated
ending the year with revenues up 3 percent to 5 percent
over last year. For one medical software contact, new
bookings remained at 30 percent of the previous year’s
level; they have relied on their backlog to sustain them
during this time. All contacts reported that operating
expenses were down, mostly due to moving to a virtual
setting for customer visits and marketing events; they
anticipate that these virtual interactions may continue
even once public health concerns have abated.
Contacts expressed confidence that they have adapted
well to what they believe will be the state of the industry
through mid-2021. While some felt that the national
economy remained uncertain, they were more optimistic
regarding their own firm’s performance
Commercial Real Estate
Industrial and lab space markets in the First District
continued to do well, while retail and office continued to
struggle. The industrial market, particularly anything
having to do with logistics, was operating at near capacity, and prices and rents increased as a result. Lab space
continued to be in high demand, so investment in these
types of buildings hasn’t slowed. Retail spaces continued
to struggle, notwithstanding states’ advancing reopening
For more information about District economic conditions visit:
www.bostonfed.org/regional‐economy
A-2
Federal Reserve Bank of
New York
The Beige Book ■ October 2020
Summary of Economic Activity
Economic activity in the Second District economy grew slightly in the latest reporting period, as the pace of re-opening
has been gradual and the virus spread has remained subdued across most of the District. Employment has been steady
overall, with some industries adding jobs but others reducing headcounts. Input prices continued to rise moderately,
while selling prices were little changed. Consumer spending has flattened out, while tourism has picked up somewhat
but remains depressed. Housing markets have been mixed but, on balance, somewhat stronger, while markets for office
and retail space have softened further. Commercial construction activity has remained depressed, though residential
construction has shown scattered signs of picking up. Finally, banks reported increased demand for commercial and
home mortgages, tighter credit standards, and a downward shift in delinquency rates for commercial and residential
mortgages. Overall, business contacts have become somewhat less optimistic about the near-term outlook.
.
Employment and Wages
Prices
The labor market has been steady, on balance, in recent
weeks. Manufacturers, wholesalers, and leisure & hospitality firms have reported some net hiring, whereas contacts in the information, transportation, and construction
sectors have reported modest staff reductions. A major
upstate New York employment agency noted a pickup in
hiring, particularly for manufacturing and customer support jobs. A New York City agency specializing in office
jobs noted scattered hiring in the financial sector but
characterized the job market overall as sluggish, with
many job-seekers laid off from retail and hospitality. This
contact also noted that many companies are still largely
operating remotely and are reluctant to on-board new
staff to work from home.
Business contacts reported that input costs continued to
rise moderately. In particular, contacts involved in construction noted sharply increasing prices for lumber and
other construction materials. A number of contacts noted
that, aside from the prices of inputs, they have incurred
additional costs in adapting to new safety concerns and
complying with regulations. Retailers and wholesalers
reported some increases in selling prices, but businesses in other sectors indicated that selling prices were little
changed. Looking ahead, somewhat more contacts than
in recent months indicated plans to raise their selling
prices—most notably, in the retail sector.
Consumer Spending
Business contacts in most sectors said they plan to
increase staffing levels in the months ahead, with the
most widespread gains anticipated among manufacturers. In contrast, more transportation & warehousing firms
plan to reduce than expand employment.
Consumer spending showed signs of leveling off since
the last report. Retailers reported that sales grew at a
subdued pace in recent weeks, as restrictions continued
to be gradually eased, though business remained well
below pre-pandemic levels. Stores in upstate New York
tended to outperform those in other areas.
Wages have edged up overall, except in the information
sector, where contacts mostly reported flat to declining
wages. Looking ahead, businesses generally expect
wages to accelerate modestly—particularly in the trade &
transportation sector.
New vehicle sales softened further in the latest reporting
period, with sales down from brisk summer levels, according to dealers in upstate New York. This continued
pullback is largely attributed to low inventories, though
one contact noted that inventory levels picked up starting
B-1
Federal Reserve Bank of New York
of the District. New York City’s sales and rental markets
have continued to weaken, while markets elsewhere—
particularly for single-family homes—have been increasingly robust. New York City’s rental vacancy rate has
surged to a multi-decade high, and rents have fallen by
roughly 10 percent from pre-pandemic levels, as landlord
concessions have become more common. Demand for
smaller units has fallen particularly sharply. Rents and
rental vacancy rates across the rest of the District have
generally been stable.
in late September. Sales of used vehicles have held up
better due to less pronounced inventory problems. Separately, consumer confidence among New York State
residents rose notably in September, reaching its highest
level since the beginning of the pandemic.
Manufacturing and Distribution
Manufacturing activity has picked up in the latest reporting period, growing at a moderate pace. Wholesale
trade firms noted a brisk rebound in activity, which had
been flat or declining since the onset of the pandemic. In
contrast, contacts in the transportation & warehousing
sectors continued to report weakening business activity,
with some noting difficulties in replenishing inventories.
The residential sales market has been mixed. Sales of
Manhattan condos and co-ops have been sluggish and
running nearly 50 percent lower than a year earlier, while
the listing inventory has risen sharply; still, prices have
been reasonably steady thus far. Across the rest of the
District—even in other parts of New York City and the
metro area—inventories have fallen to low levels and
prices have climbed. Sales volume has risen but continues to be constrained by limited supply. In some areas,
bidding wars were reported to be increasingly common.
Looking ahead, manufacturers and wholesalers remained largely optimistic, while transportation & warehousing contacts have grown increasingly pessimistic.
Services
Service industry contacts generally reported that business activity has been steady to slightly lower, after
weakening during the late summer. Contacts in the
professional & business services and education & health
sectors reported steady activity, while those in leisure &
hospitality and information reported slight declines. Service firms generally indicated they do not expect activity
to change significantly in the months ahead
Commercial real estate markets have weakened further.
Office availability and vacancy rates have risen sharply
in New York City and moderately across the rest of the
District. Similarly, office rents have declined noticeably in
New York City, running about 8 percent lower than a
year ago. Across the rest of the District, office rents were
steady to down modestly. Retail vacancies have continued to increase, and asking rents have declined further.
Tourism has shown scattered signs of a pickup. The
more rural tourist destinations across the region have
reportedly fared reasonably well. New York City’s tourism sector, in contrast, has been depressed, though
there have been signs of modest improvement. Hotels
have seen some pickup in occupancy, but a sizable
proportion remain closed, and those that are open are
still at somewhat below half capacity—with about half of
that reflecting arrangements with the city to house the
homeless. While business travel has remained moribund, a pickup in weekend occupancies signals some
return of leisure visitors—a trend that was also evident in
strong attendance at the 9-11 memorial site and a modest increase in visits to local museums. New York City
restaurants, which benefited from a broad expansion in
outdoor dining during the summer, have more recently
been allowed to restart indoor dining with limited capacity—a change that occurred earlier on in the rest of the
District. As the onset of cold weather inevitably reduces
outdoor dining, many are concerned that demand for
indoor dining will be limited by safety concerns. Movie
theaters have reopened in New Jersey and Connecticut
but remain closed in New York.
New construction activity has remained sluggish and well
below year-earlier levels. Single-family construction has
increased somewhat in recent months, while multifamily
construction has remained sluggish, and commercial
construction has been particularly depressed. Contacts
in real estate and construction expressed increasing
concern about the near term outlook .
Banking and Finance
Small to medium-sized banks in the District reported
increased demand for residential and commercial mortgages but little change in demand for other categories of
loans. Refinancing activity increased. Bankers reported
some tightening in credit standards on commercial mortgages but stable credit standards across all other categories. Delinquency rates declined for residential and
commercial mortgages but remained stable for consumer and commercial & industrial loans. Finally, bankers
reported increasingly lenient policies for delinquent accounts across all categories. ■
For more information about District economic conditions visit:
www.newyorkfed.org/regional‐economy
Real Estate and Construction
Housing markets have improved somewhat across much
B-2
Federal Reserve Bank of
Philadelphia
The Beige Book ■ October 2020
Summary of Economic Activity
Third District business activity incrementally improved during the current Beige Book period but remained well below
levels observed prior to the onset of the COVID-19 pandemic. The number of COVID-19 cases had been manageable
but began rising late in the period. Net employment continued to grow modestly, but the rate of permanent layoffs has
persisted as well. On balance, wages continued to grow slightly, and many contacts continued to report difficulties attracting workers. Prices rose modestly – driven primarily by price spikes amid disruptions to production and distribution.
Modestly positive expectations for growth over the next six months have broadened among firms. However, extreme
uncertainty is uniformly expressed, with contacts citing rising COVID-19 cases, colder weather, rising layoffs, the failure
to renew stimulus measures, a divisive political climate, and the consequences after moratoriums on evictions and
foreclosures expire.
Employment and Wages
over 25 years – largely removing that barrier. Some firms
continue to note offering wage and benefit packages
sufficient to retain their workforce with little turnover.
Employment increased modestly overall as firms continued hiring; however, recalls ebbed for previously furloughed workers, while new furloughs and permanent
layoffs persisted. Among firms responding to our COVID19 survey, 35 percent reported that they had hired new
workers in September – up from 31 percent in August
and 25 percent in July. Likewise, our mid-September
surveys indicated somewhat stronger hiring among all
types of firms than in the prior month.
Wages continued to grow slightly. In mid-September, the
percentage of nonmanufacturing firms reporting higher
wage and benefit costs per employee remained somewhat higher than the percentage reporting lower costs.
However, nearly two-thirds of the firms reported no
change.
Prices
Recalls of furloughed workers have slowed – to 5 percent in September from 13 percent in July. Meanwhile,
the share of firms issuing permanent layoffs edged up to
7 percent in September from 6 percent in July, while the
share issuing new furloughs edged down to 5 percent
from 6 percent.
Prices appeared to rise modestly, as about 25 percent of
all contacts reported higher prices for their own goods
and services and for their inputs to production. However,
over 60 percent of all firms noted no change in prices.
Most contacts were not worried about rising inflation.
Instead, contacts continued to describe scarcity, delays,
and spotty price hikes because of intermittent demand
shifts, production disruptions, and logistics problems.
Contacts noted that California wildfires have caused food
prices to spike; builders continued to note numerous
prices hikes (and delays) for lumber, appliances, and
other critical inputs.
Staffing firms reported that activity continued to increase
but tended to remain below pre-pandemic levels by 10–
15 percent. Staffing contacts continued to note more
orders than they can fill with available labor. In our
COVID-19 survey, fewer firms noted impediments to
hiring in late September than in late August. Lack of
childcare and expanded unemployment benefits were
cited by just over one-fourth of the firms, while fear of
infection was cited by just under one-fourth. One manufacturer noted that it has provided onsite childcare for
Manufacturing
On balance, manufacturing activity has grown slightly
since the prior period but may have leveled off during
C-1
Federal Reserve Bank of Philadelphia
September. At the end of July, manufacturing firms
responding to our COVID-19 survey reported that sales
and new orders were about 14 percent below what had
been anticipated pre-pandemic. At the end of August
and September, firms reported demand was about 8
percent below pre-pandemic expectations.
positive, indicating that growth was slightly less widespread among firms but that the overall direction of
change remained positive.
Financial Services
The volume of bank lending grew modestly during the
period (not seasonally adjusted); in the same period in
2019, by contrast, loan volumes grew robustly. Residential mortgages and other consumer loans grew moderately during the period, and auto loans and commercial
real estate lending grew modestly. However, these gains
were offset by moderate declines in home equity lines
and steep declines in commercial and industrial loans.
Credit card volumes rose slightly; last year, they were
essentially flat over the same period.
Diffusion indexes for shipments and for new orders from
our mid-month surveys also suggested growth. Both
indexes had risen since mid-August, indicating that
growth was more widespread among firms and that the
overall direction of change was positive.
Consumer Spending
On balance, nonauto retail sales improved incrementally
over the period but remained below contacts’ prepandemic expectations by 5–10 percent, depending on
the retail segment (restaurants were on the low end or
lower). Restaurants continue to survive with a mix of sitdown dining, takeout/delivery, catering, and groceries.
Contacts anticipate weaker sales in the coming winter
months.
Banking contacts, as well as accountants and attorneys,
noted little change in delinquencies or other credit problems. However, most remained concerned that significant problems would arise without renewed government
stimulus and as moratoriums on evictions and foreclosures expire.
Strong demand persisted for auto sales – new and used;
however, inventory constraints limited new car sales to
modest growth. Still, new car sales were less than 5
percent below the prior year, which marked a significant
improvement. Dealers did note that they are seeing more
credit-challenged customers, resistance from bank lenders, delinquencies, and repossessions.
Real Estate and Construction
Homebuilders reported robust sales relative to a year
earlier, while existing home sales grew modestly, as
extremely low inventories continued to constrain sales.
Builders and brokers alike noted that strong demand
persisted because of low interest rates, a pandemicdriven desire for more space, and the emergence of
more first-time buyers. Surging demand has enabled
builders to raise prices to cover rising labor and commodity costs. For brokers, surging demand has spurred
multiple offers and higher house prices for the limited
available homes. Banking contacts are becoming wary of
appraisals, and some appraisers are beginning to balk at
the higher prices.
Tourism changed little compared with the prior period as
a whole but did grow softer with the move from summer
to fall. In the first half of August, activity had improved to
about 39 percent below prior-year levels but was averaging 47 percent below in late September. Contacts described mixed results for the summer: Rental homes
were doing well, while some hotels struggled, and some
restaurants were busy, while others never reopened.
Attractions, business travel, and urban destinations
remain depressed.
Activity in Philadelphia’s commercial real estate construction sector essentially held steady at about 10–15
percent below the level of activity anticipated before the
pandemic. Production remains constrained by crew-size
reductions for worker safety. Commercial office leasing
activity continued to edge lower. With many workers
remote and potential layoffs ahead, firms continued to
delay leasing decisions; some are terminating leases.
Demand remained strong for warehousing and positive
for life science activities, but weak for retail space. ■
Nonfinancial Services
On balance, nonmanufacturing activity has grown slightly
since the prior period, but mostly leveled off during September. At the end of July, nonmanufacturers in our
COVID-19 survey had reported that sales and new orders were about 21 percent below what had been anticipated pre-pandemic. At the end of August and September, firms reported demand was 16.7 percent and 16.2
percent below pre-pandemic expectations, respectively.
Diffusion indexes for new orders and sales from our midmonth surveys also suggested slight growth. Both indexes had edged down since mid-August but remained
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 ■ October 2020
Summary of Economic Activity
Fourth District economic activity increased at moderate pace since the last Beige Book report. The share of business
contacts reporting an increase in customer demand was unchanged over the period; however, far fewer firms noted a
decrease in demand. The general improvement was evident across broad industry breakouts, but there was considerable variation within them. For example, spending on interest rate-sensitive goods (such as homes and light vehicles)
was particularly robust, while spending in high-contact services segments (such as accommodation and food services)
remained weak. The modest increase in customer demand was accompanied by an uptick in staffing levels. However,
contacts suggested that hiring was difficult because of limited labor availability, which also exerted more upward pressure on wages. Supply chain constraints and higher costs of freight and some materials pushed up input prices, and a
greater share of contacts were able to increase selling prices. While most firms expect demand to increase further in
coming months, capital spending remained soft as firms continue to hold on to cash amid persistent uncertainty surrounding the pandemic.
by sector. In consumer-facing segments, auto dealers,
furniture retailers, and apparel stores were among those
reporting that customers were paying higher prices.
Freight haulers said that strong demand, especially for
last-mile delivery, was pushing up both spot and contract
rates. By contrast, firms in professional and business
services indicated that prices to customers were flat to
down, with one noting that customers were “fragile” and
had little appetite for higher prices.
Employment and Wages
Staffing levels increased slightly since the last report,
although employment remained well below prepandemic levels. More firms across a wide array of
industries reportedly wanted to hire (or rehire) additional
workers to meet improving demand. However, many
indicated that they had a hard time adding workers.
Contacts said that three primary factors contributed to
their inability to hire: health concerns, difficulty arranging
dependent care, and generous unemployment insurance
benefits. Contacts were specifically asked if labor availability increased after the generous supplemental unemployment insurance payments lapsed, and most said that
it had not. There were a few exceptions noted by manufacturers, transportation firms, and restaurants. Nevertheless, the increase in labor availability was insufficient
to meet these employers’ needs. Staffing services firms
continued to report unusually large numbers of unfilled
orders because of these shortages. Moreover, they and
other business contacts suggested that some wage rates
were rising as a consequence, particularly in lower-wage
positions.
Nonlabor input costs also rose for many firms. Construction and manufacturing firms reported rising freight rates
and materials prices, along with supply chain interruptions, that contributed to higher input costs. Many of
those firms were able to push such cost increases
though to their customers. Contacts in a variety of sectors suggested that adapting their operations to account
for COVID-19 also added to their costs.
Consumer Spending
Reports from retailers suggest that consumer spending
increased modestly during the last two months. Auto
dealers said that sales remained strong in August and
September, and many suggested that sales would have
been even stronger if not for unusually low inventories.
General merchandisers and apparel retailers said that
Prices
On balance, selling prices rose moderately during the
latest Beige Book period. However, pricing power varied
D-1
Federal Reserve Bank of Cleveland
sales flattened out in recent months even though customers seemed more willing to shop in brick-and-mortar
stores. Hoteliers noted some improvement in occupancy
rates relative to those of a few months ago, although
they remained low. Looking ahead, contacts noted cautious optimism that consumer spending will continue to
recover but expressed some concern about this given
uncertainty regarding the path of the virus and the future
of fiscal stimulus.
soft patch during the last reporting period. Contacts
noted that demand for mortgages and auto loans remained strong as low interest rates persisted, but demand for business loans was flat on balance. Lenders
said that delinquency rates for commercial and consumer loans were still relatively low because of forbearance
agreements and various fiscal relief measures. However,
a number of contacts reported slight increases in delinquencies of commercial loans as the economy remained
weak and some deferral programs ended. Looking
ahead, bankers expected loan demand to remain unchanged throughout the current quarter but noted that
uncertainty regarding the path of the virus clouded their
outlook. Moreover, while bankers expressed surprise
that they had not yet seen bigger increases in metrics
reflecting financial duress, many expected them to rise in
2021.
Manufacturing
Manufacturing orders increased moderately. Several
contacts attributed stronger orders to customers’ replenishing inventories that were depleted earlier in the year.
Others said that increased auto production as well as
growing foreign demand, especially from China, contributed to their partial recovery. However, several contacts
emphasized that activity remained below pre-pandemic
levels. Looking forward, almost two-thirds of manufacturing contacts believed demand will increase over the next
quarter, although uncertainty about the path of the virus
and the upcoming presidential election persisted.
Professional and Business Services
Customer demand for professional and business services remained strong, and no contacts reported a decrease in business activity. One contact indicated that
his firm’s demand was picking up along with the broader
economy, but his firm was also benefitting from some
pent-up demand that built during the slower months
earlier in the pandemic. The transition to remote work
and online transactions has accelerated the need for
new software solutions and increased cybersecurity
measures. In spite of the recent strength in demand for
professional and business services, a couple of contacts
expressed concern that firms may begin to delay purchases as a result of continued heightened uncertainty.
Real Estate and Construction
Residential construction and real estate activity remained strong since our last report. Many contacts said
that favorable interest rates and low inventories have
persuaded many consumers to go forward with home
purchases. One real estate agent noted that sales did
not decline after Labor Day as they usually do, and
contacts noted that while they anticipate that demand will
soften in the coming months, they think demand will be
stronger than is typical for fall. One builder reported that
some potential homebuyers were pushed out of the
market by higher home prices, a situation which resulted
from low inventories and higher materials costs, particularly for lumber.
Freight
Demand for freight services increased over the reporting
period, driven by an increase in e-commerce and ongoing (and broadening) resumption in economic activity.
Eighty percent of contacts reported demand had increased in the last two months, and 70 percent expected
demand to continue to increase during the fourth quarter,
particularly because more consumers will be holiday
shopping from home. Many firms have been unable to
adequately respond to increased demand because hiring
drivers is difficult, and freight prices have increased as a
result.■
Demand for nonresidential construction was mixed.
While public work remained weak, there was a slight
uptick in private-sector projects. One general contractor
reported that previously delayed projects began to move
forward and that bidding activity had increased. For the
most part, commercial realtors remained downbeat,
citing a lack of interest in commercial space and financial
hardship among small businesses and restaurants. By
contrast, demand for industrial space remains strong.
Looking forward, firms expected nonresidential construction and leasing activity to experience a typical seasonal
deceleration as the winter months approach, but persistent uncertainty may further slow construction decisions.
Financial Services
For more information about District economic conditions visit:
clevelandfed.org/region
Overall, banking activity increased after going through a
D-2
Federal Reserve Bank of
Richmond
The Beige Book ■ October 2020
Summary of Economic Activity
Economic activity in the Fifth District increased modestly since our last report but remained soft compared to pre-COVID
and year-ago levels. Manufacturers saw a moderate increase in new orders and shipments, overall, but supply chain
disruptions limited output and increased cost of production. Ports experienced a moderate rise in volumes, particularly
of imports, as shipments neared year-ago levels. Trucking companies had strong growth in volumes, particularly of retail
goods and noted tight capacity in the market. Retail sales showed modest growth as demand for home goods was
strong, but customer traffic at brick-and-mortar stores remained soft. The travel and tourism industry saw modest improvement, but remained weak, as hotel occupancy rates were low. Residential home sales showed robust growth
across price ranges, as inventories of both new construction and resales remained low. Commercial real estate leasing
saw some declines, as retail was particularly weak. Bankers reported a moderate increase in loans, as demand for
home mortgages remained strong, but commercial lending softened somewhat. Overall, demand for nonfinancial services increased slightly, as most firms reported flat to improving sales. Employment rose in recent weeks but remained
below year-ago levels, and some businesses struggled to find workers. Price growth was fairly stable but varied across
industries, as some firms noted increased costs of raw materials.
Employment and Wages
Manufacturing
Total employment continued to rise in recent weeks, but
the level of employment remained well below prepandemic and year-ago levels. A staffing and recruiting
company said that demand for temporary and part-time
workers remained somewhat elevated but demand for
direct placement was very low. An employer of hourly
workers remarked that it was very hard to find workers,
particularly for positions paying less than $20 an hour.
Many businesses said that they were offering flexible
scheduling and remote work opportunities to workers
with children schooling at home. Wages were little
changed, overall, but there were some reports of recent
wage gains in industries with significant order backlogs.
Manufacturers in the Fifth District reported a moderate
increase in shipments and new orders in recent weeks.
Food, furniture, and appliances were strong, with demand often exceeding capacity. Manufacturers who had
shifted to making hospital gowns, sneeze guards, or
other COVID-related equipment saw strong demand.
However, manufacturers for retail stores struggled. Supply chain disruptions and tariffs put continued pressure
on costs of inputs while unavailability of workers constrained production. Many contacts were cautious about
investment because of uncertainty from the virus and the
election year, but one West Virginia contact planned to
expand factory space to increase capacity.
Prices
Ports and Transportation
Price growth remained modest, overall, since our previous report. According to our most recent surveys, manufacturers reported a slight slowdown in growth of prices
received while service sector firms reported a modest
acceleration. Businesses in both sectors reported a
small increase in prices paid. Some manufacturing and
construction firms noted supply shortages and rising
prices for certain raw materials. Several businesses
reported longer lead times and higher prices for personal protection equipment.
Fifth District ports observed a moderate increase in
shipping volumes since our last report. Many contacts
reported volumes exceeded expectations from the
spring. Import levels remained above export levels and
grew faster than exports. Both import and export automotive shipments were strong, as were consumer
goods, with one contact noting high volumes of toy shipments. Imports from east Asia grew, but heavy equipment was soft. Port contacts noted higher shipping rates,
as some blank sailings limited capacity. An airport saw
E-1
Federal Reserve Bank of Richmond
strong cargo shipments of both imports and exports,
while capacity on passenger flights was limited.
home offices, pools, and rooms suitable for homeschooling multiple children.
Trucking companies reported strong growth in recent
weeks. Capacity was tight as some companies had
experienced closures. This shifted activity to the spot
market, which saw rates reach record highs. Retail
shipments for certain goods were high as some retailers
looked to replenish inventories. Competition for drivers
from companies developing their own delivery services
led to some attrition and wage pressure. Contacts reported some capital expenditures but remained cautious, citing high uncertainty in the market.
Commercial real estate leasing declined slightly since
our last report. Vacancy rates for both retail and office
were up, while rental rates fell. Retail was particularly
weak, as some stores and restaurants closed permanently or were unable to pay rent. Office leasing was
soft. Many office tenants asked for short term lease
renewals while determining the space they will need in
the future, and some looked to sublet office space. Builtto-suit office construction was soft, and contacts did not
see speculative office building. Multifamily leasing struggled in some urban areas, as many tenants moved to the
suburbs, but was fairly stable in less densely populated
areas. Demand for industrial space exceeded supply,
leading to high rent and increasing construction.
Retail, Travel, and Tourism
Retail sales saw modest growth in recent weeks but
remained soft compared to last year. Demand was
somewhat mixed across products. Sales of home improvement goods and furniture remained strong. Clothing stores continued to struggle with low traffic and
revenues in general, but they noted fairly strong sales of
high-end clothing. Several retailers reported that inventories were out of season as excess remained from the
spring. Contacts also noted a shift in customer traffic
from large malls to individual destination stores. Some
business expressed concerns about cash flow after
Paycheck Protection Program loans run out.
Banking and Finance
Overall, respondents reported that loan activity picked up
moderately for this period, mainly driven by continued
strong demand for mortgage loans. On balance, they
indicated conventional commercial lending declined
slightly, especially in the hospitality and retail sectors. A
few financial institutions stated that downward rate pressure had squeezed their net interest margins. Deposit
growth was moderate despite low rates on interestbearing accounts. Credit quality remained good, but a
few respondents noted being more cautious in terms of
their underwriting due to the pandemic. In addition, there
is some concern that delinquencies may increase as a
result of pending layoffs or furloughs.
Travel and tourism in the Fifth District increased modestly since our last report but were below year-ago levels.
Hotel occupancy rose slightly in some areas, but hotels
still struggled with low prices and occupancy rates that
cannot sustain business in the long run. Demand for
short term rentals was solid, particularly in areas with
outdoor attractions, away from cities. Restaurants struggled, and some closed permanently. Restauranteurs
expressed concerns about the effect of coming cold
weather on demand for outdoor dining while indoor
space remains limited or undesirable. Outdoor attractions saw strong demand but noted that capacity restrictions limited business.
Nonfinancial Services
Overall, demand for nonfinancial services increased
slightly since our previous report. A majority of professional and business services firms reported flat to slightly
improving sales and revenue. A few firms noted, however, that a slowdown in retail and office construction led to
a decline in demand for their services. Health care service providers reported little change in demand, but one
clinic saw an increase in demand for virtual visits and
was increasing capital spending on technology as a
result. ■
Real Estate and Construction
Fifth District home sales growth remained robust in
recent weeks. Demand for homes was strong across
locations and price ranges. Inventories were low for both
new construction and resales, and new construction
remained strong. Prices rose, and days on the market
fell. Realtors reported increasing numbers of offers
made on homes. Customer traffic remained somewhat
sluggish, but customers were eager to buy. Low mortgage rates incentivized buyers, but rapidly growing
prices led to unpredictable appraisals. Realtors noted
that buyers increasingly want homes with more land,
For more information about District economic conditions visit:
www.richmondfed.org/research/data_analysis
E-2
Federal Reserve Bank of
Atlanta
The Beige Book ■ October 2020
Summary of Economic Activity
Economic conditions in the Sixth District improved slightly over the reporting period but remained below pre-COVID-19
levels. Labor market activity improved modestly as employers continued to add to payrolls. Nonlabor costs remained
generally muted, but costs related to construction and COVID-19 safety measures continued to rise. Retail sales grew
but largely remained below year-earlier levels. Softness in tourism and hospitality persisted as COVID-19 restrictions
continued to limit activity in many parts of the District. Residential real estate demand and home prices increased while
inventory levels remained tight. Commercial real estate activity stabilized. Manufacturing activity increased and new
orders and production levels rose. Banking conditions stabilized, and loan loss reserves continued to grow.
Employment and Wages
home postures were also reported. Insurance costs were
also cited as increasing. Pricing power remained muted,
with little ability to pass through these costs. The Atlanta
Fed’s Business Inflation Expectations survey showed
year-over-year unit costs decreased significantly, from
1.5 percent in August to 1.3 percent on average in September. Year-ahead expectations remained largely unchanged at 1.6 percent.
Contacts reported modest improvements in labor market
conditions since the last report. On balance, District
employers continued to add to payrolls over the reporting
period. Firms continued to slowly recall workers as demand returned. However, several contacts reported that
some prior staff cutbacks had become permanent, while
others noted using attrition to shrink headcount. Many
contacts indicated that the pool of available workers was
ample and speculated that the expiration of the enhanced unemployment insurance benefit had begun to
improve the supply of workers for lower-skilled positions.
Employers remained concerned about workers’ abilities
to balance workloads with the demands of childcare and
the return to school, in person or virtual.
Consumer Spending and Tourism
Reports from retail contacts were little changed from the
previous report. Sales relative to this time last year remained soft but were better than expected with continued strength in home-related products. Contacts in Florida and Louisiana anticipate an uptick in demand as
those states implemented final phases of reopening.
Contacts shared concerns for the upcoming holiday
season sales period, citing political uncertainty and the
potential for another spike in COVID-19 cases as potentially hampering sales growth.
Reports on wages and compensation varied among
contacts. Some businesses rescinded salary cuts, while
others maintained pay cuts and salary freezes. Wage
increases remained concentrated at the low end of the
pay scale.
Travel and tourism contacts reported that although demand through the summer season was softer than a
year ago, tourism activity through early October was
recovering slowly. COVID-19 restrictions continued to
negatively impact the industry in most District states as
hospitality contacts reported that group travel and conference bookings continued to be postponed or cancelled through the second quarter of 2021.
Prices
Over the reporting period, contacts noted some rising
input costs, particularly for lumber and steel. Expenses
associated with personal protective equipment, testing,
and sanitation practices to protect employees and customers from COVID-19 remained significant, and increased technology expenses for extended work-from-
F-1
Federal Reserve Bank of Atlanta
Construction and Real Estate
primarily to fewer shipments of domestically-produced
refined products.
Demand for housing continued to recover, and new
home construction continued to fall short of demand.
Inventory levels of existing homes dropped to historic
lows and shortages are expected to remain a long-term
market headwind. Limited supply and rising construction
costs have led to increased upward pressure on prices.
However, historically low interest rates continued to help
offset rising prices. Contacts shared concerns over potential higher mortgage defaults as surges in delinquencies in markets such as Orlando and Miami were noted.
Banking and Finance
Conditions at financial institutions stabilized over the
reporting period. Earnings remained pressured by compressed net interest rate margins and higher provisions
for loan losses. Persistently elevated deposit levels kept
liquidity strong. Loan growth was flat as underwriting
conditions remained tight for many loan products outside
of portfolios such as residential real estate. Requests for
additional forbearance on loan payments declined.
Commercial real estate (CRE) contacts reported continued stabilization amidst improving employment conditions and customer traffic. Hospitality, which was especially hard hit at the onset of the pandemic, was generally stagnant. Retail remained challenged; however, contacts reported marginal improvement as rent collections
increased at poor performing shopping centers. The rate
of unit leasing remained muted compared with prepandemic rates. Owners of lower-price multifamily properties reported an increase in late rent payments and
some softening in occupancies. While improving, low
levels of tourism and travel were having a notable impact
on activity across the hospitality and retail sectors. Due
to slower transaction and leasing volumes, asset valuation remained difficult.
Energy
Hurricanes Laura and Sally made landfall within the
District during the reporting period, causing supply disruptions as production, refining, and chemical processing
activity stalled, according to energy contacts. Power
generation, transmission, and distribution infrastructure
in southwest Louisiana was severely damaged by Hurricane Laura, leaving hundreds of industrial sites without
power for a sustained period. Crude oil refiners continued to experience weak demand amidst a global inventory glut. Refining contacts noted that utilization rates
remained near historically low levels and are expected to
remain low heading into the fall or until fuel prices rise
enough to justify increasing output. Still, some energy
contacts reported that large industrial petrochemical
refining and chemical processing plant expansion projects that were delayed earlier in the year were gradually
picking up again. Utilities contacts noted ongoing investment and integration of renewable energy resources.
Manufacturing
Manufacturing contacts reported an increase in overall
business activity since the previous report. Firms indicated that new orders and production levels rose, and supply delivery times increased. Finished inventory levels
were also reported to have increased, after declining
over the last three reporting periods. Expectations for
future production levels rose, with half of contacts surveyed expecting higher levels of production over the next
six months.
Agriculture
Agricultural conditions remained weak. While droughtfree conditions prevailed in most parts of the District,
some producers reported crop and infrastructure damage caused by Hurricanes Laura and Sally. The USDA
reported that District farmland values were up on a yearover-year basis except in Florida where cropland value
was unchanged. Cotton, peanut, and rice harvesting
progressed, though below the pace of their five-year
averages, while soybean harvesting was near its fiveyear average. The USDA reported that in August, yearover-year prices paid to farmers were up for cotton, rice,
soybeans, and milk, but down for corn, cattle, broilers,
and eggs. On a month-over-month basis, prices increased for rice, soybeans, and cattle but decreased for
corn, cotton, broilers, eggs, and milk. ■
Transportation
Transportation activity across the District improved over
the reporting period. Trucking firms reported that shipments of consumer staples and building materials remained above pre-COVID-19 levels. Port contacts reported significant growth in container traffic, driven by
increases in e-commerce, and ocean carriers were operating at full capacity and reinstating vessels that were
suspended as a result of the pandemic. Railroads reported that overall traffic improved, intermodal shipments of
consumer goods strengthened, and industrial freight
volumes stabilized but were down from year-earlier
levels. Inland waterway contacts noted that demand for
barge services was below pre-pandemic levels, owing
For more information about District economic conditions visit:
www.frbatlanta.org/economy-matters/regional-economics
F-2
Federal Reserve Bank of
Chicago
The Beige Book ■ October 2020
Summary of Economic Activity
Economic activity in the Seventh District increased robustly in late August and September, but the pace of growth was
slower than the prior reporting period and activity remained well below its pre-pandemic level. Contacts expected further
growth in the coming months, but most did not expect a full recovery until at least the second half of 2021. Employment
and consumer spending increased robustly; manufacturing increased moderately; construction and real estate increased modestly; and business spending increased slightly. Wages increased slightly and prices rose modestly. Financial conditions were little changed on balance. Rising prices and additional government support lifted expectations for
farm income.
Employment and Wages
Consumer Spending
Employment increased robustly overall during the reporting period, though the pace of growth slowed. Furthermore, a number of contacts again reported little or no
change to their staffing levels. Many retail contacts noted
that they continued to operate with reduced hours and
were holding staffing levels down accordingly. In spite of
high unemployment, some contacts in manufacturing
and agriculture reported that finding entry level workers
was only a little easier than prior to the pandemic. Contacts continued to report providing scheduling accommodations to workers with young children. Wages increased
slightly across skill levels, while benefits costs moved up
modestly.
Consumer spending increased robustly over the reporting period, though overall spending remained well below
pre-pandemic levels. Nonauto retail sales increased
moderately, led by growth in the home improvement,
home furnishings, and appliance categories. Hobby and
sporting good sales remained strong. Apparel sales were
lackluster because of low demand for traditional back-toschool wear. Growth in e-commerce eased but continued to register large gains from a year earlier. The pace
of vehicle sales strengthened. Dealers indicated that
inventories of new light trucks and many types of used
vehicles continued to be tight, which supported rising
prices and profit margins. Demand for auto repairs increased significantly. Contacts in the leisure and hospitality industry reported large increases in volumes, but
activity remained well below its pre-pandemic level.
Contacts noted that Labor Day air and hotel bookings
were sharply off year-ago levels and that business travel
continued to be weak. In a Michigan survey, the majority
of restaurant operators believed they would not see
sales return to pre-pandemic levels for at least 6 months.
Prices
Prices increased modestly on balance in late August and
September, and contacts expected a similar sized increase over the next 12 months. Consumer prices increased moderately, led by higher food and vehicle
prices. Producer prices increased slightly. Input costs
rose modestly, driven by rising prices for shipping and
raw materials, particularly metals. Energy prices remained weak, as inventories of natural gas and crude oil
stayed elevated and demand remained slow.
G-1
Federal Reserve Bank of Chicago
Business Spending
heavy trucks increased moderately. Manufacturers of
building materials saw a modest increase in shipments,
supported by growth in residential construction. Contacts
in food processing reported strong growth and plans to
expand capacity.
Business spending increased slightly in late August and
September. Retailers continued to struggle to maintain
inventories for in-demand items such as home improvement, home furnishings, and hobby goods because of
supply constraints. A contact said that appliance shortages, especially of refrigerators, hampered multi-family
building projects. Most manufacturers indicated that
inventories were at comfortable levels, though a number
of contacts continued to report minor supply chain problems. Capital expenditures were little changed, and
many contacts again said they had paused expansion
plans. Demand for transportation services increased
modestly, with contacts noting that capacity constraints
had led to sizeable price increases. Commercial energy
consumption decreased slightly, but industrial energy
consumption increased slightly.
Banking and Finance
Financial conditions were little changed on balance over
the reporting period. Participants in the equity and bond
markets reported little change in conditions overall,
though volatility remained elevated. Business loan demand decreased modestly, with contacts highlighting
declines in the hospitality and commercial real estate
sectors. One contact noted that commercial and industrial loan demand had started to come back because many
businesses had used up their PPP funds. Business loan
quality deteriorated modestly, with declines concentrated
in leisure and hospitality and commercial real estate.
Contacts reported that forbearances had ended for many
customers and that there were few requests for extensions. Standards again tightened some. Consumer loan
demand increased modestly, led by continued mortgage
refinancing activity. Loan quality improved slightly while
standards tightened slightly. Contacts indicated that
forbearances had ended in the consumer sector as well,
with limited effects on portfolio quality. Contacts continued to report high levels of deposits for both businesses
and households.
Construction and Real Estate
Construction and real estate activity increased at a modest pace over the reporting period. Residential construction grew modestly. Contacts noted that a lack of available lots, material shortages, and rising lumber and drywall prices were putting a damper on growth. Residential
real estate activity remained vibrant, particularly in the
single-family market. Home prices rose and inventories
remained low. Nonresidential construction was flat overall and, as with residential construction, was experiencing rising costs. A Southeast Michigan contact indicated
that while there was solid demand for new industrial
space, there was no new office or hospitality work. Commercial real estate activity fell slightly overall, with deal
making largely limited to industrial and multi-family properties. Warehouse and distribution space was in particularly high demand. Commercial real estate prices fell
modestly overall. Contacts also reported falling rents for
office and retail spaces.
Agriculture
Rising prices for key agricultural commodities and additional government support lifted expectations for farm
income for the year. Corn, soybean, and wheat prices
moved higher, reflecting in part lower stocks compared
with a year ago. Increases in corn and soybean exports,
particularly to China, also supported prices. In addition, a
dry August held back expected yields. Dairy prices were
higher, supported by increased sales to food service
establishments, and strong exports. Hog prices increased while cattle prices decreased. There were reports that improved income prospects had eased stress
on agricultural borrowers somewhat, though concerns
remained for next year, when government support was
expected to drop substantially. ■
Manufacturing
Manufacturing production increased moderately in late
August and September, but remained below where it
was before the pandemic began. Auto output continued
to rebound and was near its pre-pandemic level. Steel
production also continued to recover, but remained low.
Demand for heavy machinery was higher than earlier in
the year, but remained weak. Contacts noted that while
demand for heavy machinery from the infrastructure
segment remained solid, they were concerned about a
drop-off in spending by state and local governments,
many of which face potentially large budget cuts. Specialty metals manufacturers reported a modest increase
in sales, with contacts highlighting growth in the construction, medical, and defense industries. Demand for
For more information about District economic conditions visit:
chicagofed.org/cfsbc
G-2
Federal Reserve Bank of
St. Louis
The Beige Book ■ October 2020
Summary of Economic Activity
Reports from District contacts suggest economic activity has increased slightly but the pace of activity remains highly
variable across sectors. Employment and wages increased slightly. Auto dealers continued to report strong sales despite inventory shortages. Restaurants reported some improvement but expect activity to decline due to cooler weather.
District banking contacts reported that outstanding loan volumes decreased slightly compared with the previous survey
period but remain well above year-ago levels. Home sales in most areas remain strong for this time of the year but have
slowed in recent months.
Employment and Wages
Prices
Labor market conditions have improved slightly since the
previous report, though the pace of job growth has
slowed. Contacts across industries reported hiring or rehiring workers since July, especially in transportation,
manufacturing, and healthcare. Firms seeking to hire
workers reported a tight labor market, citing workers’
ongoing health concerns and family care responsibilities.
One firm reported having to threaten furloughed employees’ healthcare benefits to pressure enough to return to
work. Another firm estimated that 10% to15% of its
workforce was absent daily. Other firms reported business closures or emphasized stability more than growth.
Employment trends for small firms were especially
mixed. One Memphis contact reported several small
business owners were seeking additional part-time jobs
to cover their expenses, and aggregate data show little
improvement in small business employment since July.
Prices have increased moderately since the previous
report. Contacts across industries reported higher input
costs due to adding sanitization products and personal
protective equipment as inputs. Crop prices have increased moderately, except for rice, which has seen a
slight decline. However, rice prices have increased moderately year-over-year. Many raw materials are up moderately, steel prices are up significantly, while chemical
prices have declined. Contacts attribute elevated lumber
prices to increased demand and a slowdown in production as a result of the COVID-19 pandemic. An agriculture contact attributed the slight growth in cotton prices
since the previous report to the first phase of a trade
agreement between the U.S. and China. Contacts also
noted that the prices of used cars remain elevated.
Consumer Spending
Reports from District general retailers, auto dealers, and
hospitality contacts indicate that consumer spending
activity has been mixed since our previous report. Seasonally adjusted credit and debit card spending through
the middle of September was mixed across the District.
Consumers in West Tennessee have an improved outlook relative to June and expect to spend about the
same this year as they did last year. General retailers
reported mixed business activity. District auto dealers
Wages have grown slightly. Contacts reported increasing
wages in the face of labor shortages or returning to
normal salaries and wages as business normalized.
Wages for small businesses remained more stable, with
one survey finding no significant changes since our
previous report.
H-1
Federal Reserve Bank of St. Louis
continued to report strong sales but have experienced
inventory shortages. Tourism and hotel contacts continued to report business activity well below typical levels;
most contacts reported constant business activity from
late summer through early fall but expect a decline
through the remainder of the year as cooler weather
reduces outdoor dining. Restaurants continued to see
increased sales; however, some restaurants that have
maintained business through outdoor seating are planning temporary closures in the colder months.
metro areas have increased moderately since midAugust. Contacts continued to report a shortage of housing on the market, with homes selling quickly once listed.
Some contacts expressed concern about a future increase in evictions when moratoria are lifted.
Commercial real estate activity has been mixed since the
previous report. Contacts reported that demand for office
space has varied, with some tenants choosing to keep
their current spaces or expand, while others are choosing to move toward remote work on a more permanent
basis. Contacts reported continued high demand for
industrial space. A contact in Memphis noted that while a
greater number of retail tenants have been able to pay
rent compared with the spring, some are struggling to
pay or have gone bankrupt.
Manufacturing
Manufacturing activity has strongly increased since our
previous report. Survey-based indexes suggest that
manufacturing activity in Arkansas and Missouri strongly
increased. In Arkansas, firms reported a strong uptick in
new orders while production remained stable. In Missouri
both new orders and production showed a strong uptick.
Metal manufacturing contacts in the St. Louis area reported 5% to 10% increases in production. Contacts
reported that production is still below pre-COVID-19
recession levels, but conditions are steadily improving.
Fluctuations in demand were cited as impediments to
further increases in production for these contacts. Contacts in the furniture, military vehicle, and energy and
defense products all reported that ongoing projects
would considerably expand operations and employment
over the next few years.
Commercial construction activity was mixed. Contacts
reported little speculative activity or construction for
office space, while construction for industrial space
remained strong. Contacts reported delays with supply
chains for materials and a lack of skilled labor.
Banking and Finance
Banking conditions in the District have slightly weakened
since the previous report. Overall loan demand continued to decline following the end of new PPP loans. Outstanding loan volumes decreased slightly compared with
the previous survey period but were well above year-ago
levels. Growth in real estate and consumer loans fell
modestly while commercial and industrial loan volumes
slightly increased. Liquidity conditions remained strong
due to high levels of deposits, despite lower rates on
interest-bearing accounts. Delinquency rates remained
relatively low; however, several contacts expressed
continuing concerns for loans in the entertainment and
leisure and hospitality sectors. Competition for loans and
low interest rates is expected to narrow net interest
margins and profitability.
Nonfinancial Services
Activity in the nonfinancial services sector has increased
since the previous report. Airport passenger traffic is up
significantly, although it remains down more than 60%
relative to this time last year. Cargo traffic is down slightly since the previous report but remains up year-overyear due to e-commerce. Logistics activity is mixed, with
several package delivery firms hiring workers as the
pandemic and oncoming holiday season increase volume. Other logistics contacts reported lower revenue
year-over-year due to the pandemic and low oil production, which have negatively impacted businesses that
use their services. Hospital contacts reported revenue
and patient volumes are increasing while costs per patient have increased due to higher staffing costs and
PPE expenditures. Other healthcare contacts indicated
that telehealth will likely become a larger part of the
healthcare industry even after the pandemic.
Agriculture and Natural Resources
Agriculture conditions have slightly improved. Overall,
contacts reported that year-to-date revenue remains
steady or slightly up. The agribusiness sector has remained steadier than most, but the effects have been
diverse across the industry: Restaurant demand has
been collapsing, but grocery spikes have been more
than filling the shortfall. Most supply chain bottlenecks
were early in the spring and have smoothed out in recent
months. Overall, contacts expect business activity for the
remainder of 2020 will remain steady or increase
slightly. ■
Real Estate and Construction
Residential real estate activity has decreased slightly
since the previous report. While home sales have recovered from their lows in the spring, total sales in most of
the largest District metro areas have been down slightly
since mid-August. Home prices in the largest District
H-2
Federal Reserve Bank of
Minneapolis
The Beige Book ■ October 2020
Summary of Economic Activity
The Ninth District economy grew slightly overall since the last report. Employment was mixed, with overall conditions
remaining volatile. Wage pressures were modest, while price pressures were moderate. The District economy showed
growth in manufacturing and residential construction and real estate. But consumer spending and tourism were flat
overall, while activity slowed for professional services and commercial construction and real estate. Agricultural conditions improved thanks to a promising crop outlook, but remained weak overall, and energy was stable at low levels.
Employment and Wages
Wage pressures rose modestly. A Districtwide survey in
early October showed that a slightly higher share of firms
have increased wages, and a lower share have
decreased wages, compared with a similar July survey.
Other, smaller ad hoc surveys in Minnesota, Wisconsin,
and South Dakota showed generally similar results.
Wage growth was slightly stronger among Minnesota
hospitality firms, particularly in tourism regions seeing
healthy labor demand. Firms across these various
surveys also expected somewhat stronger wage growth
in the future.
Employment was mixed since the last report, and overall
conditions remained quite volatile. Contacts suggested
that some firms were in a “hiring chill,” with essential
vacant jobs getting filled, but holding overall staffing
levels in check. Initial unemployment claims over the
most recent six-week period (through mid-September)
fell significantly compared with the previous reporting
period, but remained quite elevated compared with yearago levels. Continuing claims also dropped steeply over
this relatively short period compared with mid-summer
levels. Staffing contacts in Montana and North Dakota
said job orders have grown in recent weeks, and labor
availability was tightening. However, a survey of
hospitality firms in Minnesota showed more firms were
downsizing workforces compared with those that were
increasing head count. Preliminary results of a larger,
Districtwide survey in October showed similar results,
and that trend was also expected to carry into the
coming months. A Wisconsin contact said recruitment
has become harder given pandemic constraints, and
there’s “no doubt that automation has accelerated. Some
lower-paying jobs probably won't be coming back.” Job
postings improved slightly in recent weeks across most
District states, though South Dakota saw a modest
decline, and the overall growth trend has slowed notably
from the pace seen in June and early July.
Prices
Price pressures were moderate since the previous
report, though input price pressures appeared greater
than final prices. According to preliminary results of a
survey of District businesses, half of respondents
reported that input prices were unchanged compared
with pre-pandemic levels, though nearly one-third said
input prices were up by 5 percent or more. Prices for
final goods or services increased at a smaller share of
firms. Prices for construction materials continued to
increase rapidly. A panel of manufacturers reported that
input prices had been rising faster than usual in August
and September. Retail fuel prices in District states
decreased slightly since the previous reporting period.
Prices received by farmers in August increased from a
year earlier for soybeans, wheat, potatoes, dry beans,
I-1
Federal Reserve Bank of Minneapolis
and turkeys, while prices for corn, hay, cattle, hogs,
chickens, eggs, and milk decreased.
healthy. Residential construction rose modestly. After a
slow August, single-family permits rose sharply in
September in Minneapolis-St. Paul. Permit activity over
this period also rose in Bismarck, N.D., Rochester,
Minn., and Sioux Falls, S.D.
Consumer Spending
Consumer spending was flat since the last report.
Surveys of retail and accommodation firms showed that
while many were operating below pre-pandemic
capacity, customer demand was still not outstripping
available sales or service capacity. Growth in vehicle
sales paused after a strong uptick earlier in the summer.
A dealership with multiple locations in western District
states saw sales decline significantly in August
compared with a year earlier, and September sales were
flat. Motor vehicle sales in Minnesota and Wisconsin
were also lower, according to available data.
Commercial real estate continued to decline modestly
since the last report. With many workers continuing to
work from home, office space in downtown Minneapolis
and St. Paul was seeing increased lease concessions,
according to contacts. Lower foot traffic at office
buildings also continued to put pressure on retail and
other ancillary businesses, with significant closures of
restaurant and other retail outlets. Multifamily vacancy
rates were reportedly rising in some cities. Residential
real estate continued to grow moderately overall. Closed
home sales in August were widely higher, except in
Minnesota, where sales were flat. Limited data for
September home sales suggested continued growth,
with Sioux Falls sales rising by 25 percent over last year,
and Missoula, Mont., by 12 percent.
Tourism experienced healthy late-summer activity in
rural, high-amenity regions, but many firms in these
areas worried about off-season business. Conversely,
many larger cities continued to see low hotel occupancy
rates and overall tourism activity. Air traffic was flat
overall. After a modest late-summer increase in
screened passengers at the eight largest District
airports, activity fell slightly over September and was
less than 40 percent of 2019 levels.
Manufacturing
District manufacturing activity increased moderately
since the last report. An index of manufacturing activity
indicated expansion in Minnesota and the Dakotas in
September compared with a month earlier. About half of
participants on a panel of South Dakota manufacturers
reported that new orders had increased in August and
September compared with the previous two months. A
metal fabricator reported that recent demand from
automation and packaging had increased, while demand
from heavy construction and from oil and gas exploration
was down. Manufacturing contacts continued to report
pandemic-related bottlenecks in supply chains.
Services
Activity in the professional services sector decreased
slightly since the last report. Firms providing services to
clients in oil and gas and air transportation reported
severe contraction in demand. Trucking contacts said
that demand for freight transportation decreased
recently. Providers of information technology services
and consulting said business was steady, while
broadband providers reported that demand was up
significantly.
Agriculture, Energy, and Natural Resources
Construction and Real Estate
District agricultural conditions improved going into the
harvest season, however low prices depressed the
outlook for farm incomes. Harvests were generally
proceeding ahead of schedule in most areas of the
District, and the majority of crop acres as of earlyOctober were in good or excellent condition. Despite
recent drought conditions in some parts of the District,
early estimates called for strong yields of corn and
soybeans and record production in some states. District
oil and gas exploration held steady at low levels. The
number of drilling rigs in the District as of early October
was unchanged from a month earlier, though recent oil
production increased slightly. All but one District iron ore
mine that shut down earlier in the year has reopened. ■
Commercial construction was moderately lower since the
last report. In an October sample of several dozen
construction firms, one-third saw a decrease in activity
compared with earlier in the pandemic, and that share
was expected to increase in the coming quarter. Many
contractors were also experiencing project delays,
particularly related to supply chain disruptions; a
Montana contact said product delivery times were double
or triple their normal length. Many firms continued to stay
busy thanks to project backlogs built up prior to the
pandemic. But firms across the District expressed
concern about a shrinking pipeline of future work out for
bid. Some locations appeared to be bucking the overall
trend, including Fargo, N.D., and Rapid City, S.D., where
August and September permitting activity was very
I-2
Federal Reserve Bank of
Kansas City
The Beige Book ■ October 2020
Summary of Economic Activity
Tenth District economic activity expanded slightly in September despite a pullback in consumer spending for the first time
since early summer. Retail, restaurant, auto and tourism sales declined since the previous survey, and expectations for
consumer spending were mixed. Retail and auto contacts anticipated moderate gains, while restaurant and tourism contacts anticipated declines heading into the winter months. Manufacturing production and new orders increased modestly
at both non-durable and durable goods plants. Transportation and wholesale trade sales also rose modestly, but sales in
the professional and high-tech sectors fell. Residential real estate activity continued to increase at a moderate pace, but
commercial real estate conditions weakened. Energy activity stabilized somewhat, but revenues, employment and capital
expenditures continued to decline in the sector. The agriculture sector improved slightly in September, although drought
conditions intensified in parts of the District. Most industries continued to add jobs, but overall employment levels were
modestly below year-ago levels. Wages and prices rose modestly, and similar gains were expected in the coming
months.
Prices in the retail industry rose moderately and were
well above year-ago levels. Transportation contacts
noted a slight increase in input and selling prices, although prices remained moderately below year-ago
levels. Selling prices increased moderately for construction supplies, but were expected to remain flat in the
upcoming months. Restaurant prices edged up during
this survey period and remained moderately above yearago levels. Prices of raw materials and finished products
rose modestly in the manufacturing sector and additional
increases were anticipated in the coming months.
Employment and Wages
District employment increased slightly since the last
survey period but remained modestly below year-ago
levels. Contacts in the wholesale trade, health services,
and real estate sectors reported the largest employment
gains, while tourism, transportation and manufacturing
contacts reported slight increases. Restaurant contacts
noted a slight decrease in employment following a modest gain during the previous survey period. Employment
levels remained below year-ago levels in most industries, but contacts in every sector except tourism expected to add jobs in the months ahead.
Consumer Spending
Consumer spending fell modestly since the last survey
period which was the first decline since early summer.
Restaurant and auto sales experienced the largest declines, both following moderate increases during the
previous survey period. Tourism and retail sales fell
slightly, after experiencing consistent gains throughout
the summer. Tourism, restaurant, and auto sales were
moderately below year-ago levels, however retail sales
remained modestly above. In the next six months, many
restaurant and auto contacts indicated that they will need
to increase marketing or sales and the majority of respondents in the retail and restaurant sectors noted that
they will need to hire new employees. Retail and auto
contacts expected moderate increases in sales over the
next few months, while restaurant and tourism respond-
A slight majority of contacts in the services sector reported labor shortages, including openings for truck drivers,
retail workers, and skilled technicians. Wages rose modestly and were expected to continue to do so in the
coming months. The majority of restaurant, wholesale,
transportation and auto sales respondents expected
wage growth over the coming year to be similar to that of
last year. However, the majority of tourism and health
services contacts expected slower wage growth than a
year ago.
Prices
Input and selling prices rose modestly in the services
and manufacturing sectors in September and continued
modest increases were expected in the next few months.
J-1
Federal Reserve Bank of Kansas City
ents expected continued declines.
mand and modest declines in commercial, industrial, and
agricultural loan demand. Since the last survey, credit
standards tightened modestly for commercial real estate
lending and tightened slightly for commercial, industrial,
and consumer lending. Deposit levels increased moderately over the past few weeks. Bankers reported moderate declines in loan quality compared to a year ago and
expected strong declines in quality over the next six
months.
Manufacturing and Other Business Activity
Manufacturing activity expanded modestly in September,
but remained moderately below year-ago levels. Both
the non-durable and durable goods sectors experienced
modest gains in production and new orders, marking a
slight slowdown in the pace of growth for non-durable
goods. Contacts anticipated further increases in production and new orders in the coming months. Capital expenditures were consistent with levels from a year ago in
the non-durable sector, while down slightly from a year
ago in the durable sector. The majority of manufacturing
contacts expected to hire new employees in the next six
months.
Energy
District energy activity stabilized somewhat since the
previous survey period, but revenues, employment, and
capital expenditures continued to decline. The number of
active oil and gas rigs in the District was mostly unchanged from August, and drilling and business activity
remained significantly lower than a year ago. Prices for
oil and gas remained below the average price District
firms reported needing for drilling to be profitable. Expected oil prices for the near term were higher than price
expectations from earlier in 2020, but longer-term projections were steady. Over a quarter of firms surveyed
expected global oil demand to return to pre-COVID
levels by Q2 2021, but the majority of contacts didn’t
expect oil demand to rebound fully until 2022 or 2023.
Moving forward, most firms expected more defaults and
bankruptcies in the energy sector, and over half of firms
anticipated a large increase in mergers and acquisitions
through 2021.
Outside of manufacturing, sales in transportation and
wholesale services increased modestly during the survey
period, a weakened pace of growth for both sectors
relative to this summer. Sales in professional and hightech services declined since the last survey and were
modestly below year-ago levels. Contacts in transportation and professional and high-tech services expected
modest increases in sales and slight declines in capital
expenditure in the coming months, while wholesale
respondents expected moderate increases in both
measures.
Real Estate and Construction
Residential real estate activity grew moderately since the
last survey, but commercial real estate conditions continued to decline. Home prices rose moderately as inventories fell further. Home sales held steady, and remained
moderately above a year ago. In addition, contacts expected moderate growth in both sales and prices in the
upcoming months. Construction supply sales continued
to rise modestly, keeping them moderately above yearago levels. Since the previous survey period, commercial
real estate conditions continued to worsen with a modest
increase in vacancy rates, a slight increase in developer’s difficulty in accessing credit, and slight declines in
absorption rates, sales, and rents. Commercial construction, however, increased slightly for the first time following consistent declines since early spring. Overall, expectations improved in the commercial real estate sector
compared to the previous survey, but contacts still expected conditions to worsen in the next few months.
Agriculture
Economic conditions in the Tenth District agricultural
sector improved slightly from the previous period despite
intensifying drought conditions in some parts of the
District. Alongside government payments that were
expected to help offset revenue losses, prices for most
of the region’s major agricultural commodities increased
slightly in late September. However, apart from soybean
and hog prices, agricultural prices generally remained
low. Drought conditions intensified, particularly in western District states. Through September, the share of corn
and soybean acres in poor condition was higher than a
year ago and above the national average in all states
except Missouri. Extreme drought in portions of Colorado, Wyoming, New Mexico, Oklahoma and Nebraska
could further lower crop revenues and reduce income
prospects for cow-calf producers impacted by the severe
conditions. ■
Banking
Bankers reported modest growth in overall loan demand,
with strong increases in residential real estate loan demand and slight increases in consumer installment loan
demand. Other lending categories continued to slow,
with slight declines in commercial real estate loan de-
For more information about District economic conditions visit:
www.KansasCityFed.org/Research/RegionalEconomy
J-2
Federal Reserve Bank of
Dallas
The Beige Book ■ October 2020
Summary of Economic Activity
Economic growth resumed in the Eleventh District after a spike in COVID-19 infections over the summer disrupted the
budding recovery. Growth in the services and manufacturing sectors picked up pace in September, and retail sales
increased. However, revenues remained well below normal levels in most industries. The housing market continued to
perform well. In the banking sector, real estate lending picked up further but was offset by declines in consumer and
commercial and industrial loan volumes, and most contacts expect an increase in nonperforming loans over the next six
months. Energy activity remained depressed but started to show some signs of improvement. Employment in the district
edged higher, with increasing reports of hiring. Input costs rose modestly while selling prices were flat to up slightly.
Outlooks were largely positive but highly uncertain, particularly with regard to the presidential election and the unknown
trajectory of the COVID-19 pandemic.
Employment and Wages
Manufacturing
Employment edged higher, with increasing reports of
hiring in certain sectors, including manufacturing. A
Dallas Fed survey of well over 200 Texas service sector
executives showed that 12 percent of services firms
increased employment levels on net in September,
which exceeded the share noting net layoffs for the first
time since February. Hiring was particularly strong in
financial and business services, while recent job growth
in health care abated. Airlines continued facilitating
voluntary separations and some have now begun furloughing or laying off workers. Job losses continued in
the energy sector, though at a more modest pace. Energy contacts noted that though the worst is likely past,
more layoffs are coming, especially among exploration
and production companies.
Recovery in the manufacturing sector picked up steam in
September, with production accelerating and outlooks
continuing to improve. Month-over-month production
increases were seen in both durables and nondurables
manufacturing. Nonetheless, about 60 percent of manufacturers said business is still below normal levels, by
about 30 percent on average. Petroleum refiners saw a
decrease in production and utilization rates due in part to
tropical storms curtailing operations. Margins among
refiners and chemical manufacturers remained depressed. Overall, sentiment among manufacturers regarding broader business conditions remained positive,
though uncertainty persists, particularly surrounding the
election.
Wage growth remained subdued in September. In the
energy sector, wages remained frozen and some firms
still have pay-cuts in place.
Retail sales surged in September, according to contacts.
Even still, more than half said revenues were still below
normal levels. Growth over the reporting period was led
by nondurable goods and building materials sales. Auto
sales remained weak, with multiple contacts citing supply
chain delays. Among retailers overall, outlooks and
expectations of future activity remained positive.
Retail Sales
Prices
Input costs rose at a moderate pace, except in transportation and oilfield services where costs were down somewhat. Selling prices were flat to up slightly, with more
pronounced increases in the retail and wholesale sectors.
Nonfinancial Services
Growth in nonfinancial services activity picked up notably
K-1
Federal Reserve Bank of Dallas
in September after the recovery faltered in July and
August in the wake of sharply rising COVID-19 cases.
The recent pickup was led by professional and business
services, which saw a marked acceleration in revenue
growth over the reporting period. Leisure and hospitality
also saw some recovery in revenues, but contacts noted
that with uncertainty surrounding the spread of COVID19 there has been little change in visitor activity. While
above-average growth was seen in nonfinancial services
overall over the past six weeks, the sector has not yet
recovered from the COVID-19 downturn. As of September, still more than 60 percent of contacts said revenues
were below normal. Airlines noted that demand improved
over the reporting period but was still down sharply year
over year, and that corporate travel continued to be
nearly nonexistent.
percent expect an increase in nonperforming loans six
months from now. Contacts believe commercial real
estate loans carry the greatest downside risk in terms of
credit performance.
Looking ahead, outlooks continued to improve, and half
of contacts expect increased revenue six months from
now, exceeding the less than twenty percent that expect
a decrease.
The Eleventh District rig count remained near historical
lows but increased over the reporting period for the first
time since the beginning of the year. Most contacts are
confident that oilfield activity has stabilized and begun a
long slow slog toward recovery. Well completions rose
as producers began bringing uncompleted wells into
production. Contacts mentioned that the recovery of oil
consumption is their primary near-term concern, although uncertainty in both domestic and global affairs,
particularly surrounding the U.S. election, are also worries. Most executives don’t expect the U.S. oil rig count
to increase substantially until the price of oil is at least
$51 per barrel.
In preparation for an increase in past due loans, the
majority of contacts were monitoring loan performance
more closely and setting aside additional reserves for
loan losses. Also, about 70 percent of bankers expect
lower profitability over the next six months. Cost cutting
measures focus on lowering interest rates on deposits
and reducing employment and/or worker compensation.
Despite challenges, perceptions of general business
activity improved notably, and loan demand outlooks
turned positive.
Energy
Construction and Real Estate
Activity in the housing market remained solid. Home
sales continued to outperform expectations, though the
pace was not as robust as in the previous reporting
period. Builders said they are raising prices to cover
higher construction costs and slow down sales as backlogs remained high. Some contacts noted pouring slabs
and holding off on framing houses due to crew shortages
and high lumber prices. There were also widespread
reports of supply chain issues, particularly for appliances
and windows. New home development was active, and
inventories continued to be exceptionally tight. Outlooks
were generally optimistic, with some concern about the
impact of the upcoming elections and a weak labor market on future sales activity.
Agriculture
Soil moisture conditions deteriorated further across the
western part of the district, where drought conditions
continued to intensify. Row crop harvesting progressed
and yields were quite strong, notably higher than last
year for several crops. Grain prices generally improved
over the past six weeks and will have reached profitable
levels if production is at least average. Drought hampered pasture conditions in parts of the district, which
coupled with increased feed costs strained livestock
producers. Contacts expressed concern over the La
Niña weather pattern that has developed and is likely to
persist through the winter, which will bring drier weather
and could hinder crop and pasture conditions. ■
Apartment demand rebounded in the third quarter, but
rents were flat to down compared with year-ago levels
and concessions were high, particularly in areas where
there’s a lot of new apartment units. Office leasing activity weakened further, and available sublease space increased notably in the third quarter. Retail market conditions stayed fragile, while industrial demand continued to
be strong.
Financial Services
Overall loan volume held fairly steady over the reporting
period, with gains in real estate lending offset by declines in consumer and commercial and industrial volumes. In a Dallas Fed survey of 78 financial institutions,
just over a quarter reported an increase in nonperforming loans over the past six weeks while more than 60
For more information about District economic conditions visit:
www.dallasfed.org/research/texas
K-2
Federal Reserve Bank of
San Francisco
The Beige Book ■ October 2020
Summary of Economic Activity
Economic activity in the Twelfth District expanded moderately on balance during the reporting period of mid-August
through early October. Employment levels increased modestly on net, but hiring activity varied across sectors and
somewhat across the District. Wages rose slightly, and price inflation increased marginally. Sales of retail goods rose
noticeably, while conditions in the consumer and business services sectors improved somewhat. Manufacturing expanded moderately. Conditions in the agriculture sector improved modestly. Residential real estate activity increased further,
while the commercial market remained broadly unchanged. Lending picked up at a fair pace.
Employment and Wages
are not currently under consideration but noted that
plans for next year may change, partially due to renegotiations with unions.
Employment levels increased modestly on net. Hiring
picked up overall in the Mountain West as most businesses have reopened. Employment levels in California
and the Pacific Northwest increased more slowly than in
other parts of the District. Hiring in these regions for
lower-paid service positions especially lagged, partially
due to relatively more stringent social-distancing guidelines and partly due to smaller labor supply as people
fled from wildfires. Employment levels in the information
technology sector were generally stable over the reporting period, although one contact reported layoffs connected to strategic discontinuation of some product lines.
Hiring in lumberyards and construction firms was somewhat constrained by a shortage of skilled workers. Employers in the financial and energy sectors mostly engaged in replacement hiring only. Employment levels in
restaurants, hotels, retailers, and the entertainment and
tourism sectors remained low. Hiring firms reported
receiving plentiful applications for open positions and
ease in filling them. Instances of absenteeism decreased, but workers showed continued concern about
COVID-19 exposure and grappled with childcare needs.
Prices
Price inflation increased marginally on balance. Increased demand and low inventories for durable goods,
building materials, and processed foods resulted in
markedly higher prices for consumers. Constrained
supply chains also put upward pressure on costs faced
by restaurants and some retailers, though some firms
were able to absorb these costs. In contrast, prices
decreased for many agricultural goods, including animal
proteins. Many bankers reported charging lower interest
rates on loans. Similarly, scheduled price increases for
undergraduate tuition and some technology services
were deferred this year. A few contacts also noted that
prices for air travel and hotel rooms remained subdued.
Retail Trade and Services
Retail sales rose noticeably over the reporting period.
The retail sector benefited from further easing of socialdistancing restrictions and better adherence to health
and safety guidelines. Contacts reported that consumers
felt more comfortable shopping, and foot traffic increased. Sales in brick-and-mortar stores picked up
strongly but remained below pre-pandemic levels, while
online sales continued to be robust. Demand for durable
goods such as home appliances, home improvement
goods, and vehicles increased noticeably, and retailers
noted low inventories. Grocers in Southern California
and the Pacific Northwest highlighted limited supplies of
many products and more customers stocking up and
switching brands. A specialty retailer in Arizona noted
strong sales for pet products but weak department store
sales for women’s fashion products.
Wages increased slightly overall, although some employers reported keeping wages fairly unchanged over the
reporting period. Labor shortages in the construction
sector fueled increases in wages. Some employers in
the financial sector observed higher wages over recent
weeks despite still high unemployment in their communities and regions. Following other businesses in the
Mountain West, a provider of animal health-care products planned to distribute merit increases. Wages in
retail and agriculture in some areas in California increased due to regulatory developments concerning
overtime pay. Some firms reported that wage increases
L-1
Federal Reserve Bank of San Francisco
Conditions in the consumer and business services sectors improved somewhat over the reporting period. High
demand remained for logistics and transportation services, including home deliveries and shipment of healthcare products. Activity remained strong in the information
technology and health-care sectors as well as the mental
health services subsector. Food service, travel, and hospitality providers reported incremental sales increases
over recent weeks, though the pickup in activity has been
comparatively faster in the Mountain West relative to
other areas in the District. Generally, firms in these sectors continued to operate at a fraction of their prepandemic levels, and contacts expressed concern regarding prospects for the winter. Conditions in the entertainment and the health and beauty sectors continued to
be precarious. One contact in the education sector reported decreased enrollment rates at both two- and four-year
undergraduate institutions, which is unusual during economic downturns.
potential risks of new COVID-19 cases among their
workforce as well as wildfires, which could harm supply
chains and production.
Manufacturing
Activity in the commercial real estate market remained
broadly unchanged. Demand for commercial and office
space was either stagnant or decreased in most of the
District. However, new hotels and offices continued to be
built in the Mountain West. In other areas, demand for
new industrial and warehouse space expanded. A contact in Alaska noted that prices for commercial real estate remained unchanged despite subdued local activity
and more emigration from the area.
Real Estate and Construction
Residential construction activity increased further, supported by a low interest rate environment. Contacts
reported increased demand for new and existing homes
throughout the District, which kept inventories low and
construction permitting high. Home prices continued to
climb at double-digit rates, partially fed by increased
demand for suburban homes in the current telework
environment. Rents in metropolitan areas dipped. Contacts expressed some concern over the undersupply of
affordable housing, especially after some regions suffered from wildfire-led destruction. Homebuilders in the
Mountain West and Pacific Northwest reported backlogged projects, increased costs of building materials,
and finalized sales well in advance of project completion.
Manufacturing expanded moderately. Demand for manufactured wood products and building materials soared on
the back of a very active residential real estate market.
Construction activity also underpinned strong sales of
fabricated and recycled metals over the reporting period,
although one contact attributed the rise in demand mainly
to niche markets. Manufacturers of home appliances and
recreational equipment reported limited increases in
production, given pandemic-related capacity reductions.
In the Mountain West, meat-processing plants saw increased demand for beef products but a reduction in pork
sales. These plants continued to experience COVID-19related staff shortages but remained open per local officials’ orders aimed at ensuring adequate food supply.
Financial Institutions
Overall lending activity picked up at a fair pace. Contacts
noted that the bulk of demand was for home mortgages
and refinancing as households took advantage of low
interest rates, as well as for auto loans. In contrast,
utilization of commercial lines of credit was down, as was
demand for unsecured personal loans. Financiers noted
strong asset quality, liquidity conditions, and capital
positions. Deposits continued to grow at double-digit
rates. Some contacts suspected that deposit levels
remained high partially due to PPP funds being kept in
firms’ checking accounts. Contacts highlighted some
uncertainty regarding loan demand in coming months
given expected decreases in activity over the winter.
Some bankers in California reported that a few retail
bank branches closed due in part to wildfires. One contact expressed concern over mortgage forbearances and
eviction moratoriums and their implications for loan
servicing and the health of the real estate market once
the deferral periods are over. ■
Agriculture and Resource-Related Industries
Conditions in the agriculture sector improved modestly.
Most of the grain crops in the Mountain West and the
eastern Pacific Northwest have been harvested, with high
yield and quality. Yields of grapes, nuts, peaches, and
tomatoes in California’s Central Valley also were good.
Potato output was not as high as expected, though quality remained high. Domestic sales of peaches, wine
grapes, vegetables, oils, seafood, and beef rose on the
tailwind of ameliorated supply chain disruptions and
reduced costs. Higher output and a recent depreciation in
the U.S. dollar contributed to increased international
sales of grain, fruit, raisins, and nuts, principally to Asian
markets. Growers throughout the District reported the
L-2
Cite this document
Federal Reserve (2020, November 4). Beige Book. Beige Book, Federal Reserve. https://whenthefedspeaks.com/doc/beige_book_20201105
@misc{wtfs_beige_book_20201105,
author = {Federal Reserve},
title = {Beige Book},
year = {2020},
month = {Nov},
howpublished = {Beige Book, Federal Reserve},
url = {https://whenthefedspeaks.com/doc/beige_book_20201105},
note = {Retrieved via When the Fed Speaks corpus}
}