Beige Book
For use at 2:00 PM EDT
Wednesday
January 13, 2021
The Beige Book
Summary of Commentary on Current Economic Conditions
By Federal Reserve District
January 2021
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.
This report was prepared at the Federal Reserve Bank of San Francisco based on information collected on or before January 4, 2021. 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
Boston
1
A-1
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 each District’s
sources. Reports are published eight times per year.
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What is the purpose of the Beige Book?
First District
New York
Second District
Philadelphia
C-1
Third District
Cleveland
D-1
Fourth District
Richmond
E-1
Fifth District
Atlanta
F-1
Sixth District
Chicago
G-1
Seventh District
St. Louis
H-1
Eighth District
Minneapolis
I-1
Ninth District
Kansas City
J-1
Tenth District
Dallas
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Eleventh District
San Francisco
Twelfth District
What is the Beige Book?
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The Beige Book is intended to characterize the change in economic
conditions since the last report. Outreach for the Beige Book is one of
many ways the Federal Reserve System engages with businesses and
other organizations about economic developments in their communities. Because this information is collected from a wide range of contacts through a variety of formal and informal methods, the Beige Book
can complement other forms of regional information gathering. The
Beige Book is not a commentary on the views of Federal Reserve
officials.
How is the information collected?
Each Federal Reserve Bank gathers information on current economic
conditions in its District through reports from Bank and Branch directors, plus interviews and online questionnaires completed by businesses, community organizations, economists, market experts, and other
sources. Contacts are not selected at random; rather, Banks strive to
curate a diverse set of sources that can provide accurate and objective
information about a broad range of economic activities. The Beige
Book serves as a regular summary of this information for the public.
How is the information used?
The information from contacts supplements the data and analysis used
by Federal Reserve economists and staff to assess economic conditions in the Federal Reserve Districts. 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. 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 does not have the type of information I’m looking
for. What other information is available?
The Federal Reserve System conducts a wide array of recurring surveys of businesses, households, and community organizations. A list of
statistical releases compiled by the Federal Reserve Board is available
here, links to each of the Federal Reserve Banks are available here,
and a summary of the System’s community outreach is available here.
In addition, Fed Listens events have been held around the country to
hear about how monetary policy affects peoples’ daily lives and livelihoods. The System also relies on a variety of advisory councils—
whose members are drawn from a wide array of businesses, non-profit
organizations, and community groups—to hear diverse perspectives on
the economy in carrying out its responsibilities.
National Summary
The Beige Book ■ January 2021
Overall Economic Activity
Most Federal Reserve Districts reported that economic activity increased modestly since the previous Beige Book period,
although conditions remained varied: two Districts reported little or no change in activity, while two others noted a decline.
Reports on consumer spending were mixed. Some Districts noted declines in retail sales and demand for leisure and
hospitality services, largely owing to the recent surge in COVID-19 cases and stricter containment measures. Most Districts reported an intensification of the ongoing shift from in-person shopping to online sales during the holiday season.
Auto sales weakened somewhat since the previous report, while activity in the energy sector was said to have expanded
for the first time since the onset of the pandemic. Manufacturing activity continued to recover in almost all Districts, despite increasing reports of supply chain challenges. Residential real estate activity remained strong, but accounts of weak
conditions in commercial real estate markets persisted. Banking contacts saw little or no change in loan volumes, with
some anticipating stronger demand from borrowers in coming months for new government-backed lending programs.
Although the prospect of COVID-19 vaccines has bolstered business optimism for 2021 growth, this has been tempered
by concern over the recent virus resurgence and the implications for near-term business conditions.
Employment and Wages
A majority of Districts reported that employment rose, although the pace was slow, and the recovery remained incomplete. However, a growing number of Districts reported a drop in employment levels relative to the previous reporting
period. Labor demand was strongest in the manufacturing, construction, and transportation sectors, with some employers
noting staffing shortages and difficulty attracting qualified workers, especially for entry-level and on-site positions. These
hiring difficulties were exacerbated by the recent resurgence in COVID-19 cases and the resulting workplace disruptions
in some Districts. Contacts in the leisure and hospitality sectors reported renewed employment cuts due to stricter containment measures. Firms in most Districts reported that wages increased modestly, as labor market conditions improved
somewhat in some areas but generally remained weak. Employers in some Districts reported raising wages or offering
more generous benefits, such as year-end bonuses and flexible work arrangements, to limit employee turnover.
Prices
Almost all Districts saw modest price increases since the last report, with growth in input prices continuing to outpace that
of finished goods and services. Most notably, prices for construction and building materials, steel products, and shipping
services were reported to have risen further. Contacts in several Districts noted an improved ability to raise final selling
prices to consumers, especially in the retail, wholesale trade, and manufacturing sectors, and some cited plans to increase selling prices in coming months. Energy prices picked up in the reporting period but remained below prepandemic levels. Home prices continued to climb, driven by low inventories and rising construction costs.
Highlights by Federal Reserve District
Boston
New York
Recovery from the pandemic continued in the final
weeks of 2020, with mixed results across sectors. In
particular, hospitality and travel remained hard-hit.
Among firms that were hiring, some cited difficulty finding
workers; other firms held headcounts steady or allowed
attrition. A substantial dose of pandemic-related uncertainty clouded an otherwise-optimistic outlook.
The regional economy weakened moderately in late
2020, and the labor market has deteriorated somewhat.
This weakness was concentrated in the service sector,
where activity has been further constrained by a rise in
COVID-19 cases, increased restrictions, and cold weather. Consumer spending declined, with holiday sales
down from last year and auto sales weakening. Businesses reported some acceleration in wages and selling
prices.
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National Summary
Philadelphia
St. Louis
Business activity fell modestly during the current Beige
Book period as sharply rising COVID-19 cases created
disruptions at worksites and curtailed consumer spending during the holidays. On the whole, activity remained
below levels attained prior to the onset of COVID-19.
Meanwhile, slight wage growth and modest inflation
continued, but employment appeared to edge down.
Economic conditions have been generally unchanged
since our previous report. Reports on overall consumer
spending were mixed, while reports on holiday sales
focused on an accelerated shift to online shopping.
District banking contacts reported slowing growth in loan
volumes but anticipate stronger demand in coming
months from new PPP loans.
Cleveland
Minneapolis
The District economy lost some momentum in recent
weeks. Contacts said that rising cases of COVID-19
curbed demand for goods and services and disrupted
supply through its impact on labor availability. Despite
the slower growth in demand, firms generally indicated
that they would hire workers if more were available.
Wages and input costs rose moderately, as did selling
prices.
District economic activity increased modestly. Hiring
demand increased, but contacts said health risks and
other obstacles kept some workers out of the labor force.
Holiday spending was better than many feared, but
below last year, especially for small retailers. Commercial construction slowed, and the outlook remained
weak. Agricultural conditions improved due to increased
commodity prices and government aid.
Richmond
Kansas City
The regional economy grew modestly in recent weeks.
Employment and wages showed modest increases,
while prices grew at a moderate pace. The housing
market remained strong, while commercial real estate
leasing remained soft. Port and trucking volumes were
high, and manufacturing activity showed a moderate
increase.
Economic activity held steady in December, but conditions varied significantly across industries. Retail sales
rose sharply, but overall consumer spending fell due to
lower auto, restaurant, tourism and healthcare sales.
Contacts in manufacturing, professional and high-tech
services, and energy all reported increased activity
levels, while activity slowed in the transportation, wholesale trade, and real estate sectors.
Atlanta
Dallas
Economic activity expanded modestly. Labor markets
were mixed. Some nonlabor costs continued to rise. On
balance, retail sales were down. Tourism activity slowed.
Residential real estate demand remained strong and
home prices continued to rise. Challenges persisted in
commercial real estate markets. Manufacturing activity
rose. Conditions at financial institutions were stable.
The District economy expanded at a moderate pace, but
activity in most industries remained below normal levels.
Recovery in the manufacturing and service sector picked
up, while retail activity remained weak. The housing
market continued to be a bright spot, and real estate
lending spurred growth in overall loan volumes. Energy
activity accelerated slightly. Employment rose moderately. Outlooks were generally positive, but uncertainty
remained elevated.
Chicago
Economic activity increased modestly but remained
below its pre-pandemic level. Manufacturing increased
moderately; business spending and construction and
real estate increased modestly; and employment and
consumer spending increased slightly. Wages rose
modestly and prices were up slightly. Financial conditions were little changed. Agricultural income for 2020
was better than expected.
San Francisco
Economic activity in the District continued to expand at a
modest pace. Holiday retail sales picked up, but activity
in the services sector was mixed. Conditions in the agricultural and manufacturing sectors strengthened somewhat. Contacts reported strong activity in the housing
market and overall healthy conditions in lending markets.
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Federal Reserve Bank of
Boston
The Beige Book ■ January 2021
Summary of Economic Activity
Economic activity continued to expand in the First District through December, according to business contacts. Retailers
reported revenue increases in recent weeks compared with a year earlier, while travel and hospitality remained well
below pre-pandemic levels. Manufacturers also cited increased revenues in recent weeks, but some were up only in
comparison to earlier in the pandemic, while others saw gains from a year ago. Software and information technology
services firms reported gradual improvement, but new bookings remained below year-earlier levels. Reports from commercial real estate contacts were mixed, as in the last report, and residential real estate markets remained strong. Most
responding firms were optimistic in their outlooks, but still quite uncertain about the first half of 2021.
holiday season. A furniture retailer noted sustained yearover-year growth averaging about 15 percent in 2020,
notwithstanding persistent delays of 8 to 12 weeks for
most furniture orders. One clothing retailer reported store
foot traffic remains down 30 percent compared to a year
earlier, but a higher conversion rate and strong online
sales led to a year-over-year increase of about 5 percent
in total November sales. With modest increases in sales
throughout 2020, this retailer had greater profits because
of reduced store operating costs and smaller promotions
than in recent years. An online retailer continued reporting substantial growth relative to last year, with year-over
-year increases in revenue, profits, and sales to repeat
customers throughout 2020.
Employment and Wages
Labor market reports from business contacts were
mixed. Some retailers were holding headcounts steady;
one was hiring “aggressively.” Manufacturers’ reports on
hiring varied. Several contacts reported difficulty finding
workers, including a furniture maker suffering significant
production delays due to a worker shortage. Another
contact, however, said that it was much easier to find
factory workers now than just before the pandemic. Most
software and IT services contacts reported restarting
hiring plans, and one noted upward pressure on wages
for technical positions.
Prices
Observations on pricing were limited. One retail contact
noted no price changes; others said little about prices.
Manufacturing contacts for the most part reported no
unusual pricing pressure. A producer of cardboard boxes
said that paper prices had increased after remaining flat
for five years. Several contacts noted significant logistics
issues both domestically and internationally, causing
both higher prices and delays. Software and IT services
contacts reported no changes in prices across the board,
although one mentioned potentially restarting their annual increases in the next few months.
Airline passengers into Boston remained down 70 percent in November, an improvement from year-over-year
declines of over 95 percent this spring. International
passengers were down nearly 80 percent in November.
International travel to Europe was down sharply, but
passengers heading to South America ticked up recently. Scheduled flights in early 2021 are up modestly.
Manufacturing and Related Services
All seven firms contacted this cycle reported a good
fourth quarter. For some contacts, including a furniture
manufacturer and a frozen fish producer, results were
significantly stronger than a year earlier. For others, like
a producer of motors and brakes for industrial uses,
sales were up significantly versus earlier in the year but
Retail and Tourism
Travel industry contacts continued to report major disruptions related to COVID-19, but responding retailers
reported strong sales throughout the fall and into the
A-1
Federal Reserve Bank of Boston
still down from a year ago. Five of the seven contacts
reported that sales would have been substantially higher
were it not for capacity problems. A semiconductor manufacturer said that automotive customers drew down
inventories to conserve cash in Q2 and demand has now
increased dramatically both because they are producing
more cars and because they are restocking inventories.
and around the Boston area, despite high costs of construction.
In the office market, renewals of expiring leases were
almost the only activity, and tenants were willing to pay
slightly higher rents in exchange for shorter lease terms.
With new activity thin, rents have not yet begun to reflect
the downward pressure from increased sublease space.
The retail and hospitality markets were still very soft,
especially as some areas experienced new restraints in
response to COVID-19 spikes. Many contacts predicted
that some retail space will be converted to industrial over
the next several years.
Contacts were generally optimistic. Although all respondents expressed uncertainty about the vaccine and the
evolution of the pandemic, most expected the economy
to be back on trend in the second half of 2021. The
furniture maker expressed concern about labor shortages and his inability to fulfill orders quickly, which might
lead to a reduction in demand for his products. A supplier of components to capital goods manufacturers said
that orders started rising in Q4 2020 in anticipation of
higher build rates in the second half of 2021.
Most contacts expected the first two quarters of 2021 to
be similar to Q4 2020. Until the virus is more controlled
and vaccines more widely administered, most commercial respondents said they would try to delay making
decisions. While the first half of 2021 looks “bumpy,”
contacts expected improvements in the second half.
Software and Information Technology Services
Software and IT services firms in the First District saw a
gradual pick-up in demand as the calendar year drew to
a close. On a year-over-year basis, demand remained
muted as new bookings had not fully rebounded to last
year’s levels; however, the recent uptick was seen as an
early sign of recovery. A contact at a healthcare software
firm that was not seeing a pickup attributed the weakness to hospitals’ “preoccupation” with the latest wave of
COVID-19 cases; this firm has been relying on their
backlog for the past 10 months but noted that it would
run out at the end of 2020. Margins for all firms continued improving as expenses for travel and facilities remained lower.
Residential Real Estate
In the First District, the home buying “frenzy” continued
in November, with contacts attributing strong buyer
confidence to historically low mortgage rates and historically high stock market performance. (Five states and
Greater Boston reported changes from November 2019
to November 2020; Connecticut data were unavailable.)
The number of closed sales once again increased from a
year ago in all reporting areas, with double-digit increases for all markets except Boston condos. However,
severe inventory shortages persisted, with the inventory
of homes for sale remaining substantially below a year
earlier in all reporting markets except Boston condos,
where inventories rose. Low inventory and high demand
put upward pressure on prices. For single family homes,
the median sale price increased by double-digit percentages in all markets. For condos, the median sale price
increased in all markets except Rhode Island, but changes in prices for condos were smaller than for single
family homes. Contacts noted that demand for condos
has been curbed by buyers’ pandemic-related desire for
more space at home and less urban settings. Additionally, contacts in both Maine and Rhode Island noted a
substantial influx of out-of-state buyers.■
Looking ahead, contacts expressed optimism that things
would “return to normal” in the second half of 2021, but
they remained concerned about the timing of the recovery. Most contacts reported feeling confident that their
product offerings were well suited for growth as the
economy recovers.
Commercial Real Estate
Commercial leasing conditions in the First District remained mixed, as in the last report. The industrial and
lab-space markets were still doing well, while the retail
and office-space markets continued to be weak. In the
industrial leasing sector, demand outpaced supply in
some metropolitan markets, with one contact citing a
local vacancy rate below 2 percent. Several contacts
reported multiple interested buyers on any for-sale industrial building, with one noting that this has pushed
cap rates “shockingly low” (under 4 percent) in some
cases. The life sciences sector was also strong; investors continued planning for and building new lab space in
For more information about District economic conditions visit:
www.bostonfed.org/regional-economy
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Federal Reserve Bank of
New York
The Beige Book ■ January 2021
Summary of Economic Activity
Economic activity in the Second District weakened moderately in the latest reporting period. The labor market has softened somewhat, with employment slipping in almost all service industries, where activity has been further constrained
by a rise in COVID-19 cases, increased restrictions, and cold weather. However, businesses reported a modest increase in hiring plans and rising wage pressures. Input prices continued to rise at a moderate pace, and selling prices
picked up modestly. Consumer spending declined, with holiday sales down from last year and auto sales weakening.
Tourism picked up slightly in the latter half of December but was still at depressed levels. Housing markets have been
mixed, while markets for office and retail space weakened further. Finally, banks reported some pickup in loan demand
and little change in delinquency rates. Despite the recent weakening in business conditions, contacts grew somewhat
more optimistic about the near-term outlook.
moderately, with contacts in the manufacturing, distribution, and construction sectors reporting substantial upward pressure on prices paid. Businesses in most sectors expect further increases in the prices they pay in the
months ahead.
Employment and Wages
The labor market softened somewhat in the final weeks
of 2020. A major New York City employment agency
noted that hiring activity has been depressed, though
this is typically a slow season; no significant pickup is
expected until the spring at the earliest.
Selling prices have accelerated modestly, led by fairly
widespread hikes among retailers, wholesale distributors, and manufacturers. Looking ahead, a rising proportion of businesses indicated plans to raise their selling
prices in the next few months—most notably in the
wholesale and manufacturing sectors.
Businesses in almost all sectors, most notably construction and leisure & hospitality, reported weakening employment. The only exceptions were manufacturing and
finance, where employment was reported to be little
changed. Looking ahead, however, businesses expected
that they would add staff, on net—especially in the manufacturing, wholesale trade, and information sectors
Consumer Spending
Consumer spending weakened since the last report.
Retail holiday spending has been mixed. Sales at major
retailers in New York City have been dismal, reflecting a
lack of both tourists and office workers. However, retailers in upstate New York and other parts of the District
noted that sales improved somewhat in December and
were on or a bit above plan, though still down sharply
from a year earlier.
Wages have accelerated moderately, with more businesses indicating rising wages than at any point since
the start of the pandemic. The most widespread increases were reported in the retail trade sector. A number of
contacts in New York State remarked that the year-end
hike in the minimum wage has been burdensome. Looking ahead, businesses expect wages to accelerate
somewhat—particularly in retail & wholesale trade and,
to a lesser extent, in construction, information and professional & business services.
New vehicle sales weakened further in late 2020, falling
well below comparable 2019 levels, according to dealers
in upstate New York. This weakness was attributed to
both weaker demand and low inventories—particularly
for trucks and SUV’s. Sales of used vehicles also weak-
Prices
Businesses’ input prices overall have continued to rise
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Federal Reserve Bank of New York
ened, reflecting softer demand. Consumer confidence
among residents of the Middle Atlantic region (NY, NJ
PA) fell to a multi-year low in December, reflecting a
weakening assessment of current conditions.
leveled off, following an exceptionally strong third quarter. The number of new listings is up from a year ago,
while the inventory of homes on the market remains high
in New York City but low elsewhere.
Manufacturing and Distribution
The residential rental market has continued to weaken,
led by New York City. Partly reflecting increased landlord
concessions, effective rents in Manhattan and Queens
are reported to be down more than 20 percent from a
year earlier and down 8 percent in Brooklyn. Rental
vacancy rates across New York City are reported to be
at multi-decade highs.
Manufacturing activity continued to expand at a subdued
pace in December, while wholesale trade contacts reported weakening activity. Transportation firms noted a
modest pickup in activity. A few contacts indicated delays in getting shipments from overseas.
Looking ahead, manufacturers and wholesalers expressed widespread optimism about the outlook, while
transportation & warehousing contacts, who had been
fairly gloomy in recent months, have become mildly
optimistic in the latest reporting period.
Commercial real estate markets have weakened further,
to varying degrees, across the District. Retail and office
markets have been particularly weak in New York City,
with asking rents trending down and well below yearearlier levels. Elsewhere, office markets have been
modestly weaker, while retail markets have mostly been
flat. The market for industrial space, however, has remained fairly firm.
Services
Service industry contacts reported marked weakening in
business activity in the latest reporting period. Contacts
in the professional & business services, information, and
leisure & hospitality sectors reported widespread declines in activity, while those in education & health reported more moderate declines. Looking ahead, professional & business service firms expressed increased
optimism about prospects for the first half of 2021, while
those in other industries expected little change.
New construction activity has remained sluggish in both
the residential and commercial segments. Contacts in
the construction industry continued to report weakening
activity but have grown substantially less pessimistic
about the near-term outlook. Contacts continued to
report sharp increases in the cost of materials and scattered shortages and delays.
Tourism in New York City has remained exceptionally
weak, though there was a modest pickup in the latter
part of December. Restrictions on indoor dining combined with the onset of cold weather have hit restaurants
hard. A number of hotels have closed, some permanently, and the occupancy rate among those still open has
hovered around 35 percent—higher on weekends, lower
during the week. With business travel moribund, most
hotel stays are from weekenders and subsidized housing
for the homeless, with a bit of an uptick in late December
from holiday visitors. An authority on New York City’s
tourism sector noted that advance bookings have grown
much shorter, due to uncertainty about the pandemic,
and expects visitations to rebound gradually over the
next two years, with business and international visits
lagging the most.
Banking and Finance
Finance-sector contacts generally reported widespread
declines in business activity since the last report. Small
to medium sized banks in the District reported higher
loan demand across all categories, along with a modest
increase in refinancing activity in the final weeks of 2020.
Bankers reported tightened credit standards for consumer loans and commercial mortgages and narrowing
spreads across all loan categories. Delinquency rates
declined for consumer and C&I loans but rose for commercial mortgages. Finally, contacts reported some
increased leniency for delinquent commercial mortgages. ■
Real Estate and Construction
Housing markets have remained mixed in the latest
reporting period. Sales markets in upstate New York
remained strong in the final weeks of 2020, with homes
selling quickly and prices continuing to rise. New York
City’s co-op and condo market has picked up in recent
weeks, with both sales and prices rising modestly,
though still below late-2019 levels. Housing markets in
areas around New York City, on the other hand, have
For more information about District economic conditions visit:
www.newyorkfed.org/regional-economy
B-2
Federal Reserve Bank of
Philadelphia
The Beige Book ■ January 2021
Summary of Economic Activity
On balance, business activity in the Third District fell modestly during the current Beige Book period after plateauing in
the prior period. Activity in most sectors remained below levels observed prior to the onset of the COVID-19 pandemic.
Net employment appeared to decline slightly after rising modestly in the last period. Positive wage and price growth
trends continued at slight and modest paces, respectively. The sharp rise in COVID-19 cases, renewed restrictions, and
colder weather further reduced economic activity across most of the District, especially within the retail, restaurant, and
hospitality sectors. Numerous firms across all sectors noted disruptions to operations as COVID-19 cases emerged at
worksites or employees’ homes. Positive expectations for modest growth over the next six months have narrowed
among manufacturers but broadened among other firms.
Employment and Wages
Prices
Employment appeared to decrease slightly overall. The
share of nonmanufacturing firms reporting employment
decreases exceeded the share reporting increases for
both full- and part-time employees. Among the reporting
manufacturers, employment increases still exceeded
decreases, but by less than in the prior period. Moreover, average hours worked rose for a smaller share of
manufacturing firms and fell, on net, among nonmanufacturers.
On balance, prices continued to rise modestly, although
reported increases were generally less widespread than
in the prior period. Nearly 30 percent of the manufacturers reported higher prices for factor inputs, but only 20
percent received higher prices for their own products.
Similarly, about 20 percent of the nonmanufacturers
reported that prices rose for their inputs, and 20 percent
noted higher prices received from consumers for their
own goods and services. Over half of all firms noted no
change in prices.
Staffing firm contacts described continuing demand for
employees and an ongoing lack of willing and qualified
job candidates. During the current period, this mismatch
was compounded by increased workplace disruptions,
as COVID-19 cases caused temporary plant or store
shutdowns and forced employees to quarantine at home.
Employers and staffing agencies alike noted difficulties
finding workers to fill shifts. Given childcare needs, agencies are increasingly compelled to fill some positions with
such hours as a candidate can supply.
Supply disruptions, shortages, and price spikes became
more prevalent again, as COVID-19 cases rose. However, few contacts noted significant lasting price hikes.
Manufacturing
On average, manufacturing activity was essentially unchanged as trends continued to soften from November
into December. The diffusion indexes for shipments and
for new orders remained positive, but just barely so for
new orders. Firms also reported that sales and new
orders were about 7 percent below what had been anticipated pre-pandemic – only slightly better than in the prior
month.
Wages continued to grow slightly. The percentage of
nonmanufacturing firms reporting higher wage and benefit costs per employee remained somewhat higher than
the percentage reporting lower costs. However, threefourths of the firms reported no change.
Contacts offered a diversity of comments, including
several firms noting gradual improvement. One firm
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Federal Reserve Bank of Philadelphia
noted overwhelming orders and huge backlogs for packaging materials, while another observed a return to
caution from buyers of electrical equipment. A primary
metals firm observed weak demand from customers
serving the energy and hospitality sectors, while strong
demand emanated from the utility and transportation
sectors. Other contacts noted strong demand for pharmaceuticals and medical devices.
round. Although some problem loans have begun to
emerge, bankers continued to note that overall loan
delinquencies remain low.
Real Estate and Construction
Beginning in November, homebuilders reported some
slowdown to a modest pace of growth. However, the
level of demand remained strong – in part reflecting firsttime buyers moving out of apartments and well-heeled
buyers seeking more space or second homes. Existing
home sales also grew modestly – a slower pace than in
the prior period. Strong demand for limited inventories
continued to drive prices higher and reduce affordability.
Appraisal challenges were rising but were often avoided
by cash purchases.
Consumer Spending
Nonauto retail sales appeared to fall modestly as rising
COVID-19 cases, cold weather, and new restrictions
further hampered consumer spending. Restaurants and
the hospitality sector were most heavily impacted, especially compared with a typically busy holiday season.
Stores selling food or other necessities observed some
operating difficulties but little deterioration in demand.
Philadelphia’s commercial construction activity appeared
to remain busy but at lower levels than had been anticipated before the pandemic. Although the pipeline of new
construction has thinned, construction should remain
active through the first half of 2021. Commercial leasing
activity continued to fall moderately, as contacts noted
sublease office space being dumped onto the market
and growing retail vacancies. Demand remained strong
for warehousing construction and leasing. ■
Auto dealers reported slight growth in year-over-year
sales but noted that consumer activity had slowed since
late October as COVID-19 cases spiked. Black Friday
sales were lackluster, and December sales were hampered by snow.
Although ski resorts have opened, the destinations are
operating at lower capacity and with restrictions on restaurants and other attractions. Overall, tourism activity
has slipped below half of prior-year levels – trending
modestly lower as the weather grows colder and COVID19 spreads.
Nonfinancial Services
On balance, nonmanufacturing activity has fallen modestly since the prior period. Firms reported that sales or
new orders had edged down to 19 percent below prepandemic expectations. Another measure of firms’ new
orders and sales (which had been slightly negative)
deepened – significantly for sales or revenues – indicating that declines were more widespread among firms.
Financial Services
The volume of bank lending fell slightly during the period
(not seasonally adjusted); in the same period in 2019, by
contrast, loan volumes grew modestly. Residential mortgages and commercial real estate lending grew modestly, while home equity lines fell moderately and commercial and industrial loans continued to fall sharply. Auto
loans and other consumer loans were essentially flat on
net. And while seasonal trends drove credit card volumes up moderately, they rose at a significantly greater
pace over the same period in 2019.
Banking contacts were preparing for another round of
Paycheck Protection Program loans, even as some
uncertainty remained about the dispensation of the first
For more information about District economic conditions visit:
www.philadelphiafed.org/research-and-data/regionaleconomy
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Federal Reserve Bank of
Cleveland
The Beige Book ■ January 2021
Summary of Economic Activity
The Fourth District economy expanded only slightly in recent weeks as it lost some momentum amid rising COVID-19
cases. Contacts reported that the growing pandemic was adversely affecting both the demand for and supply of goods and
services. Household demand softened as retailers, restaurants, and hotels reported weaker sales in late November and
December, in large part because of rising COVID-19 cases. By contrast, demand was solid for manufacturers, freight
haulers, and professional and business services firms, although some contacts in these industries suggested that labor
constraints, exacerbated by rising COVID-19 cases, made it difficult for production to keep up with demand. A larger share
of our contacts indicated that they wanted to increase staffing levels during the cycle, but hiring remained difficult. Contacts were encouraged that COVID-19 vaccines were becoming more widely available, but the most recent surge in cases
left them less optimistic about the near-term outlook for demand than they were during the prior reporting period. Because
of continuing uncertainty, firms generally limited capital spending. On average, wages and other input cost pressures were
higher than earlier in the pandemic but lower than a year earlier, while output prices increased at a modest pace.
Employment and Wages
Prices
Labor demand increased modestly, on average, in spite
of the broader slowdown in economic growth. Labor
demand was strongest for those firms in sectors that
reported strong increases in demand for their goods and
services: professional and business services, freight and
transportation, and manufacturing. Some contacts in
these sectors noted that they had a little more success in
filling open positions, but they also reported that competition for workers was intense and that they still needed
more workers to keep up with demand. New orders
continued to flow into staffing services firms, but their
ability to fill those orders was limited by worker availability. Retailers indicated that they had increased temporary
staffing during the holiday shopping season, but payrolls
remained well below year-ago levels. In addition, retailers said that filling positions in fulfillment centers was
made difficult by a general shortage of applicants and by
competition from larger distribution and logistics firms
that continue to add more permanent positions as more
commerce takes place online. Restaurants and hotels
said that fewer workers were needed as customer demand waned amid rising COVID-19 cases, yet they, too,
faced challenges filling positions that were available.
Nonlabor input costs also rose for many firms. Contacts
from a variety of industries reported that shipping costs
were up significantly because of capacity constraints.
Construction firms said that costs for many materials
were increasing, particularly those for steel, lumber, and
some cement products. Manufacturers also noted rapidly
rising steel prices, with one contact attributing the increase to supply chain disruptions and increasing global
demand for steel products.
On balance, selling prices continued to rise modestly.
Freight haulers said that exceptionally strong demand
and limited capacity has allowed them to dictate terms to
their customers, pushing shipping rates materially higher. Manufacturers also reported some success in pushing through price increases to cover rising input costs. In
spite of softening demand, retailers and auto dealers
said that prices firmed up in recent weeks because low
inventories led to less discounting.
Consumer Spending
Reports suggest that consumer spending softened toward the end of the reporting period. Retailers noted that
in spite of strong activity in October and November, the
recent rise in COVID-19 cases and associated uncertainty weakened sales. Hoteliers and restauranteurs said
that government-mandated restrictions on operating
hours further reduced business activity. Auto dealers
Wage pressures were elevated relative to earlier in the
pandemic. Some firms said that they were raising wages
to fill open positions and to minimize turnover. Some
contacts paid additional yearend bonuses to thank employees for working through a difficult year.
D-1
Federal Reserve Bank of Cleveland
said that seasonal factors, along with low inventories,
were limiting sales. Reports from general merchandisers
and apparel retailers were mixed; while some said sales
were up from those of the last reporting period because
of the holiday shopping season, many noted that in-store
sales were down and that online sales, while strong,
were hurt by cost pressures from shippers. Looking
ahead, contacts expected ongoing concerns about
COVID-19 to restrain overall consumer spending in the
next few months.
tenants.
Financial Services
Banking activity remained mixed by market segment
during the reporting period. Contacts noted that low
interest rates continued to support demand for household loans, especially for mortgages. However, demand
for business loans reportedly was flat. Lenders indicated
that delinquency rates for commercial and consumer
loans were still low because of forbearance agreements
and various fiscal-relief measures, although one banker
noted that delinquency rates were up among hoteliers.
Multiple contacts reported growth in core deposits as
customers held off on spending and investment. Looking
ahead, bankers expected loan demand to remain unchanged in the near term but were optimistic that conditions will improve as more COVID-19 vaccines are distributed in 2021.
Manufacturing
Overall manufacturing orders increased moderately this
cycle, although demand varied by industry segment.
Steelmakers reported that orders were strong and that
they had difficulty maintaining inventory. Some noted
particular strength in demand from auto producers, suppliers to residential builders, and transportation equipment manufacturers, along with increased demand from
China. By contrast, orders for steel used in commercial
aerospace and nonresidential construction applications
remained depressed. A sizeable share of manufacturers
said they were operating below their target capacity
utilization rate because of a lack of available workers.
Manufacturers’ reports were replete with concerns about
rising input costs, emerging supply chain disruptions in
Europe, and persistent uncertainty about the pandemic.
On balance, manufacturers expected demand to soften
somewhat in coming months, although many indicated
that this was part of a typical seasonal pattern.
Professional and Business Services
Demand for professional and business services continued to increase at a steady, modest pace since our last
report. The surge in ecommerce brought on by the pandemic led to an increase in demand for cybersecurity, IT
solutions, and transaction authentication services. Firms
in these industries were optimistic about the future because consumers continue to shift to online transactions.
Freight
Freight volumes increased notably again in recent
weeks. The rise in activity resulted from three primary
factors, according to contacts: more online holiday sales
this year (and subsequent home deliveries), strong imports, and firms’ replenishing inventories. Seventy percent of freight contacts reported demand had increased
in the last two months, and many had difficulty hiring
enough drivers to keep up with demand. Looking forward, contacts expected shipments to remain strong in
the near term as the pickup from holiday demand has
Real Estate and Construction
Demand for residential construction and real estate
leveled off in recent weeks, a circumstance which contacts attributed to a typical seasonal slowdown. Pent-up
demand for home construction and remodeling helped
mitigate the decline in activity normally experienced
during this time of year. One residential real estate agent
noted that while the pace of transactions slowed in recent weeks, activity was still much higher than it was a
year earlier. Contacts expected activity to remain seasonally slow in the near term but predicted that demand
will rebound in the spring.
historically continued into early February.■
Nonresidential construction and real estate conditions
continued to vary by end market. Robust demand for
industrial space persisted, with one general contractor
indicating that his industrial backlogs had doubled over
the past two months. By contrast, demand for retail and
office space remained weak as COVID-19 cases continued to rise and corporate uncertainty persisted. Going
forward, contacts remained concerned that the increase
in COVID-19 cases would continue to hamper consumer
demand, putting additional strain on retail and hospitality
For more information about District economic conditions visit:
clevelandfed.org/region
D-2
Federal Reserve Bank of
Richmond
The Beige Book ■ January 2021
Summary of Economic Activity
Fifth District economic activity increased modestly in recent weeks, but several industries continued to see business
below year-ago and pre-COVID levels. Manufacturers reported moderate growth in shipments and new orders amid
high demand, but they were sometimes constrained by supply chain disruptions and labor shortages. Ports saw volumes hold steady at high levels as imports of consumer goods such as furniture were especially strong. Trucking volumes were little changed, remaining at high levels, which were largely attributed to home goods and packaging volumes. Retailers experienced modest declines in in-store sales as customer traffic remained low; however, online sales
were strong. The travel and tourism industry saw modest drops in business as hotel occupancy decreased and restaurants had more limited seating due to COVID restrictions and inclement weather. Residential home sales and prices
held steady at high levels. Commercial real estate was little changed, as office tenants continued to downsize and industrial remained strong. Financial institutions reported slight loan growth due to continued strong demand for mortgage
loans. Demand for nonfinancial services decreased slightly on balance. Employment rose modestly, and many firms
reported difficulty finding workers. Overall, prices grew moderately, particularly for raw materials.
Employment and Wages
Manufacturing
Total employment in the Fifth District rose modestly in
recent weeks but remained below year-ago and prepandemic levels. Manufacturers and technology companies in particular reported increased hiring. Trucking
companies saw driver shortages. Demand for health
care workers was high. Several contacts reported that
they had difficulty finding qualified workers, and many
businesses reported that COVID-related absences were
leaving them temporarily short-staffed. On the other
hand, some restaurants had to cut serving staff. Some
firms, including professional and business services firms
were reluctant to hire because of uncertainty around the
virus. In general, wages showed modest growth.
Manufacturers in the Fifth District reported moderate
growth in recent weeks as shipments and new orders
increased. Manufacturers of furniture, food, and construction materials saw especially strong demand. Several manufacturers pointed to supply chain issues resulting in delays and high prices of inputs. Some manufacturers also reported production constraints from understaffing while employees were on quarantine. Conversely, some manufacturers saw weak demand such as a
South Carolina office supply producer and a Virginia
souvenir manufacturer who were unsure how long they
could remain open.
Prices
Fifth District ports saw little change in activity since our
last report. Shipping volumes remained near record
highs and were substantially above year-ago levels.
While there was strength in both import and export shipments, import levels remained above export levels.
Contacts reported increases in furniture, toys, and produce imports, while meat and grains were strong on the
export side. One contact noted that the rush to get empty
containers back to Asia for future shipments is limiting
container availability for exports. Ports saw increased
shipments as vessels were added to normal rotations to
transport excess volumes.
Ports and Transportation
The Fifth District saw moderate price inflation since our
last report. According to our most recent surveys, both
manufacturing and service sector firms saw an acceleration in growth of prices received. Growth of prices paid
for inputs increased moderately for service sector firms
but slowed slightly for manufacturers. Inflation of prices
paid outpaced that of prices received. Many firms reported rising costs of and longer lead times for raw materials, particularly those used in construction. Others reported continued elevated costs for personal protective
equipment, which remained a strain.
E-1
Federal Reserve Bank of Richmond
Fifth District trucking volumes held fairly steady at high
levels since our last report. Demand exceeded supply as
a shortage of drivers, partially attributed to suspensions
of training programs during the pandemic, constrained
trucking capacity. Volumes of home improvement goods
and cardboard were high, and demand increased
among industrial and manufacturing customers. Trucking rates were elevated, with one contact reporting that
customers were offering to pay more to renew their
contracts early because of the capacity shortage. Spot
market demand and rates were high, and trucking companies continued to invest in capital expenditures for
potential expansion.
Commercial real estate leasing in the Fifth District was
little changed since our last report and remained weak
compared to pre-pandemic levels. Many office tenants
downsized on space as their leases ended or sublet as
some employees worked from home, and others asked
for short-term renewals of leases. Retail vacancies remained elevated compared to a year ago. By contrast,
industrial real estate was very strong, with tight supply
and new construction, both speculative and built-to-suit.
Multifamily leasing was somewhat weak as vacancies
were high and rents were soft.
Banking and Finance
Overall, respondents reported that loan activity improved
slightly for this period, mainly driven by continued strong
demand for mortgage loans. However, financial institution contacts indicated a tepid demand for commercial
lending given the continued challenges in the economy.
Deposit growth was moderate, even with low rates on
interest-bearing accounts, due to many businesses
holding cash in reserve. Credit quality remained good,
but a few respondents noted a slight upward trend in
delinquencies as CARES Act payment deferrals expired.
Still, most financial institutions remarked that credit quality deterioration and delinquencies are not as severe as
they expected at the start of the pandemic.
Retail, Travel, and Tourism
Fifth District retailers reported modest declines in business since our last report and saw sales well below year
-ago levels. Auto sales softened somewhat, particularly
for import brands. Ecommerce was strong, but some
retailers said sales were limited by customer capacity
constraints that reduced foot traffic. Furniture, hardware,
and home goods retailers saw strong business and
depleted inventory levels as some experienced delays
or shortages from suppliers. Meanwhile, some pop-up
retailers developed, buying or leasing property where
former retailers had gone out of business.
Travel and tourism activity in the Fifth District declined
modestly in recent weeks and was below year ago and
pre-pandemic levels. Hotel occupancy declined from
already low levels. Restaurants struggled as cold weather deterred outdoor dining and restrictions limited indoor
dining, leading to some restaurant closures. Many attractions such as museums either closed temporarily or
reported low and decreasing visitation. Group travel,
business travel, conventions, and the wedding business
were very weak. However, a ski resort saw strong bookings and worked to adjust schedules to maximize business while observing social distancing.
Nonfinancial Services
Overall demand for nonfinancial services softened slightly since our last report. Many firms reported decreases in
demand and revenue. Some professional and business
services firms reported struggling as they had clients,
especially small firms, who were going out of business.
Event-related businesses were uncertain how long they
could remain open, and a marketing firm reported difficulties related to unreliable or delayed package delivery
for clients. However, demand for education and health
care remained strong. ■
Real Estate and Construction
Fifth District home sales decreased modestly in recent
weeks but remained strong and well above year-ago
levels. Realtors attributed the slight slowdown to both
seasonality and COVID-related stay at home orders.
However, inventories remained very low. Prices were
little changed recently and were up on a year-over-year
basis. Average days on the market held fairly steady at
low levels since our last report. One contact reported
that builders are limiting the number of home sales per
week in order to not run out of inventory of quickdelivery homes. Builders described delays in and shortages of materials and appliances as well as a spike in
the price of lumber.
For more information about District economic conditions visit:
www.richmondfed.org/research/data_analysis
E-2
Federal Reserve Bank of
Atlanta
The Beige Book ■ January 2021
Summary of Economic Activity
Business contacts in the Sixth District indicated that economic activity continued to expand at a modest pace from midNovember through December. Labor markets continued to gradually improve, and wage pressures were muted, on
balance. Nonlabor costs related to construction and supply chains rose further over the reporting period. Although retail
contacts reported overall holiday sales were subdued, ecommerce activity remained strong. Auto dealers noted sales
declined since the previous report. Tourism and hospitality activity softened. Residential real estate demand remained
strong, but challenges in commercial real estate markets persisted. Overall manufacturing activity rose moderately.
Banking conditions remained stable, but some contacts noted an uptick in delinquencies, mostly with residential mortgages.
Employment and Wages
Prices
On balance, contacts noted that employment levels and
hours worked rose over the reporting period. However,
labor conditions were strained in several parts of the
District as COVID-19 cases rose and absenteeism
slowed activity. Labor markets continued to remain
bifurcated with low turn-over and small steady improvements occurring among higher skilled positions where
most can work remotely, while markets for positions that
require in-person work (many of which are low-skilled)
were tighter and had higher turnover. Looking ahead,
many employers anticipate adding to headcounts as the
pandemic subsides and demand increases. However,
because of efficiencies realized during the pandemic,
staffing levels for some firms are not expected to return
to pre-pandemic levels. Most contacts also agree that
flexible work arrangements will be a part of their staffing
model going forward, allowing them to retain and attract
higher-quality talent, and for some, reducing their real
estate footprint.
Consistent with previous reports, input costs, particularly
for lumber, aluminum, and steel, continued to rise notably. Transportation, shipping, and packaging costs increased as well. More contacts mentioned an ability to
pass through increased costs to retailers and consumers. The Atlanta Fed’s Business Inflation Expectations
survey showed year-over-year unit costs increased
significantly to 1.7 percent on average in December, up
from 1.3 percent in November. Year-ahead expectations
remained relatively unchanged at 2 percent.
Consumer Spending and Tourism
Retailers reported that, as expected, holiday sales were
softer than in the previous year. Brick-and-mortar stores
continued to struggle, while on-line sales were strong.
Contacts expressed having little visibility into 2021 as
some expect consumer spending behavior to change as
a result of the pandemic. After experiencing a slight
recovery in vehicle sales levels during the Fall, auto
dealers reported softening demand through the end of
the year, which was largely attributed to a resurgence in
COVID-19 cases.
Despite high demand for low-skilled workers, most employers resisted raising wages, though many increased
referral, signing, and productivity bonuses to attract and
retain workers. The upward pressure on wages at the
lower end of the pay-scale, along with challenges to
sourcing the required skills, accelerated talks of increasing automation. In Florida, the majority of employers
expect little impact from the mandated increases to
minimum wage as market forces have already begun to
push wages to $15 per hour or will before the 2026
deadline.
Travel and tourism activity softened since the previous
report. Contacts noted that properties affected by recent
hurricanes, primarily in Alabama, had not completed
repairs as quickly as anticipated, which led to canceled
reservations. Drive-to destinations across the District
continued to experience solid activity; however, some
contacts anticipate that surges in COVID-19 cases would
dampen demand in the near term.
F-1
Federal Reserve Bank of Atlanta
Construction and Real Estate
metallic minerals, iron and steel scrap, and waste and
nonferrous scrap. Nevertheless, some industry contacts
do not expect a recovery to pre-pandemic levels until
2022 or beyond.
Home sales throughout the District remained strong as
low interest rates continued to fuel demand. Existing
home inventory remained extremely low in many markets, continuing to place upward pressure on home
prices. The pace of new home construction continued to
lag behind demand and lumber and labor costs remained a concern for builders. However, builders noted
the ability to pass along rising costs to buyers through
higher home prices. Though down from peak levels,
mortgages either in forbearance or in delinquency remained elevated throughout the District, especially in
rural areas of Alabama, Mississippi, and Louisiana, as
well as urban markets in South and Central Florida, and
North Georgia.
Banking and Finance
Conditions at financial institutions remained stable. Loan
balances across most portfolios continued to trend
downward, attributed to economic uncertainty, concerns
about credit quality, and collateral valuations. Deposit
levels remained elevated, and financial institutions continued to hold higher balances in cash accounts and their
securities portfolios. Although a majority of loans modified earlier in the year have exited forbearance arrangements, credit quality did not significantly deteriorate. Still,
financial institutions reported some higher noncurrent
balances, primarily associated with residential mortgages.
Commercial real estate (CRE) activity continued to be
impacted by the pandemic. Hospitality, which was especially hard hit earlier in the year, experienced declining
occupancies over the reporting period. The retail sector
remained challenged due to a combination of rising
ecommerce activity and an oversupply of retail space.
Low levels of tourism and travel were reported as having
a notable impact on activity across the hospitality and
retail sectors. The number of new CRE borrowers seeking relief continued to moderate. Recent CRE asset
valuations confirmed that values have deteriorated and
may be creating impediments to new lending along with
tighter underwriting standards.
Energy
Weak demand for crude oil, fuels, and other energy
products persisted over the reporting period. Refinery
output remained low, resulting in further consolidation
among refiners. Industry contacts reported increasing
optimism surrounding COVID-19 vaccine news, which
has helped to strengthen crude oil prices, although concerns about oversupply diminished some of that confidence. While many planned petrochemical processing
expansion projects and liquified natural gas export terminal construction projects remained stalled, some contacts reported renewed interest in moving projects forward. Within the utilities sector, contacts noted energy
usage remained sensitive to COVID-19 conditions. Nevertheless, investments remained solid in renewables,
grid modernization, and other infrastructure.
Manufacturing
Manufacturing contacts reported a moderate rise in
overall business activity since the previous report. While
new orders increased only slightly, production levels
rose at a stronger pace. Contacts indicated that finished
inventory levels had fallen, while purchasing managers
described delivery times as getting somewhat longer.
Expectations for future production levels increased notably, with over half of contacts expecting higher levels of
production over the next six months.
Agriculture
Agricultural conditions were mixed. While drought-free
conditions prevailed in most of the District, some abnormally dry conditions were reported. Some counties in
Alabama, Florida, Louisiana, and Tennessee were designated as natural disaster areas due to losses suffered
from earlier hurricanes and storm damage. December
production forecasts for Florida's orange and grapefruit
crops were down from the previous report’s forecasts
and below last year's production. The USDA reported
year-over-year prices paid to farmers in November were
up for corn, cotton, and soybeans but down for rice,
cattle, broilers and eggs while milk prices were unchanged. On a month-over-month basis, prices increased for corn, cotton, rice, soybeans, cattle, broilers,
and milk but decreased for eggs. ■
Transportation
Transportation firms reported increased levels of activity
since the previous report. Freight forwarders experienced robust volumes and increased revenue due to
sustained growth in ecommerce activity. Air cargo contacts noted year-over-year revenue growth as capacity
constraints pushed up rates and congestion in Asian
seaports drove some cargo, particularly high-dollar
goods, to air transportation. Distribution of the COVID-19
vaccine is expected to bolster activity for both air cargo
carriers and freight forwarders in the near term. Railroads reported considerable improvements in total traffic,
including double-digit growth in intermodal freight and
increased shipments of grain, food products, non-
For more information about District economic conditions visit:
www.frbatlanta.org/economy‐matters/regional‐economics
F-2
Federal Reserve Bank of
Chicago
The Beige Book ■ January 2021
Summary of Economic Activity
Economic activity in the Seventh District increased modestly in late November and December but remained below its
pre-pandemic level. Contacts expected further growth in the coming months, but most did not expect to see full recovery
until at least the first half of 2022. Manufacturing increased moderately; business spending and construction and real
estate increased modestly; and employment and consumer spending increased slightly. Wages rose modestly and
prices were up slightly. Financial conditions were little changed. Agricultural income for 2020 was better than expected
at the beginning of the year and at the onset of the pandemic.
Employment and Wages
manufacturing contacts noted large price increases for
metals and metal products, particularly steel and aluminum. Energy prices increased some, as lower crude
inventories supported higher prices for petroleum products.
Employment increased slightly over the reporting period,
but contacts expected a moderate increase over the next
12 months. Contacts continued to report elevated employee absenteeism due to Covid-19 cases or exposures
and childcare challenges for their workers, with some
manufacturers saying they were forced to slow production following the Thanksgiving holiday due to staffing
challenges. Many contacts noted difficulty in hiring workers, especially at the entry level. One aluminum producer
said they were struggling to meet demand because they
couldn’t hire enough workers, even after raising wages.
Overall, wages rose modestly across skill levels, with an
increased number of reports of pay hikes for higher
skilled workers. Benefits costs also rose modestly, with
several contacts reporting higher healthcare costs. Some
contacts said they had paid out larger-than-normal yearend bonuses, but others said they had been forced to
cancel them.
Consumer Spending
Consumer spending increased slightly over the reporting
period. Nonauto retail sales increased modestly as holiday sales came in at the low end of forecasts. Ecommerce sales remained strong, but growth plateaued,
in part because of shipping challenges. Brick-and-mortar
traffic fell overall during the holiday shopping season.
Demand remained robust in the home improvement,
appliances, and furniture categories leading some items
to be out of stock. Apparel sales increased only slightly.
Light vehicle sales decreased slightly, and remained
below pre-pandemic levels, with new vehicle sales softening more than sales of used vehicles. One contact
said that vehicle demand from low and moderate income
consumers had retreated as fiscal stimulus effects wore
off. Leisure and hospitality spending weakened further
as new and existing restrictions on restaurants and
entertainment venues limited sales.
Prices
Prices increased only slightly in late November and
December, but contacts expected a more moderate
increase in prices over the next 12 months. Consumer
prices remained flat while producer prices increased
some. Input costs increased modestly, driven by rising
raw materials, energy, and shipping prices. Numerous
G-1
Federal Reserve Bank of Chicago
Business Spending
auto, and appliance industries. Manufacturer sales of
specialty metals increased moderately and some contacts reported that capacity constraints had pushed up
delivery lead times. Demand for heavy machinery rose
slightly, driven in part by growth in the agriculture sector.
Demand for heavy trucks increased strongly. There was
steady demand for building materials.
Business spending increased modestly in late November
and December. Retail inventories were somewhat low
overall. Dealers said that vehicle inventories remained
well below pre-pandemic levels and weren’t expected to
rebound until well into 2021. Manufacturing inventories
were generally at comfortable levels, but a growing
number of contacts reported supply chain problems,
especially related to raw materials, cardboard boxes,
electrical components, and specialty parts. One contact
said that they had stocked higher levels of raw materials
to reduce the risk of running out. Capital expenditures
increased modestly, as a number of contacts said they
were resuming small-scale investment in equipment after
pausing at the start of the pandemic. Contacts expected
a moderate increase in capital spending over the next
twelve months. Demand for transportation services
increased moderately, and contacts noted that capacity
constraints had led to sizeable price increases. There
was a small increase in commercial and industrial energy consumption.
Banking and Finance
Financial conditions were little changed on balance over
the reporting period. Participants in the equity and bond
markets reported a small improvement in conditions,
though volatility remained elevated. Business loan demand decreased modestly overall, with one contact
highlighting commercial real estate as a source of decline. Business loan quality deteriorated slightly, with
declines concentrated in the retail, entertainment, and
commercial real estate sectors. Business loan standards
tightened modestly. Consumer lending was little
changed on balance. Contacts continued to note steady,
strong demand for residential mortgages. Most contacts
said that loan quality and standards were little changed,
though one contact reported a slight increase in delinquencies as customers came off deferrals.
Construction and Real Estate
Construction and real estate activity increased modestly
on balance over the reporting period. Residential construction activity increased moderately, with a number of
contacts reporting increased single-family building. A
contact in Des Moines said home construction was at its
highest level in more than a decade and that the market
for land was quite competitive. Contacts again reported
project delays because of increased lead times for building materials and appliances, labor shortages, and delays in government permits and inspections. Residential
real estate activity increased modestly. Home prices
rose moderately, while rents rose slightly. Nonresidential
construction was unchanged on balance. Construction of
industrial space remained a bright spot, with a contact
saying completed projects in 2020 in the Indianapolis
area broke 2019’s record. Commercial real estate activity fell slightly. Prices and rents fell marginally for commercial real estate, while sublease space increased
slightly. Demand for industrial space remained robust,
but interest in office and retail space decreased further.
Agriculture
Agricultural income for 2020 was better than contacts
expected at the beginning of the year and at the onset of
the pandemic. Contacts viewed government payments
as an important reason many farms had profits. Corn
and soybean prices continued to move higher over the
reporting period, spurred by strong export demand. A
larger than usual number of acres were planted with
winter wheat, encouraged by higher prices for wheat and
good fall weather. Dairy prices were volatile over the
reporting period but ended close to where they started.
Cattle prices were generally up, but hog prices moved
down. Farmland values increased some. Ethanol producers continued to struggle, but some were helped by
growing demand for byproducts such as carbon dioxide
for dry ice. ■
Manufacturing
Manufacturing production increased moderately in late
November and December, with reports of activity in
some sectors approaching pre-pandemic levels. Some
firms with strong demand continued producing on days
during the holiday weeks when they normally would have
been shut down. Auto output was stable and near its pre
-pandemic level. Production of steel and aluminum increased, with growing demand from the construction,
For more information about District economic conditions visit:
chicagofed.org/cfsbc
G-2
Summary of Economic Activity
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Employment and Wages
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Consumer Spending
-
Prices
H-1
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Manufacturing
Banking and Finance
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Nonfinancial Services
Agriculture and Natural Resources
Real Estate and Construction
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H-2
Federal Reserve Bank of
Minneapolis
The Beige Book ■ January 2021
Summary of Economic Activity
Economic activity in the Ninth District increased modestly since mid-November. Employment grew modestly, with increased hiring demand, but restrained labor supply. Wage pressures were moderate overall, and price pressures were
generally modest. Sources reported growth in consumer spending, residential construction and real estate, manufacturing, and agriculture. Energy activity held steady at low levels, while tourism and commercial construction and real estate
activity declined.
Employment and Wages
Labor supply constraints remained significant. A handful
of workforce development sources acknowledged a
growing number of available jobs. But one contact noted
that many available jobs lacked health care benefits and
“just don’t pay enough” to take given higher health risks
and other obstacles, like day care availability,
transportation difficulties, or the possibility of being
recalled from furlough. The prospect of further enhanced
unemployment benefits was also keeping some workers
on the sidelines. A contact in Minneapolis-St. Paul said
she was seeing lower labor force participation among
younger workers who were “extremely worried about
parent and grandparent vulnerability” to COVID-19.
Multiple contacts also noted technology equity issues,
manifested in broadband availability and the lack of
computer skills necessary for effective job search. “Just
about every business in today’s world is run by
technology. If you lack those skills, you will not succeed”
in the job search, said one contact. Many job assistance
offices remained closed to walk-ins, and newly enhanced
online services compounded search problems for those
without computer skills.
Employment grew modestly since the last report, with
hiring demand seeing continued growth, but labor supply
not responding in kind. Staffing contacts in Minnesota
and North Dakota said December job orders were
surprisingly strong, possibly to expand workforces to
cope with virus-related quarantines and other
interruptions. A November survey of hiring expectations
among Ninth District firms found that a modestly higher
share was planning to increase employment in 2021
compared with those planning to decrease staff levels.
Many contacts noted evidence of healthy hiring demand.
Districtwide, job postings have mostly recovered on a
year-over-year basis, except in Minnesota, where
postings have plateaued about 10 percent below yearago levels. There were pockets of pessimism, however.
A mid-December survey of Minnesota hospitality and
tourism firms found that more than half were cutting or
furloughing staff, in part due to operating restrictions put
in place by the state a month earlier. Preliminary
December data on workers compensation policies in
Minnesota also showed a slight drop-off, suggesting that
employers might be pulling back on future hiring plans.
Initial and continuing unemployment insurance claims
rose in recent weeks, due at least in part to normal
seasonal slowing in some sectors like construction. As of
mid-December, the number of workers receiving jobless
benefits in District states was two-and-a-half times the
level seen one year earlier.
Wage pressures were moderate overall. A staffing
contact overseeing multiple offices in Minnesota said
that average wage offers in mid-December were 8
percent higher than a year ago, with most of that growth
materializing in the second half of the year. Other
contacts reported a rise in signing bonuses, but also a
decline in hazard pay. A notable share of hospitality and
I-1
Federal Reserve Bank of Minneapolis
tourism firms reported little or no wage increases given
the difficulties in that sector. “I really can't even think of a
wage increase except the mandatory (minimum wage
increase) on January first,” said the female owner of a
Minneapolis-St. Paul restaurant. “I need to survive first.”
Construction and Real Estate
Commercial construction fell moderately since the last
report. Two industry databases showed construction
starts and total active projects in the District continuing to
slow into December. A recent Minnesota survey reported
a sour industry outlook, with 42 percent predicting a
sectoral downturn in 2021, compared with 10 percent
last year. Residential construction continued to
outperform the rest of the sector. November single-family
permitting rose 8 percent over last year in MinneapolisSt. Paul and also rose in Bozeman, Mont., Bismarck,
N.D., and Sioux Falls, S.D.
Prices
Price pressures were generally modest, but shipping
costs were up. Survey respondents from the hospitality
and tourism industry generally reported flat or mildly
increased wholesale prices over the past year, including
for food and drink. Retail prices saw even less pressure.
Most participants in a poll at a large transportation
conference in early December expected freight pricing
(excluding fuel surcharges) to increase faster than usual
through early 2021. An industry source reported that
residential rents as of December declined 2.1 percent in
Minneapolis-St. Paul month over month, and 11 percent
since March, the ninth fastest decline among the nation's
50 largest cities since the start of the pandemic.
Commercial real estate fell modestly since the last
report. Softening levels of new commercial construction
has helped keep a lid on vacancy rates in many real
estate categories. However, the overall 2021 outlook
was subdued, particularly in urban areas. Late payments
among multifamily renters continued to creep up,
according to surveys, which has put particular strain on
more affordable properties with already thin margins.
Sources believed federal stimulus proposals would
temporarily relieve some financial stress for tenants and
landlords, but there was continued concern over
pandemic-related forbearance policies and their effects
on housing markets. In contrast, residential real estate
was strong. November home sales were robust across
most the District, including many rural areas, and
banking contacts reported record-level mortgage activity.
Consumer Spending
Consumer spending rose modestly from the previous
report. Many Minnesota retailers saw lighter foot traffic
during the holidays, but some reported that it
nonetheless exceeded their scaled-back expectations.
Online sales were widely and significantly higher, but
contacts suggested that total sales for many would fall
modestly short of last year, particularly for small retailers.
North Dakota retailers had cautious holiday expectations
because of the downturn in the oil sector. A South
Dakota contact said retailers saw “a real mixed bag.”
Rural consumers there have been more willing to shop in
person, so foot traffic in smaller communities “seems to
be steady.”
Manufacturing
District manufacturing activity increased briskly since the
previous report. An index of regional manufacturing
activity indicated brisk expansion in North Dakota and
South Dakota in December compared with the previous
month, while activity in Minnesota grew more
moderately. Transportation industry contacts generally
reported increased freight orders in the fourth quarter of
2020 relative to the third, with much of the growth
coming from manufacturing customers.
Vehicle sales saw a modest dip in November, but a
dealership in the western part of the District said sales in
early December were solid, “although we would like
more inventory, especially trucks.” Vehicle sales taxes in
Minnesota in December were higher than last year.
Restaurants and bars continued to see decreased
revenue across the District. A majority of hospitality and
tourism firms in Minnesota reported negative revenue
trends in December and continued pessimism for early
2021. Results were even more dour for minority-owned
firms. A minority-owned hotel in central Minnesota said
the facility’s pool and breakfast buffet were both closed,
and area bars and restaurants were barred from inside
dining and drinking due to state-imposed restrictions.
“Why would anyone want to stay?”
Agriculture, Energy, and Natural Resources
Agricultural conditions improved modestly on strong
harvests and recent increases in some commodity
prices. However, contacts in the industry cautioned that
much of the recent growth in farm incomes has been due
to increased government aid rather than improved
market conditions. District oil and gas activity remained
steady at low levels. ■
I-2
Federal Reserve Bank of
Kansas City
The Beige Book ■ January 2021
Summary of Economic Activity
The Tenth District economy held fairly steady in December, on net, albeit with large variation across sectors. However,
contacts in almost every sector expected conditions to improve over the next six months. Consumer spending continued
to decline due to further drops in auto, restaurant and tourism sales. But retail sales rebounded sharply in December and
were above year-ago levels. Manufacturing production and new orders expanded modestly, driven by moderate gains at
durable goods plants. Sales rose slightly among professional and high-tech firms, but transportation and wholesale trade
contacts reported declines. Residential real estate activity slowed as home sales declined amid falling inventories and
rising prices. Commercial real estate conditions continued to deteriorate, but contacts expected vacancy rates to edge
down and prices to stabilize in coming months. Energy activity expanded as revenues, profits and drilling rose for most
firms. The agricultural sector improved modestly as higher crop prices lifted prospects for farm incomes. Employment
levels increased slightly, and wages rose modestly. Input prices continued rise faster than selling prices, leading to tighter
profit margins.
Employment and Wages
ing, prices for raw materials rose moderately while prices
received for finished products grew slightly. Additionally,
prices for raw materials were expected to continue to
outpace selling prices in the coming months, putting
pressure on profit margins. Retail prices increased moderately, with input prices rising slightly faster than selling
prices. In contrast, contacts from the transportation and
restaurant sectors indicated that selling prices rose
faster than input prices in December, but expected that
trend to reverse in upcoming months. Contacts in construction supply noted that selling prices rose modestly
and expected them to continue to do so in following
months.
District employment increased slightly in December, but
remained slightly below year-ago levels. Within the
services sector, gains were driven by retail and wholesale trade, while growth was restrained by the restaurant
and tourism industries. Expectations within the services
sector were mostly positive aside from the transportation, restaurant, and health services sectors. Manufacturers noted increases in both employment levels and
employee hours and expected modest growth in the
coming months.
The majority of contacts in the services sector reported
labor shortages, noting a need for truck drivers, specialized information technology workers, and mechanics.
One hospital noted being short on staff to care for
COVID patients such as registered nurses, respiratory
therapists, and certified nursing assistants. Wages rose
modestly during the survey period and were expected to
rise at a faster pace in the coming months. Services
contacts reported that 23 percent of employees were
working remotely on average, while the average among
manufacturers was 9 percent.
Consumer Spending
Overall consumer spending declined in December despite a robust increase in retail sales. Declines in restaurant, auto, and tourism sales accelerated, while activity
in the health services sector also fell following moderate
gains during the previous survey period. Retail trade was
the only bright spot, with strong sales growth during
December and sales above year-ago levels. Auto and
restaurant sales were modestly below year-ago levels,
while tourism activity remained sharply lower. Respondents from all consumer sectors expected modest gains in
the next few months. While the majority of contacts
indicated that the most recent surge of COVID cases
negatively affected their firm’s business, a quarter of
Prices
Growth in input prices continued to outpace that of selling prices in the services and manufacturing sectors,
although more notably for the latter. Within manufactur-
J-1
Federal Reserve Bank of Kansas City
respondents indicated that it had had no effect.
standards tightened slightly for residential real estate
and commercial and industrial loans, and tightened
modestly for commercial real estate loans. Overall loan
quality improved slightly compared to a year ago, although bankers expected loan quality to decline modestly
over the next six months in several categories including
commercial real estate, hospitality and small business.
Deposit levels increased robustly in recent weeks. Anecdotal evidence suggested the economy outperformed
expectations this year, but there remained a general
uncertainty around future performance. One banker
commented, “surprised how well our year turned out.
Economy seems very fragile yet continues to perform
surprisingly well”.
Manufacturing and Other Business Activity
Manufacturing activity expanded modestly since the last
survey, but remained modestly below year-ago levels.
Production and new orders rose moderately for durable
goods, while activity for non-durables fell slightly for the
first time since late spring. Contacts in both sectors
expected production and new orders to rise in coming
months. Capital expenditures were just below year-ago
levels. Looking ahead, firms’ primary motivations for
capital outlays in the upcoming year were to make investments in labor saving technology and equipment to
enhance production capacity.
Energy
District energy activity expanded since the previous
survey period but continued to lag year-ago levels. Revenues, profits, and drilling activity rose for most firms but
remained below year-ago levels. However, employment
levels continued to decline. The number of active oil and
natural gas rigs increased broadly across District states.
While commodity prices increased since the last survey
period, regional firms also reported needing a higher
average price for a substantial increase in drilling to
occur for oil and natural gas. Most contacts expected
higher regulatory costs for their firm in the upcoming
year, and a significant share of firms indicated plans to
reduce emissions or reuse water. Expectations for future
drilling and business activity turned positive for the first
time since the first quarter of 2020, but firms anticipated
additional job cuts moving forward due to continued
consolidation and efficiency gains.
Outside of manufacturing, sales in transportation and
wholesale trade fell, leaving sales modestly below yearago levels. Sales in professional and high-tech services
rose slightly, but remained moderately below year-ago
levels. Capital expenditures edged down in transportation and professional and high-tech services but increased modestly for wholesale trade. Contacts from
these three sectors anticipated both sales and capital
expenditures to rise over the next few months.
Real Estate and Construction
Residential real estate activity slowed moderately in
December, while commercial real estate conditions
continued to worsen modestly. Residential sales fell
moderately as inventories of homes fell further and prices continued to rise. Despite this, home sales remained
above year-ago levels and contacts anticipated moderate increases in sales and prices the coming months.
Construction supply sales fell for the first time since
February and were expected to continue to fall modestly
moving forward. Commercial real estate contacts noted
modest declines in absorption rates, sales, prices, and
rents along with an increase in vacancy rates. Developers reported that credit was increasingly difficult to access. Commercial construction, however, edged up and
additional increases were expected in the next few
months. Additionally, contacts expected vacancy rates to
edge down and prices to stabilize.
Agriculture
Conditions in the Tenth District agricultural economy and
prospects for farm income improved modestly since the
previous reporting period alongside further increases in
crop prices. District contacts reported that direct government payments had provided robust support for farm
incomes, and expected the sharp increase in crop prices
during recent months to further improve profits. Since the
previous period, crop prices increased moderately and
were well above a year ago. In addition to higher prices,
strong crop yields in some parts of the District boosted
revenues further, particularly in Missouri. Profit opportunities for livestock producers in the District were more
limited. Cattle prices were generally stable, but remained
well below a year ago. Hog prices declined slightly in the
period, but were slightly higher than a year ago. ■
Banking
Banking contacts reported a slight increase in total loan
demand in recent weeks. Growth was concentrated in
two categories, with a modest increase in the demand
for residential real estate loans and a slight increase in
the demand for commercial real estate loans. Loan
demand in all other lending categories slowed, with a
slight decline in consumer loan demand, a modest decline in commercial and industrial loan demand, and a
moderate decline in agricultural loan demand. Credit
For more information about District economic conditions visit:
www.KansasCityFed.org/Research/RegionalEconomy
J-2
Federal Reserve Bank of
Dallas
The Beige Book ■ January 2021
Summary of Economic Activity
The Eleventh District economy expanded at a moderate pace, but activity in most industries remained below normal
levels. Recovery in the manufacturing and service sectors picked up, while retail activity remained weak. The housing
market continued to be a bright spot, with robust home sales and strengthening apartment demand. Overall loan volume
increased, led by real estate lending. Energy activity showed mounting signs of improvement after a prolonged contraction. Employment rose moderately, though wage growth remained subdued. Input cost increases continued to outpace
growth in selling prices. Outlooks were generally positive, but uncertainty remained high. Several contacts voiced concern about rising COVID-19 infection rates impacting their short-term business prospects, though there was optimism
about the vaccine paving the way to a resumption of more normal activity this year.
Employment and Wages
Prices
Employment rose moderately overall. Hiring was most
robust in the manufacturing sector but also picked up in
the service sector after stalling out in the prior period.
Several contacts noted hiring freezes and, among those
adding to payrolls, there were scattered reports of recruiting difficulty. Layoffs continued in the energy sector,
although they abated somewhat. Energy contacts said
more layoffs and early retirements were in the works, but
the worst is past despite mounting bankruptcies. Outside
the energy sector, just over half of Texas businesses
surveyed expect to add to headcounts in 2021, while 38
percent expect to keep employment levels flat and 10
percent expect declines. Airline contacts noted the new
COVID-19 relief bill would likely prevent further layoffs in
the first quarter.
Input costs continued to increase at a moderate pace
overall, though retailers saw more substantial rises and
several manufacturers noted sharply increased raw
materials prices, particularly steel. Selling prices were
flat to up slightly, with more marked increases reported
in the retail and manufacturing sectors. While contacts
overall noted subdued growth in selling prices in 2020,
most expect a rebound to average or above-average
selling price growth this year.
Manufacturing
The Texas manufacturing recovery gathered steam in
December, with production and demand growth accelerating from November. Growth was widespread and led
by nondurables, particularly petrochemical products.
Petrochemical contacts noted healthy demand for PVC,
driven by construction, and very strong plastic packaging
demand. The pandemic remained a drag on business
overall, with nearly half of manufacturers saying revenues were still below normal. The vast majority expect
2021 revenues to be stronger than last year, with growth
peaking in the third quarter. Outlooks among manufacturers pushed further positive, despite considerable
uncertainty.
Wage growth remained subdued, except in manufacturing where it picked up after a nine-month slump. Still,
several service sector contacts noted implementing
bonuses or increased wages, with an accommodations
firm citing the increasing minimum wages in California
and Florida contributing to their decision. Looking ahead,
most firms expect wage growth in 2021 to be well above
what was seen in 2020.
K-1
Federal Reserve Bank of Dallas
Retail Sales
ments in December. Office leasing stayed weak and
contacts noted concern about the growing amount of
sublease space. The industrial market continued to
perform remarkably well.
Texas retail activity was flat in December following a
decline in November. Auto sales picked up, though
contacts voiced concern that rising COVID-19 infections
could negatively impact buying activity. A Dallas Fed
survey of about 50 Texas retailers showed that a nearly
equal share—about 30 percent—expect revenue to
decrease in the first quarter versus increase, but that by
the second quarter the share expecting a decrease falls
to 17 percent while the share expecting an increase
grows to 53 percent. Overall, well over half of retail firms
expect 2021 revenues to exceed 2020 levels.
Financial Services
Overall loan volume increased modestly over the reporting period, with declines in consumer and commercial
and industrial (C&I) loans offset by increases in residential and commercial real estate loans. Loan pricing continued to decrease, and some contacts voiced concerns
about margin compression. Credit standards tightened
further, particularly for C&I loans. Nonperforming loans
rose over the past six weeks, though at a markedly
slower rate than what was seen in mid-2020. While
assessments of current general business activity remained mixed, nearly 70 percent of contacts expect an
increase in business activity six months from now.
Nonfinancial Services
Growth in the nonfinancial services sector resumed but
remained muted as rising COVID-19 cases restrained
demand. Continued contraction was seen in leisure and
hospitality. In transportation services, cargo volumes
through Texas ports and via small parcel delivery services were up quite strongly, and much of the leftover
passenger air capacity was used to move freight air
cargo. Airlines noted that increasing COVID-19 cases
were impacting leisure air travel and that despite a seasonal pickup in passenger demand, airline bookings
remained well below year-ago levels. Business air travel
continued to be virtually nonexistent. Recovery continued, however, among professional and business services firms, with revenue growth accelerating in December. Staffing services firms said demand was broadbased and had increased drastically over the last couple
of months.
Energy
The rebound in the energy sector solidified further over
the reporting period, though the level of activity remained
below year-ago levels. The Eleventh District rig count
rose markedly, and drilling and well completion activity
continued to improve. Contacts on both the exploration
and production side and the oilfield services side reported stronger levels of business activity for the first time
since the onset of the COVID-19 pandemic, and oil
production stabilized after several months of decline.
Outlooks generally improved, though rising COVID-19
cases and the prospect of tighter regulations weighed on
contacts’ sentiment about future activity.
Looking ahead, a majority of businesses expect 2021
revenues to exceed 2020 levels, by about 30 percent on
average. Even still, a sizeable share expects flat or
reduced revenue this year. Overall, outlooks remained
marginally positive, with many contacts pointing to the
COVID-19 vaccine as a particular driver of optimism.
Agriculture
Drought conditions intensified further, particularly in the
western part of the District. Demand for agricultural
products remained solid. Crop and cattle prices rose
over the past six weeks, though cheese prices fell dramatically. Higher crop prices boosted sentiment, as
current levels are profitable for many producers given
normal yields. ■
Construction and Real Estate
Home sales remained solid during the reporting period.
Several contacts noted seasonal softness; however,
sales were up year over year. Builders said they continued to push up prices, and a few noted solid margins.
New home development remained vigorous, though
there were continued reports of supply chain issues and
skilled labor shortages. Outlooks were favorable, with
continued concern about political uncertainty and a weak
labor market negatively impacting future sales.
Apartment demand in the fourth quarter was better than
expected. Nevertheless, demand lagged completions,
putting downward pressure on occupancy and rents.
There was slight deterioration in apartment rent pay-
For more information about District economic conditions visit:
www.dallasfed.org/research/texas
K-2
Federal Reserve Bank of
San Francisco
The Beige Book ■ January 2021
Summary of Economic Activity
Economic activity in the Twelfth District continued to expand at a modest pace during the reporting period of midNovember through December. Overall employment levels and the existing modest pace of price inflation were largely
stable, and wages increased slightly. Retail sales picked up, but activity in the consumer and business services sectors
was mixed. Manufacturing activity increased somewhat, and conditions in the agriculture sector strengthened slightly.
Contacts reported continued strong activity in residential real estate markets, while conditions in the commercial sector
weakened. Lending activity continued at high levels.
Employment and Wages
increases in wages and rising pressures.
Employers in most reporting sectors maintained generally stable staff head counts, following a sustained period
of employment volatility due to the pandemic. Some
contacts reported increased employee turnover but also
highlighted little difficulty finding qualified applicants.
Others reported labor shortages in the construction and
building materials manufacturing sectors, which was
intensified in some areas by reconstruction efforts following the wildfire season. Contacts in tourism and food
services noted employment cuts in response to the
recent surge in COVID-19 cases and resulting renewal
of mobility restrictions in some areas. A contact in automotive services reported reduced numbers of workers
and hours due to slower activity. A few contacts in the
financial sector mentioned operational efficiencies that
led to the elimination of redundant positions. Demand for
labor in the technology and health-care industries remained solid.
Prices
Most contacts reported stable and low price inflation over
the reporting period. While manufacturers noted that
input costs had increased, some highlighted that they
had not passed those increases to end users. Consumer
service providers generally did not change their price
structures, but some business service providers implemented holiday season surcharges in response to strong
demand. Prices for building materials rose significantly,
while those for agricultural products rose modestly.
Retail Trade and Services
Retail sales picked up in general, but reports varied
somewhat by region. Holiday sales were stronger than
expected given the pandemic but weaker than past
holiday seasons. Retailers in areas where local governments reinstated limitations on commerce and mobility in
response to the recent virus surge saw a large negative
impact on sales. Reports highlighting foot traffic varied
widely, with some contacts noting empty stores and
shopping malls, and others mentioning customers in long
wait lines. Sales at auto dealerships were boosted somewhat by year-end tax incentives. Some specialty retailers, including for pet products, reported strong sales.
Others mentioned weaker sales for discretionary products due to customers’ focus on purchases for essential
products. E-commerce volumes increased notably relative to brick-and-mortar stores, and contacts reported
that the pandemic has further accelerated the shift to-
Wages increased slightly near year-end. Contacts reported little change in entry level wages, except for
workers affected by minimum wage legislation. For
higher-paying positions, employers noted either no noticeable changes to wages or only typical merit increases
for existing employees. Some firms in the construction
and manufacturing sectors offered extra vacation days
and extended holiday season bonuses to help reduce
turnover. There were a few reports of decreased wages
for some financial service providers due to a reduction in
interest margins. Others, however, mentioned slight
L-1
Federal Reserve Bank of San Francisco
ward online sales. Contacts in areas that depend more
heavily on tourism, such as Alaska and Hawaii, reported
that holiday retail sales were significantly below levels
from past seasons.
prior reporting period but remained high. Fires in California’s Central Valley impacted production capacity for
some farmers and livestock ranchers, but the total impact is yet to be determined.
Activity in the consumer and business services sector
was mixed. Demand for logistics and delivery services
rose further, with providers working at full capacity. Shipping service quotas were implemented on many big box
companies, with some reported order backlogs and
shipping delays due to increased online sales volume
during the holiday period. In health care, demand for
elective procedures and mental health assistance continued to rebound from the pause earlier in the year,
though providers expressed concerns about the recent
surge in COVID-19 cases potentially limiting the volume
of such services. Contacts in the tourism industry noted
that demand for air travel and hotel rooms was still subdued. The pandemic continued to severely impact restaurant and dining services, with reports noting that
many smaller restaurateurs have struggled to stay open.
Production in the entertainment sector has returned
slowly under strict safety protocols. Capacity utilization
among automotive service providers remained low, and
store hours were reduced to reflect the current environment. Demand for nonprofit services focused on housing
assistance remained at average levels, while enrollment
numbers for higher education stayed tepid.
Real Estate and Construction
Activity in residential real estate markets continued to
grow robustly across the District, yet the pace of growth
was slightly slower than in the previous reporting period.
Demand for homes continued to be boosted by historically low mortgage rates and wider geographic searches
by those able to work remotely. New construction and
prices for housing rose further while inventories remained tight, especially for homes at more affordable
price ranges. Contacts in the Mountain West noted that
many homes were sold prior to completion. Across the
District, contacts reported constraints on the availability
of qualified construction labor, building materials, and
lots with ready access to public utility services. Demand
for residential rental units in metropolitan areas continued to fall. In contrast, contacts reported increased inquiries for suburban rental spaces. One contact in the
Pacific Northwest highlighted an increase in the number
of past due rent payments.
Demand for new commercial construction weakened,
and contacts observed that high uncertainty continued to
cloud plans in the District. Reports focused on increased
vacancies in retail space but continued modest competition for warehouse space. Construction permitting for
industrial and storage facilities was still in high demand,
partially due to increasing rents. A contact in Utah noted
increased demand for office and hotel space due to
population growth in the area. One contact in California
mentioned that the positive news concerning vaccines
was a material input in their firm’s decision to partially
renew their commercial space lease.
Manufacturing
Manufacturing activity increased modestly on balance.
Production and capacity utilization for renewable energy
equipment and supply chain services continued to grow
at a strong pace, with some factories engaging in considerable overtime to meet pent-up demand. Production
and capacity utilization in metals and wood products
manufacturing remained robust, and contacts reported
adequate access to materials. Demand for energy from
manufacturers other than aerospace rebounded faster
than power providers had anticipated. Aerospace manufacturing activity continued to be plagued by the pandemic-related drop in air travel demand. One contact
also mentioned that pre-pandemic technical issues continued to hamper demand for manufactured aircraft
parts.
Financial Institutions
Lending activity remained at high levels but the pace of
new loan generation slowed somewhat. Reports indicated that expectations for a new round of governmentbacked lending programs with favorable terms have
encouraged many business borrowers to postpone their
loan applications slightly. Demand for new mortgages
and refinancing remained strong. Deposits were robust
and banks reported having significant liquidity, high
asset quality, and generally healthy balance sheets.
Nonetheless, some bankers expressed concern over
potential loan losses should payment deferrals and loan
forbearances be terminated, especially in relation to
loans extended to restaurants, bars, and hotels. In venture capital markets, contacts noted increased investor
interest in clean energy and other businesses oriented
around environmental sustainability. ■
Agriculture and Resource-Related Industries
Agricultural activity increased slightly over the reporting
period. Demand for agricultural products grown in California and the Pacific Northwest expanded both domestically and internationally, as exports benefitted from a
depreciated dollar. Sales of wheat, fruit, raisins, and nuts
to global markets picked up near year-end, with shipments of almonds reaching record highs according to a
contact who provides transportation services for the
agricultural sector. Inventories fell somewhat from the
L-2
Cite this document
Federal Reserve (2021, January 26). Beige Book. Beige Book, Federal Reserve. https://whenthefedspeaks.com/doc/beige_book_20210127
@misc{wtfs_beige_book_20210127,
author = {Federal Reserve},
title = {Beige Book},
year = {2021},
month = {Jan},
howpublished = {Beige Book, Federal Reserve},
url = {https://whenthefedspeaks.com/doc/beige_book_20210127},
note = {Retrieved via When the Fed Speaks corpus}
}