Beige Book
For use at 2:00 PM EDT
Wednesday
March 3, 2021
The Beige Book
Summary of Commentary on Current Economic Conditions
By Federal Reserve District
February 2021
Federal Reserve Districts
Boston
Minneapolis
New York
Chicago
Cleveland
Philadelphia
San Francisco
Kansas City
Richmond
St. Louis
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 Atlanta based on information collected on
or before February 22nd. 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
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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
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Sixth District
Chicago
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Seventh District
St. Louis
H-1
Eighth District
Minneapolis
I-1
Ninth District
Kansas City
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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 ■ February 2021
Overall Economic Activity
Economic activity expanded modestly from January to mid-February for most Federal Reserve Districts. Most businesses remain optimistic regarding the next 6-12 months as COVID-19 vaccines become more widely distributed.
Reports on consumer spending and auto sales were mixed. Although a few Districts reported slight improvements in
travel and tourism activity, overall conditions in the leisure and hospitality sector continued to be restrained by ongoing
COVID-19 restrictions. Despite challenges from supply chain disruptions, overall manufacturing activity for most Districts increased moderately from the previous report. Among Districts reporting on nonfinancial services, activity was
mixed, though most reported modest growth over the reporting period. Some Districts noted that financial institutions
experienced declines in loan volumes, but most cited lower delinquency rates and elevated deposit levels. Historically
low mortgage interest rates continued to spur robust demand for both new and existing homes in most Districts, and
home prices continued to rise in many areas of the U.S. On balance, commercial real estate conditions in the hotel,
retail, and office sectors deteriorated somewhat, while activity in the multifamily sector remained steady and the industrial segment continued to strengthen. Districts reporting on energy observed a slight uptick in activity related to oil and
gas production and energy consumption. Overall, reports on agricultural conditions were somewhat improved since the
previous report. Transportation activity grew modestly for many Districts.
Employment and Wages
Most Districts reported that employment levels rose over the reporting period, albeit slowly. Labor demand varied considerably by industry and by skill level, and many contacts noted continued difficulties attracting and retaining qualified
workers. Labor supply shortages were noted by contacts as most acute among low-skill occupations and skilled trade
positions. Constraints on labor supply included those related to COVID-19, childcare, and unemployment benefits.
Overall, contacts expect modest improvements in employment levels in the near term. Several Districts reported modest wage increases for high-demand positions with many also noting upward pressure on wages to attract and retain
employees. On balance, wage increases for many Districts are expected to persist or to pick up somewhat over the
next several months.
Prices
On balance, nonlabor input costs rose moderately over the reporting period, with steel and lumber prices increasing
notably. In many Districts, the rise in costs was widely attributed to supply chain disruptions and to strong overall demand. Transportation costs continued to increase, in part due to rising fuel costs and capacity constraints. Reports on
pricing power were mixed, with some retailers and manufacturers affected by input cost increases reporting the ability
to pass prices through, while many others were unable to raise prices. Several Districts reported anticipating modest
price increases over the next several months.
Highlights by Federal Reserve District
Boston
New York
Economic activity remained mixed in the First District,
with strong performance at manufacturers and ongoing
weakness at hospitality outlets. Labor markets were tight
for skilled workers. Manufacturers faced new upward
pressures on input prices. Single-family home sales
increased further. Contacts in the restaurant and hotel
industries expressed a more optimistic outlook.
The regional economy declined modestly, with particular
weakness in the service sector. The labor market has
remained sluggish, though wage growth accelerated.
Businesses reported further acceleration in prices, as
well as increasingly widespread supply disruptions.
Contacts across a wide variety of sectors expressed
increased optimism about the near-term outlook.
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National Summary
Philadelphia
which they linked to vaccine rollout and efficacy.
Business activity rebounded to a modest pace of growth
during the current Beige Book period. COVID-19 cases
waned and restrictions eased, but economic disruptions
continued. On the whole, activity remained below levels
attained prior to the pandemic. Employment rebounded –
growing slightly – as wage growth and prices picked up
to modest and moderate paces, respectively.
Minneapolis
District economic activity increased modestly. Hiring
demand rose, but employment growth remained flat,
likely due to labor supply constraints and workers’ hope
of being rehired by previous employers. Manufacturers
expected a recent uptick in business to carry forward,
while construction and real estate were seeing hot-andcold activity across the District. Conditions for minorityand women-owned businesses remained difficult.
Cleveland
The District’s economy regained momentum, reflecting
declining numbers of coronavirus infections and various
fiscal support measures. That said, activity remains
below prepandemic levels for most firms, and supply
chain disruptions restrained output for many firms. Such
disruptions also led to sizable increases in nonlabor
costs. Hiring activity remained modest, although a greater share of firms reported they were raising wages.
Kansas City
Economic activity expanded slightly, with gains in most
sectors. Stronger retail, restaurant, and healthcare sales
drove consumer spending higher in January, but consumers pulled back in February. Activity rose in the
manufacturing, professional and high-tech services,
wholesale trade, residential real estate, energy, and
agriculture sectors. Contacts were generally optimistic
about future growth, driven in part by the COVID-19
vaccine rollout.
Richmond
The regional economy continued to grow modestly.
Manufacturing activity picked up, as did port and trucking
transportation. Travel and tourism also rose in recent
weeks. Retail sales, on the other hand, declined. The
housing market remained strong and commercial real
estate leasing rose modestly. Employment increased
slightly while wages were little changed. Prices increased moderately in recent weeks.
Dallas
The District economy expanded at a moderate pace,
though output in most industries remained below normal
levels. Unprecedented winter storms and widespread
power outages in mid-February severely disrupted economic activity, though the impact is mostly expected to
be transitory. The housing market continued to be a
bright spot, and energy activity improved further. Employment rose and wages increased moderately. Outlooks were generally positive, but uncertainty persisted.
Atlanta
Economic activity expanded modestly. Labor market
conditions improved, and wage pressure was subdued.
Some nonlabor costs rose. Retail spending was steady.
Tourism and hospitality activity rose slightly. Residential
real estate demand increased, and home prices rose.
Commercial real estate conditions were mixed. Manufacturing activity improved. Conditions at financial institutions were stable.
San Francisco
Economic activity in the District expanded at a modest
pace as labor markets deteriorated somewhat. Wages
and inflation picked up. Retail sales improved, but activity in the services sector declined moderately due to
ongoing pandemic-related restrictions. Conditions in the
agricultural and manufacturing sectors strengthened
modestly. Residential construction and lending activity
continued to be strong.
Chicago
Economic activity in the Seventh District increased modestly. Manufacturing and consumer spending increased
moderately; business spending and construction and
real estate increased slightly; and employment was little
changed. Wages and prices rose modestly. Financial
conditions were little changed. Contacts expected agricultural income to be solid in 2021.
St. Louis
Reports from contacts indicate that economic conditions
have been generally unchanged since our previous
report. Overall, the outlook among contacts continued to
improve and is generally optimistic. Contacts noted a
high degree of uncertainty about the pace of recovery,
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Federal Reserve Bank of
Boston
The Beige Book ■ February 2021
Summary of Economic Activity
Economic activity was decidedly mixed in the First District, with moderate growth on balance. Manufacturers reported
strong to very strong results, while restaurants and hotels experienced very weak demand. Retail sales were robust
across a variety of outlets, and auto sales made a sharp rebound in late 2020. Performance at staffing firms was mixed
but most saw growth that exceeded expectations. The commercial real estate market was split between very strong
activity for industrial and laboratory space and sluggish to very weak demand for office, retail, and hotel properties.
Residential real estate sales and prices continued to climb but low inventories remained a problem. The outlook took a
more optimistic turn among many contacts in response to the vaccine rollout and the pending arrival of warmer weather.
faced extreme upward pressure on petrochemicals prices due shortages that were exacerbated by the winter
storms in the south-central US, two who said that shipping costs had increased substantially, and another that
paid more for gold. Nonetheless, none of those contacts
planned to raise their output prices. Most other manufacturing contacts experienced level (nonlabor) input prices,
but two had seen a recent easing of costs. One manufacturer planned to increase its output prices on the
strength of demand for its products. Outside of manufacturing the only report on prices was that daily room rates
at Boston-area hotels were down 40 percent from one
year ago.
Employment and Wages
According to reports from staffing firms, labor demand
was strong from manufacturing, legal services, health
care, and scientific and technical firms, while the market
for lower-skilled services workers exhibited significant
slack. A staffing firm described the markets for health
care and scientific/technical workers as being at full
employment, making it difficult to find qualified workers in
those fields. Among manufacturing contacts, all but one
planned to add workers. Most of those were engaging in
light to modest hiring but two planned on dramatic increases in headcounts, including a life sciences firm
hoping to hire 12 to 15 times as many workers in 2021
as in a typical year. Several manufacturers reported
having difficulties finding qualified workers and two also
said that absenteeism was a problem. About half of
manufacturing contacts remarked that labor costs had
increased and a few had raised or were planning to raise
salaries by around 3 percent in 2021. Staffing firms said
that wages were up for highly skilled temporary employees and that both the duration of temporary employment
and the conversion rate from temporary to permanent
employment had increased for high-skilled occupations.
Retail and Tourism
Retail contacts noted continued strength in sales in early
2021 in automobiles, RVs, winter sports equipment,
salvaged goods, and online sales of home furnishings.
Hospitality contacts said that restaurant sales and hotel
stays slumped further during the winter months amid the
renewed surge in COVID-19 cases. Nonetheless, the
same contacts were optimistic for the first time since the
pandemic began, as they expected that more widespread vaccine distribution and warmer weather would
result in a release of pent-up demand in the spring and
summer. All Boston-area conventions originally scheduled to take place by summer 2021 have been postponed.
Prices
Pricing reports were mixed. Some manufacturers reported higher nonlabor input prices, including one who
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Federal Reserve Bank of Boston
Automobile sales in 2020 broke records at many dealerships despite steep declines last spring. Stronger-thanexpected auto sales have exacerbated the pre-existing
shortage of semiconductor chips and could crimp an
otherwise strong 2021. A salvaged goods chain reported
strong sales despite persistent weakness in stores near
the Canadian border. Online sales of home furnishings
remained robust.
quarters, as they expect that vaccine rollouts will allow
more people to reenter the workforce.
Commercial Real Estate
Commercial real estate conditions in the First District
were mostly unchanged since December. Throughout
the District there remained significant disparities between the industrial sector—which saw robust demand
and extremely low vacancy rates—and the retail and
hospitality sectors, both of which continued to register
very weak demand and declining property values. The
life sciences industry, concentrated in greater Boston,
extended its boom in the leasing and construction of lab
space. Although office leasing was mostly sluggish, a
Providence contact reported a slight uptick in leasing
activity that was noteworthy in that tenants expressed
interest in longer-term leases. The same contact noted
that concessions on Providence office space had increased, lowering effective rents if not asking rents.
Contacts expect demand for office space to remain
muted or to improve modestly in the first half of 2021,
and to improve significantly in the second half. Hotel
demand is expected to rebound in mid-to-late 2021 as
well. Nonetheless, contacts are forecasting a permanent
decrease in office occupancy of 20 percent or more in
the post-pandemic economy, and a glut of lab space in
greater Boston remains a risk at the two-to-three-year
horizon.
Manufacturing and Related Services
All ten firms contacted this cycle reported higher sales,
and three said their company had seen its best performance ever in recent quarters. Semiconductor industry
contacts reported exceptionally strong demand, coming
from both the auto industry and manufacturers of personal computers and other electronic devices. Combined
with supply-chain hiccups that began in 2019 and were
exacerbated by the pandemic, the surging demand has
led to shortages in the chips used in automobiles in
particular. Other manufacturers, producing everything
from almond milk to bulk chemicals to veterinary diagnostics to lab equipment, also reported very strong
sales.
Most contacts planned to increase their capital expenditures in 2021. Some of these increases were intended to
compensate for COVID-19 related disruptions to investment activity in 2020. Surprisingly, however, some contacts revised their capital expenditure plans down for
2021 because they had completed more investment in
2020 than originally expected. Contacts were generally
optimistic about 2021, despite expressing uncertainty
about the evolution of the pandemic and vaccinations.
One contact expressed concern that some of the demand increases they had experienced in 2020 would
recede along with the pandemic. For example, a veterinary care products maker said that COVID-19 had led
people to spend more time with pets and to adopt new
ones, a pattern that could reverse in the coming months.
Residential Real Estate
The residential real estate market in New England
showed no signs of slowing in December and January.
(Rhode Island and Vermont reported over-the-year
changes to December 2020; Massachusetts, Boston,
New Hampshire, and Maine reported over-the-year
changes to January 2021; Connecticut data were unavailable.) The number of closed sales increased in all
reporting areas. However, the inventory of homes for
sale continued to fall well below year-earlier levels in all
markets except the Boston condo market, which saw an
uptick in inventory. The median sales price rose in all
markets, but the increase was greater for single-family
homes than for condos. Contacts from Massachusetts,
Rhode Island, and Maine saw high numbers of out-ofstate buyers, especially for homes in vacation communities. The Massachusetts contact said low interest rates
and flexible work arrangements had likely provided a
boost to demand for vacation homes. ■
Staffing Services
A few New England staffing firms reported negative year
-over-year revenue growth, but the majority experienced
stronger-than-expected growth in Q4 of 2020. The demand for labor was strong in most sectors, including
manufacturing and legal services, but one contact noted
a surplus of lower-skilled services workers. Both bill and
pay rates increased for most firms, but without any substantial changes to mark-ups, as client organizations
were willing to pay higher wages. In addition, most contacts reported incurring greater costs in order to attract
candidates, such as expanding their advertising efforts
and/or hiring additional recruiters. Contacts were unanimous in expressing greater optimism about the coming
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 ■ February 2021
Summary of Economic Activity
Economic activity in the Second District has declined modestly in the latest reporting period. However, with vaccinations
rising and the spread of COVID on a steady decline, business contacts have grown considerably more optimistic about
the near-term outlook. While the labor market has remained sluggish, with employment flat to down modestly in almost
all industries, wage growth and hiring plans have picked up. Input price pressures have continued to expand, and more
businesses are raising their own prices or planning price hikes in the months ahead. Consumer spending has remained
lackluster in early 2021, though auto sales have firmed. Tourism has picked up and prospects for the months ahead
have improved. Housing markets have generally remained robust, whereas markets for office and retail space have
continued to weaken. Finally, contacts in the broad finance sector continued to indicate weakening conditions, though
regional banks reported increased loan demand and modest improvement in delinquency rates.
Employment and Wages
upward pressure on wages. Looking ahead, a growing
number of businesses also plan to raise wages—most
notably in leisure & hospitality and retail & wholesale
trade.
The labor market has remained sluggish since the start
of the year. A major New York City employment agency
characterized hiring activity as moribund, noting that it is
hard to on-board and train new staff remotely and that
there is still a great deal of uncertainty. On the other
hand, an upstate employment agency reported a pickup
in hiring activity in recent weeks and noted that it has
been difficult to fill lower-wage jobs. A major upstate
New York employer indicated that it has had difficulty
retaining IT workers, losing them to remote work opportunities in other parts of the country.
Prices
Firms’ input prices have accelerated since the beginning
of the year, particularly among businesses in the manufacturing and construction sectors. In particular, prices of
metals and construction materials are said to have escalated substantially. Businesses in most sectors expect
fairly widespread increases in the prices they pay in the
months ahead.
Businesses in most sectors—particularly construction
and leisure & hospitality—have continued to report
weakening employment. The exceptions were manufacturing, information, finance, and retail, where employment was reported to be little changed. Looking ahead,
however, a growing proportion of businesses reported
plans to add staff, on net, especially in the leisure &
hospitality sector.
Selling prices have picked up modestly, primarily among
retailers, wholesalers, and manufacturers. Looking
ahead, businesses in these same sectors plan further
price increases.
Consumer Spending
Consumer spending has remained sluggish thus far in
2021. Retailers largely report that sales have been flat at
depressed levels. However, retail contacts have become
substantially more optimistic about the near-term outlook.
Wages have accelerated further, with more businesses
raising wages than at any time since the start of the
pandemic. Wage increases were most widespread in the
education & health, retail, finance, and transportation
sectors. A number of contacts stated that the January
1st minimum wage hike across much of the District, as
well as generous unemployment benefits, have put
New vehicle sales were mixed but, on balance, up slightly, with scattered reports of improvement across upstate
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Federal Reserve Bank of New York
Real Estate and Construction
New York. In contrast, used auto sales have weakened.
Contacts reported lean inventories and expressed concern about inventory issues related to a shortage of
microchips used in new vehicles.
Housing markets have remained mixed but generally
robust in the latest reporting period. Sales markets in
upstate New York have remained solid in early 2021,
with homes selling quickly and lean inventories continuing to drive up prices. Home-sales activity in areas
around New York City has remained strong, though
restrained by record-low inventory levels, with prices up
considerably from a year ago but leveling off.
Consumer confidence among residents of the Middle
Atlantic region (NY, NJ PA), which had fallen to a multiyear low in November and December, rebounded moderately in January.
Manufacturing and Distribution
New York City’s co-op and condo market has picked up
noticeably in terms of volume, but with prices running 510 percent below year-earlier levels, as inventory remains elevated. Both the steepest price drops and the
strongest activity have been at the high end of the market. New York City’s residential rental market has continued to slacken, with rents down 10-15 percent from a
year ago in Brooklyn and down 20-25 percent in Manhattan and Queens. Rental vacancy rates across New York
City are reported to be at multi-decade highs. However,
leasing activity has been increasingly robust, with this
January being the liveliest in more than a decade.
Manufacturing activity picked up somewhat in January
and early February, expanding at a moderate pace. In
contrast, wholesale trade contacts reported flat activity,
and businesses in transportation & warehousing noted
some weakening. A large and growing number of firms in
these sectors reported supply disruptions and delays—
particularly in getting shipments from overseas.
Looking ahead, manufacturers and wholesalers remain
widely confident about business prospects for the first
half of 2021, while transportation & warehousing contacts have now also become more optimistic.
Commercial real estate markets have weakened further,
across the District. Retail and office markets have been
particularly weak in New York City, where vacancy and
availability rates have soared and asking rents have
continued to decline, with landlords reportedly offering
increased concessions.
Services
Service industry contacts noted ongoing weakening in
business activity in the latest reporting period. Contacts
in the information, and leisure & hospitality sectors continued to report fairly widespread declines in activity,
while those in education & health and professional &
business services reported more moderate declines.
Looking ahead, professional & business service firms
expressed widespread optimism about prospects for the
first half of 2021, while those in other industries have
grown somewhat more optimistic and expect moderate
improvement.
New construction activity has remained sluggish in both
the residential and commercial segments. Contacts in
the construction industry noted widespread weakening in
activity, possibly exacerbated by harsh weather, and
they remain somewhat pessimistic about the near-term
outlook. Contacts continued to report sharp increases in
the cost of materials, as well as supply disruptions.
Tourism in New York City has shown more signs of
picking up, though from depressed levels. The decline in
the spread of the pandemic and increased vaccinations
in recent weeks have prompted some easing in restrictions on indoor dining. The closing of many hotels
catering to business travelers has contributed to a nearly
one-third reduction in hotel capacity since the pandemic
began. Hotels that have remained open have reported
rising occupancy rates on weekends, reflecting increased leisure travel. In fact, the occupancy rate over
Presidents’ weekend exceeded 60 percent—the highest
since the start of the pandemic. Museums that are open
have reportedly been at or near capacity, albeit reduced
capacity. A local travel industry expert anticipates a
strong rebound in leisure visitors by summer but expects
business travel to lag.
Banking and Finance
Contacts across the broad finance sector continued to
report weak conditions but expressed somewhat more
optimism about the near-term outlook. Separately, small
to medium-sized banks in the District reported increased
loan demand across all categories except consumer
loans. Banks reported no change in credit standards on
consumer loans but tightening standards for all other
categories. Finally, delinquency rates held steady for C&I
loans but improved across all other categories. ■
For more information about District economic conditions visit:
www.newyorkfed.org/regional‐economy
B-2
Federal Reserve Bank of
Philadelphia
The Beige Book ■ February 2021
Summary of Economic Activity
On balance, business activity in the Third District rebounded to a modest pace of growth during the current Beige Book
period – the first significant growth since midsummer. However, activity in most sectors remained below levels observed
prior to the onset of the COVID-19 pandemic. Net employment appeared to rise slightly after falling slightly in the prior
period. Positive wage and price growth trends increased to modest and moderate paces, respectively. Economic gains
appeared to reflect waning COVID-19 cases and the relaxation of some business restrictions. However, firms continued
to cite disruptions at production sites, consumer outlets, and along supply chains. Moreover, wintry weather conditions
have constrained growth in several sectors. More than half of the firms expressed positive expectations for modest
growth over the next six months – the percent broadened further among nonmanufacturing firms but narrowed among
manufacturers.
Employment and Wages
salary spectrum. While several contacts worry about a
potential minimum wage increase, one contact said that
wages were rising because of demand for labor – “the
$15.00 minimum is already here.” Another pointed to job
ads offering $23 an hour for warehouse jobs.
Employment appeared to increase slightly overall –
rebounding from a slight decrease in the prior period.
The share of nonmanufacturing firms reporting employment increases for full-time employees just edged out
those reporting decreases. Among the manufacturers,
employment increases broadened to nearly one-third of
the reporting firms, while reported job declines waned.
Moreover, average hours worked rose for a larger share
of all firms.
Prices
On balance, prices appeared to rise moderately over the
period – following a modest increase in the prior period
and modest increases over most of the prior year. Over
half of the manufacturers reported higher prices for
factor inputs, but less than one-third received higher
prices for their own products. Similarly, about one-third
of the nonmanufacturers reported that prices rose for
their inputs, and less than one-tenth noted higher prices
received from consumers for their own goods and services. Most firms noted no change in prices.
Staffing firm contacts reported that strong demand continued for new orders, while qualified job candidates
remained a challenge to hire and retain. Employers
confirmed data reports that a significant portion of the
potential labor force remains sidelined by childcare
responsibilities, especially women. Contacts also noted
some loss of experienced employees to other firms.
Moreover, staffing firms noted an increase in the number
of their own temp placements that are being hired by
clients into full-time positions.
Most respondents continued to cite COVID-related disruptions in production and supply chain logistics as
primary reasons for shortages and price spikes of various commodities, including some agricultural products,
building materials, cleaning products, and microchips.
Wages picked up modestly, after maintaining a slight
pace of growth since midsummer. The percentage of
nonmanufacturing firms reporting higher wage and benefit costs per employee broadened to nearly one-third.
Just over half of the firms reported no change. Staffing
firms reported that wages were increasing across the
Looking ahead one year, firms now anticipate receiving
moderately higher prices for their own goods and services – a significant increase from one quarter earlier.
Firm expectations also pegged compensation paid to
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Federal Reserve Bank of Philadelphia
workers as moderately higher; firm expectations for
consumer inflation were somewhat lower.
home mortgages fell slightly. Commercial and industrial
loans fell modestly, while home equity lines continued to
fall moderately. Other consumer loans rose modestly.
Seasonal factors drove credit card volumes down
sharply – at a greater pace than over the same period
in 2020.
Manufacturing
On average, manufacturing activity appeared to pick up
to a moderate pace of growth following a period of no
growth. More than 40 percent of the firms reported increases of shipments and new orders. Although some
firms have reported increased demand for their products
through the pandemic, manufacturing activity as a whole
remained below pre-pandemic levels.
Bankers, accountants, and bankruptcy attorneys continued to report relatively few problem loans. The Paycheck
Protection Program and other stimulus programs were
often credited for keeping firms and households afloat.
However, most contacts anticipate delinquencies and
bankruptcies to increase in the future. In another sign of
stress, Pennsylvania utilities have reported that nearly
1 million customers are late on payments, but they are
shielded from cutoffs by a routine winter moratorium in
effect until the end of March.
Several contacts noted that demand was increasing
across most sectors from countries throughout the world.
Plant operations continued to be plagued by COVID-19
outbreaks and supply chain disruptions. Contacts noted
that backlogs have grown and delivery times have
lengthened.
Real Estate and Construction
Consumer Spending
Homebuilders reported moderate growth in contract
signings stemming from strong demand across all demographics. Contacts noted challenges to production,
ranging from land acquisition to cost of lumber to availability of window packages to scheduling of specialized
tradespeople. Existing home sales continued to grow
modestly. Limited inventories continued to constrain
otherwise strong demand and drive prices higher.
Nonauto retail sales appeared to rebound slightly as
COVID-19 cases and operating restrictions eased. However, wintry weather limited the snap back in consumer
spending.
Auto dealers cited snowstorms as they reported modest
declines in year-over-year sales. Much more positive
comparisons are anticipated over the next half year
against months in which operations were restricted by
states. However, dealers are concerned about the supply of new models because of the shortage of microchips
needed for production.
Philadelphia’s commercial construction activity appeared
to have slowed slightly. The project pipeline and
COVID-19 safety protocols continue to support levels at
about 80 percent of the prior year.
Overall, tourism appears to have rebounded slightly but
remains constrained by travel and operating restrictions.
Contacts noted significant pent-up demand and drew
confidence from increases in advanced bookings. Activity is expected to grow as herd immunity is achieved –
first for trips to see the grandchildren and for other leisure travel by the initial wave of senior vaccine recipients.
Commercial leasing activity slowed slightly after falling
moderately in the prior period. Contacts continued to
note uncertainty about the future demand for office
space and don’t expect clarity until large downtown
offices are able to resume normal operations. ■
Nonfinancial Services
On balance, nonmanufacturing activity appeared to pick
up to a modest pace of growth following a modest decline in the prior period. About one-fourth of the firms
reported increases of sales and new orders. On balance,
the firms continued to report that output remains below
pre-pandemic levels.
Financial Services
The volume of bank lending fell modestly during the
period (not seasonally adjusted); in the same period in
2020, by contrast, loan volumes grew modestly. Commercial real estate and auto lending were flat, while
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 ■ February 2021
Summary of Economic Activity
The District’s economy regained momentum after it had slowed in the previous reporting period. Customer demand in
the current period proved to be better than what contacts had expected, reflecting declining numbers of coronavirus
infections and various fiscal relief measures. That said, activity remains below prepandemic levels for most firms. In
addition, many firms, particularly those in construction, retail, and manufacturing, reported that delayed deliveries from
suppliers and coronavirus-related employee outages constrained their output. Hiring activity was modest, even though
customer demand improved, and wage pressures increased moderately. Nonlabor costs rose strongly as supply chain
disruptions coincided with stronger demand for inputs. Selling prices rose moderately as firms attempted to keep up with
mounting input costs. Looking ahead, contacts expected moderate improvement in customer demand over the next
couple of months, and they expected stronger gains in the second half of the year as coronavirus vaccines are more
widely distributed.
Employment and Wages
Prices
Staff levels increased modestly, on balance, and hiring
activity cooled somewhat despite the pickup in business
activity. Labor demand varied across sectors. In the
freight sector, labor demand was especially strong, and
many firms noted they would like to hire more drivers but
experienced shortages. By contrast, labor demand was
weakest in financial services, wherein several firms
reported they were cutting costs and reducing their
physical footprints. Consistent with activity in the last
several reporting periods, a number of firms in manufacturing, retail, and construction noted that they wanted to
add staff but found it difficult to fill open positions. Aside
from typical staffing challenges, one in four firms reported that coronavirus-related staff outages impeded their
ability to meet customer demand. Such reports were
more common among manufacturers and construction
firms where close to one third of firms expressed these
difficulties.
Reports suggest that upward pressure on costs and
selling prices increased since the last report. Nonlabor
costs rose strongly during this period, a change from the
last several periods when costs were reported to have
risen moderately. Manufacturers and construction firms
indicated that steel and lumber costs continue to increase significantly. Other input costs also rose, including for aluminum, copper, resins, and some concrete
products. Many firms attributed these price increases to
supply chain disruptions occurring at the same time as
demand was improving. Finally, firms in a range of sectors reported that transportation costs were up significantly because of capacity constraints among shippers
and higher fuel costs.
Selling prices rose moderately, on balance, and a greater share of firms reported they increased their prices as
compared with the share in the previous report. Price
hikes were most prevalent among freight haulers, who,
faced with very strong demand and tight capacity in the
industry, were able to command higher prices with ease.
Many construction and manufacturing firms raised their
prices to keep up with escalating input costs, although
several of them were concerned that doing so would not
be adequate to preserve their margins. Price changes for
consumer goods and services were less pronounced
Overall, upward pressure on wages was moderate, and
more firms reported increasing wages than at any point
in the pandemic. Pay raises were often between 2 percent and 3 percent, although several retailers and manufacturers commented that there were pockets of more
sizeable increases for lower-wage workers and some
skilled tradespeople such as machinists.
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Federal Reserve Bank of Cleveland
than for goods producers and transportation firms. Auto
dealers commented that low inventories of vehicles
continue to push up prices for new and used cars. Department stores and apparel retailers said they reduced
their sales promotions. By contrast, most restaurants
and hotels held their prices. Professional services firms
broadly held their prices, as they have done for several
reporting periods.
distribution space increased. By contrast, activity in the
office and retail segments remained weak. Contacts
anticipated that nonresidential construction and leasing
activity would improve modestly in the next few months.
Financial Services
Banking activity increased moderately. Contacts noted
that low interest rates continued to support demand for
mortgages. Also, the current round of the Paycheck
Protection Program (PPP) boosted lending to businesses, although some bankers commented that demand for
the program was not as strong this round as it was in the
first round. Aside from the PPP, demand for business
loans was reportedly flat. Lenders indicated that delinquency rates for commercial and consumer loans were
still low because of forbearance agreements and various
fiscal relief measures, although some noted that delinquency rates were slightly up from those of two months
ago. Multiple contacts reported that core deposits increased as customers deferred spending and investment. Looking ahead, bankers were optimistic that loan
demand would pick up in the near term and even more
so later in the year as more coronavirus vaccines are
distributed.
Consumer Spending
Reports suggest that consumer spending improved
following weaker activity in the previous reporting period.
The lifting of government-mandated restrictions on operating hours improved business activity somewhat for
restauranteurs. Sales for general merchandisers and
apparel retailers were slightly better recently, although
some noted that in-store sales remained soft. Auto dealers said that low inventories were limiting sales, while
hoteliers indicated that the lack of business travel continued to delay the sector’s recovery. Contacts were cautiously optimistic that consumer spending will continue to
recover in the coming months thanks to additional fiscal
stimulus and the apparent drop in coronavirus infections.
Manufacturing
Professional and Business Services
Manufacturing orders increased moderately, on balance,
although demand varied by industry segment. Contacts
noted that demand for home goods, shipping materials,
construction equipment, and logistics equipment was
particularly strong. By contrast, demand for products
related to commercial aerospace and to oil and gas
production remained depressed. Many manufacturers
experienced delayed deliveries of inputs, which impeded
their ability to meet demand. Most manufacturers expected that demand will improve over the coming
months, although many were concerned about rising
input costs and turnover of entry-level employees.
Demand for professional and business services continued to increase, albeit at a slower pace than in the last
reporting period. Authentication and cloud services and
human resources and payroll software providers all
continued to benefit from the shift toward more remote
work and online purchases. One contact noted that
demand for the firm’s cloud offerings increased significantly because many firms have begun to outsource
certain functions to software vendors rather than investing in their own IT resources or equipment. Contacts
anticipated further increases in activity in the coming
months as the economy continues to recover and more
firms shift to remote channels of commerce and communication.
Real Estate and Construction
Housing demand remained strong, thanks partly to low
interest rates. Homebuilders also indicated that low
inventories of existing homes motivated consumers to
move forward with new-home construction. One contact
commented that demand for suburban homes had increased. Despite the strong level of activity, a significant
share of homebuilders experienced delayed deliveries
from suppliers that resulted in extended lead times.
Contacts anticipated sales would remain strong through
the spring as pent-up demand is released. However,
there was some concern that rising prices would eventually price some buyers out of the market.
Freight
Demand for freight services increased strongly, and
contacts expect the high level of activity to persist in the
near term. Contacts commented that activity was driven
by stronger import volumes, continued demand from
home construction suppliers, and customers’ replenishing their inventories. On the downside, several firms said
their deliveries to customers were delayed because they
struggled to find qualified drivers. ■
Nonresidential construction and real estate activity
edged higher, on balance, as demand for industrial and
For more information about District economic conditions visit:
www.clevelandfed.org/region
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Federal Reserve Bank of
Richmond
The Beige Book ■ February 2021
Summary of Economic Activity
The Fifth District economy continued to grow at a modest rate. On balance, manufacturers reported modest growth in
shipments and new orders, with some food and furniture manufacturers experiencing strong growth. Port volumes increased further from already-high levels. Trucking volumes rose modestly and were constrained by shortages of drivers
and trailers. Retail sales declined modestly as many stores experienced low foot traffic and supply chain issues affecting
inventories. Travel and tourism picked up modestly and short term rentals saw increased occupancy rates. Sales of both
existing and new houses increased, as did prices, but sales growth was limited by low inventory levels. Commercial real
estate leasing rose modestly and contacts saw new interest in vacant restaurant spaces. Lending activity declined
slightly as demand for commercial real estate loans remained soft and residential demand slowed down due to the low
inventory of available homes for sale. Demand for nonfinancial services increased moderately, overall, with some sectors seeing strong demand, such as technology consultancy services. Employment rose slightly as firms struggled to
find employees to fill open positions and were reluctant to raise wages. Only a few manufacturers reported slight increases in wages in recent weeks. Prices increased at a moderate rate as firms faced increased costs of raw materials
and non-labor inputs. Food manufacturing inputs and construction materials prices were particularly high and increased
further in recent weeks.
Employment and Wages
Manufacturing
Employment in the Fifth District rose slightly since our
previous report. Many contacts reported having difficulties finding workers, with several of them noting that
fewer women were returning to their jobs due to childcare and homeschooling needs while others cited skills
mismatches as a hinderance. One contact said that there
were many hospitality workers out of a job and manufacturers who need workers, but those skills don’t easily
translate. Additionally, a staffing agency contact believed
that workers were hesitant to change jobs right now and
firms were unwilling or unable to raise wages. Indeed,
there were few reports of firms raising wages outside of a
few manufacturers that reported slight wage increases.
Manufacturing in the Fifth District grew modestly since
our last report as shipments and new orders increased.
Furniture and food manufacturers had particularly strong
business and were often unable to meet demand. Many
firms reported supply chain disruptions as shortages of
materials and packaging, both domestic and imported,
led to longer lead times and higher input prices. Some
manufacturers were also constrained by labor shortages
and employee absences. Several manufacturers reported transportation delays and high prices both from trucking and from sea transport.
Ports and Transportation
Shipping volumes strengthened somewhat from already
high levels since our last report, with import volumes
remaining well above export volumes. Contacts reported
strong growth in imports and modest growth in exports,
noting export growth was constrained by a shortage of
shipping containers. Import volumes of furniture, perishable food, and toys were particularly high. Autos and
lumber showed strength on the export side. An airport
contact reported that there are not enough cargo planes
to meet demand, leading companies to use passenger
planes for cargo shipments.
Prices
Prices rose moderately in recent weeks. According to our
most recent surveys, manufacturers and service sector
firms reported increases in over-the-year growth of prices
received, which slightly exceeded two percent. Manufacturers experienced a sharp increase in input prices paid,
some of which were explained by supply shortages and
some by strong demand. Food manufacturers noted
rising prices for some raw materials while meat prices
remain at historically high prices. Construction materials
prices, lumber in particular, rose from already-high levels.
Fifth District trucking volumes rose modestly in recent
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Federal Reserve Bank of Richmond
weeks. Companies were unable to meet demand and
had to turn away business as driver shortages and
delays in acquiring new and replacement trailers limited
capacity. Shipping rates increased, and customers
offered to pay extra to have their goods shipped. Firms
saw increased shipments in a broad range of goods,
with particular strength in home goods such as furniture,
appliances, and building materials. Meanwhile, spot
market demand and rates remained high.
businesses looked to add locations, and vacated restaurant space sparked interest. Office tenants continued to
ask for short-term lease renewals, and many downsized,
but others added space and some landlords found new
clients. Industrial leasing was very strong, as inventories
were low and new construction continued. Multifamily
leasing remained soft, with some landlords upping incentives and reducing rent.
Retail, Travel, and Tourism
Overall, loan activity declined slightly for this period.
Respondents indicated tepid conditions for commercial
real estate lending. Business lending picked up slightly
despite companies being uncertain about economic
conditions and less demand for round three of PPP
funding. Mortgage volume remains strong but down from
previous periods due to the limited supply of available
homes for sale. Deposit growth was tempered as financial institutions reduced rates on interest bearing accounts. Overall credit quality and delinquencies remained good despite an ending of most deferrals and
forbearances. The respondents reported increased
competition as financial institutions are struggling for
loan growth.
Banking and Finance
Retailers in the Fifth District saw modest declines in
business in recent weeks, and sales remained well
below pre-pandemic levels for most retailers. Many
contacts reported supply chain issues, including longer
lead times and higher prices of inventories. Several
retailers, such as clothing and jewelry stores, saw very
low foot traffic and depressed sales. However, hardware
stores, food providers, and furniture shops reported
strong demand, and some looked to expand. Meanwhile, auto sales were constrained by low inventories of
new vehicles, but low supply increased profit margins
Travel and tourism in the Fifth District increased modestly since our last report but remained below prepandemic levels. Restaurants saw healthy demand but
struggled with capacity constraints on indoor dining and
cold weather affecting outdoor dining. Outdoor attractions such as ski resorts saw strong visitation, and some
indoor attractions reopened with limited hours. Hotel
rates and occupancy remained low. Lack of business
travel and conventions persisted, but one contact noted
increased travel for weddings and athletic events. Short
term rentals saw increased occupancy, and in some
beach destinations, rentals were already booked
through the summer.
Nonfinancial Services
On balance, the demand for nonfinancial services increased moderately in recent weeks. A technology consulting firm saw robust growth and the demand for health
services remained high. A digital marketing contact
noted a recent uptick in radio advertising from local
restaurants and small businesses, particularly from
home improvement and repair companies. College enrollment, on the other hand, was down considerably. The
president of a community college in North Carolina said
that majority of the students not returning were black or
Hispanic and enrollment in high school equivalency
programs was down the most substantially. ■
Real Estate and Construction
Home sales in the Fifth District increased modestly since
our last report and were well above pre-pandemic levels.
Inventories of both new and existing homes were very
low, as demand exceeded supply. Prices continued to
increase sharply, and average days on the market decreased. Realtors reported that houses frequently sell
within an hour, often sight-unseen. Many builders limited
the number of houses they sold each week so as to
have some inventory available in the spring market.
Construction of new homes was strong, but long lead
times for appliances led to delays and some houses
closing before appliances arrived.
Fifth District commercial real estate leasing increased
modestly in recent weeks but was below year-ago levels. While retail vacancies remained elevated, more
For more information about District economic conditions visit:
www.richmondfed.org/research/data_analysis
E-2
Federal Reserve Bank of
Atlanta
The Beige Book ■ February 2021
Summary of Economic Activity
Economic activity in the Sixth District expanded modestly, on net, from January to mid-February. Labor markets improved some as employers added to headcounts, and wage pressures remained muted. Increases in certain nonlabor
costs were noted, and pricing power among firms was mixed. Retailers reported continued strong demand in home
furnishings and recreational products. Online sales continued to outpace brick-and-mortar sales. Auto sales increased,
exceeding expectations. Tourism contacts saw an uptick in activity over the reporting period as domestic travel rebounded slightly. Demand for housing remained robust, inventories of new and existing homes fell, and home prices rose.
Commercial real estate markets were mixed. Manufacturing activity accelerated as new orders and production levels
increased. Conditions at financial institutions were stable, but loan demand weakened.
Employment and Wages
Prices
On balance, contacts indicated that employment levels
and hours worked rose modestly over the reporting
period. Most reported that employment levels were even
with or below pre-pandemic levels, and about half of
contacts expect to increase employment levels slowly as
demand improves. Large leisure and hospitality firms
reported a strong willingness from furloughed employees
to return to work when called back. Among firms planning to reduce employment levels over the coming
months, most planned to downsize through attrition
rather than layoffs. Those hiring indicated that most jobs
were easy to fill with the exception of lower-skilled positions, nurses, and long-haul drivers. The remote work
stance was largely unchanged since the previous report,
and several noted that this has allowed them to fill higher
-skilled positions more easily. Many firms indicated that
they planned to encourage employees to get the COVID19 vaccine but at this point would not require it. Some
contacts were offering paid time off to get the vaccine or
were looking to provide the vaccine onsite.
Consistent with previous reports, input costs, particularly
for lumber and steel, continued to rise notably over the
reporting period. Transportation and shipping costs
continued to increase as well, with some contacts noting
supply chain constraints creating upward cost pressures.
Reports on pricing power were mixed. Sectors such as
construction, manufacturing, and transportation that
were affected by rising input costs implemented increases, while others were unable or unwilling to raise prices.
The Atlanta Fed’s Business Inflation Expectations survey
showed year-over-year unit costs increased notably to
2.1 percent in February, up from 1.8 percent in January.
Year-ahead expectations remained relatively unchanged
at 2.2 percent.
Consumer Spending and Tourism
Home furnishings and recreation goods retailers reported a continuation of strong demand that began last
March. Online sales continued to grow at a faster pace
than brick and mortar sales. Auto sales in January outpaced expectations, and dealers reported a positive
outlook for the balance of 2021; however, suppliers to
the industry noted that shortages of semiconductors
could impact future volumes.
Most contacts noted that wage pressure remained subdued. Shortages of nurses, skilled trades workers, warehouse workers, and commercial drivers were putting
upward pressure on wages in those occupations according to several contacts. In Florida, most employers anticipate little impact from the mandated increases in the
minimum wage (by 2026), although a few noted they
were investing in capital to replace some of this labor.
Many expect normal merit increases during 2021, with
higher increases in critical and high-demand fields.
Travel and tourism contacts reported a slight uptick in
activity since the previous report. Domestic travel rebounded slightly and is expected to continue to strengthen as the COVID-19 vaccine is more widely distributed.
Contacts expect that leisure travel will begin to normalize
towards the end of summer, while business travel is
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Federal Reserve Bank of Atlanta
expected to pick up in the fourth quarter of 2021 but
remain well below pre-pandemic levels.
Banking and Finance
Conditions at financial institutions were steady. Net
interest margins stabilized even as loan yields declined
due to lower funding costs. Earnings also improved
slightly as a result of lower provisions for credit losses.
Loan growth declined due to tepid demand, especially
among commercial customers, resulting in higher balances in banks’ cash accounts and securities portfolios
amidst healthy deposit growth. Despite concerns that
increased unemployment levels might negatively impact
loan payments, credit quality stayed strong at most
banks. Customer loan payment performance continued
to improve, with some banks reporting extremely low
past due loan levels; however, retail delinquencies were
still elevated in comparison to other commercial borrowers.
Construction and Real Estate
The District’s housing market maintained its momentum
as rising home sales continued to be fueled by low interest rates. In many markets, sales increased sharply from
a year ago. Inventory shortages were prevalent as available homes for sale did not keep pace with demand.
New home construction also fell short of market demand,
and shortages of lots, materials, and labor increased
costs for builders. As a result, both existing and new
home prices have experienced significant upward pressure. Though low rates have helped offset rising prices,
home ownership affordability declined overall. The level
of mortgage delinquencies, while elevated due to the
pandemic, remained stable over the reporting period.
Energy
Commercial real estate (CRE) contacts reported that the
sector continued to be hampered by the effects of the
pandemic; however, some areas of CRE showed improvement. Conditions in the retail sector improved
modestly and rent collections recovered from the dismal
results experienced in mid-2020. Multifamily conditions
were mixed; however, leasing activity appeared to be
picking up in some of the harder hit areas. The hospitality sector continued to be negatively impacted by low
levels of tourism. Banks reported that financing for commercial projects was available and demand for new
construction rose.
In parts of the District, residents and businesses grappled with power outages and rolling blackouts during mid
-February winter storms. Refiners, chemical manufacturers, and liquified natural gas producers in Southwest
Louisiana were forced to idle production. Fuel carriers in
the region reported a severe backlog of deliveries as
hazardous road conditions, power outages, and terminal
shutdowns created delivery congestion and delays.
Crude oil production was steady, and oil and gas rig
counts gradually picked up. Contacts described a moderate recovery of consumer demand for petroleum products. However, refiners continued to experience low
utilization resulting from weak global demand for refined
products. Some refiners took production offline while
others were forced to consolidate or shut down completely. Renewables remained strong, with considerable
solar, wind, and battery storage projects in the works
across the country. Within the utilities sector, contacts
noted energy usage remained sensitive to COVID-19
conditions. More broadly, though, energy contacts continued to express optimism about COVID-19 vaccinations stimulating economic activity.
Manufacturing
Manufacturing firms indicated that business activity
accelerated since the previous report. Contacts reported
an increase in new orders and production levels, while
purchasing managers continued to see longer supply
delivery times and slightly elevated finished inventory
levels. Expectations for future production remain optimistic, with almost two-thirds of contacts expecting higher
levels of production over the next six months.
Transportation
Agriculture
On balance, transportation activity was consistent with
the previous report. Railroads noted further improvements in overall traffic buoyed by double-digit increases
in intermodal shipments. Freight brokerage firms reported robust demand and revenue growth as limited trucking capacity boosted rates per mile. Port contacts noted
record container volumes amid surges in imports and an
uptick in exports. Trucking contacts continued to benefit
from strong demand for consumer staples; however,
driver shortages remained a constraint in the industry
despite rising wages. Inland barge and relocation contacts, however, continued to experience challenges due
to COVID-19, and a return to pre-pandemic levels of
activity is not expected until 2022 or beyond.
Agricultural conditions remained mixed. Abnormally dry
conditions prevailed across much of the District. On a
month-over-month basis, the February production forecast for Florida's orange crop was up while the grapefruit
production forecast was unchanged; both forecasts were
below last year's production. The USDA reported yearover-year prices paid to farmers in December were up
for corn, cotton, rice, and soybeans but down for cattle,
broilers, eggs, and milk. On a month-over-month basis,
prices increased for corn, cotton, rice, soybeans, cattle,
and broilers, but decreased for eggs and milk.■
For more information about District economic conditions visit:
www.frbatlanta.org/economy-matters/regional-economics
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Federal Reserve Bank of
Chicago
The Beige Book ■ February 2021
Summary of Economic Activity
Economic activity in the Seventh District increased modestly in January and early February but remained below its prepandemic level. Contacts expected growth to pick up in the coming months, but most did not expect to see full recovery
until at least the first half of 2022. Manufacturing and consumer spending increased moderately; business spending and
construction and real estate increased slightly; and employment was little changed. Wages and prices rose modestly.
Financial conditions were little changed. Contacts expected agricultural income to be solid in 2021.
Employment and Wages
ing contacts reported large price increases for primary
metals and metal products, particularly copper and steel.
Energy prices increased, with some prices spiking because of cold weather.
Overall, employment was little changed over the reporting period, though contacts expected a moderate increase over the next 12 months. Contacts reported that
staffing challenges related to COVID-19 cases or exposures and childcare needs had become less severe. In
addition, a staffing firm that primarily supplies manufacturers with production workers noted that reduced risk of
contracting COVID-19—because of modifications to
worksites, training, and falling case counts—was helping
support the supply of workers. That said, many contacts
continued to experience difficulty in hiring workers, especially at the entry level. One electronics manufacturer
was still struggling to fill open positions despite implementing training programs and building relationships with
technical schools. Several contacts expressed concern
that unemployment benefits were putting a damper on
worker availability. Wages across skill levels and benefits costs increased modestly.
Consumer Spending
Consumer spending increased moderately on balance
over the reporting period. Nonauto retail sales increased
moderately, supported by robust demand in the home
improvement, appliances, furniture, and sporting goods
segments and a pickup in sales at apparel and discount
stores. Contacts said that stimulus checks received as
part of the federal coronavirus relief bill passed in December helped increase activity. While e-commerce
continued to be strong, contacts also noted an increase
in brick-and-mortar sales as the decline in COVID-19
cases made some consumers feel safer shopping instore. Light vehicle sales were up modestly, with low
inventories of many popular models leading to price
increases. Demand for travel, hospitality, and other
leisure-related activities remained weak.
Prices
Prices increased modestly overall in January and early
February, and contacts expected a moderate increase in
prices over the next 12 months. Consumer and producer
prices both increased modestly. Input costs, however,
increased moderately, driven by rising prices for raw
materials, shipping, and energy. Numerous manufactur-
Business Spending
Business spending increased slightly in January and
early February. Inventory levels continued to be lean in
many retail segments due to high demand. Contacts
anticipated that vehicle inventories would decline even
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Federal Reserve Bank of Chicago
further because a shortage of microchips had slowed
production, and dealers expected inventory levels to be
uncomfortably low until at least the second half of the
year. Manufacturing inventories were generally at comfortable levels, though several contacts reported supply
chain issues related to raw materials (particularly steel
and copper), microchips, and specialty parts. Capital
expenditures were little changed overall. And while some
said they were holding back because of uncertainty over
the pandemic, contacts overall expected a moderate
increase in their capital spending over the next twelve
months on the anticipation that the pandemic will continue to recede. Demand for transportation services increased slightly on top of a high level. Contacts continued to report that bottlenecks in shipping, particularly at
West Coast ports, were causing delayed deliveries.
There was a small increase in commercial and industrial
energy consumption.
for heavy machinery remained flat, while demand for
heavy trucks increased moderately.
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, with declines concentrated in
commercial real estate and in leisure and hospitality.
That said, contacts noted that round two of the Paycheck
Protection Program was supporting activity. Business
loan quality edged down, with declines reported in the
commercial real estate, hospitality, and retail sectors.
Business loan standards tightened slightly overall. In
consumer markets, loan demand decreased slightly,
though residential mortgage activity remained strong.
Standards for consumer loans tightened slightly and loan
quality remained unchanged on balance. A contact at an
organization that assists consumers in obtaining home
loans noted that many clients who were participating in
the federal government’s COVID-19 mortgage forbearance program were concerned about whether their incomes would recover enough for them to resume making
payments in June, when the program is set to expire.
Construction and Real Estate
Construction and real estate activity increased slightly on
balance over the reporting period. Residential construction was flat, but the level of activity remained high.
Contacts noted that difficulties in obtaining building materials, especially steel and lumber, were pushing up
costs and slowing construction activity. Residential real
estate activity increased slightly, with reports that tight
inventories were holding back sales. Home prices and
rents increased modestly on balance, though contacts in
parts of the District reported that some homes were
receiving multiple offers and selling for well over asking
price. Nonresidential construction activity increased
modestly. Contacts in southeast Michigan said there was
a noticeable increase in industrial and warehouse construction in vacant areas of Detroit. Commercial real
estate activity was flat. The office sector continued to
struggle. Contacts indicated that some office tenants
were downsizing their footprint in response to the pandemic. There were also reports of leasing deals that
included long periods of free rent. Prices and rents fell
slightly, and the availability of sublease space increased
slightly.
Agriculture
Contacts expected agricultural income to be solid in
2021, though down some from 2020’s strong results:
Direct income from agricultural products could be higher
in 2021, but federal government payments were expected to be lower. Corn, soybean, and wheat prices
moved up during January and early February. Higher
crop revenues helped boost demand for farm equipment,
and there were reports of low inventories of new equipment in some areas. Cattle and hog prices also moved
up from the prior reporting period. Dairy prices were
generally down, and producers faced uncertainty regarding demand from government food programs and
schools. Looking ahead, recent adverse weather was
expected to support prices, particularly for milk and
cattle. Cold weather boosted costs for District farmers;
more generally, contacts reported rising input costs for
both crop farmers and livestock producers driven by
higher fertilizer and feed prices. Farmland values continued to increase strongly. ■
Manufacturing
Manufacturing production increased moderately in January and early February, with overall activity approaching
pre-pandemic levels. Auto output slowed despite solid
demand because of supply chain problems. Production
of steel and aluminum increased moderately, responding
to a broad increase in demand across most manufacturing subsectors. Manufacturers’ sales of specialty metals
increased moderately, driven by demand from the automotive, construction, and agriculture sectors. Demand
For more information about District economic conditions visit:
chicagofed.org/cfsbc
G-2
Federal Reserve Bank of
St. Louis
The Beige Book ■ February 2021
Summary of Economic Activity
Reports from contacts indicate that economic conditions have been generally unchanged since our previous report.
Firms continue to report mixed changes in employment levels. Firms reported difficulties attracting candidates for positions despite increasing wages. Inflation pressures have increased, as contacts reported moderate increases in prices;
however, most contacts believe it will be difficult to pass on further price increases. Overall, contacts’ outlooks continued
to improve and are generally optimistic. Most cited a high degree of uncertainty about the pace of recovery, which related primarily to the pace and efficacy of vaccinations.
Prices
Employment and Wages
Prices charged to consumers have increased moderately
since our previous report. However, contacts believe
they have less ability to further increase prices. A regional grocer reported lowering some prices due to competitive pressures and making up profits on higher volumes.
A restaurant contact reported an inability to increase
prices amid already slow business. A supplier for a contact in the graphic design industry unexpectedly increased the prices for paper and packaging products.
Multiple contacts noted the price of silver has increased.
A contact in the jewelry industry reported this increase
will lead to higher prices to consumers but is allowing
customers to switch to brass. A manufacturing contact
noted the increase in silver prices has increased the
costs of producing its antimicrobial products. Contacts
also noted that ocean freight costs have more than doubled, which a warehouse contact believes will lead to
higher prices for consumers. A retail industry contact is
passing increased shipping costs to consumers. Contacts also reported higher steel and soft-lumber prices
since our previous report. A warehouse contact expects
the elevated price of steel to increase the cost of maintenance and replacement for the company’s forklift fleet.
Employment trends have been mixed since the previous
report. On net, 12 percent of respondents reported
employ-ment levels lower than a year ago. Contacts
noted stag-nant or declining employment, especially
among small businesses and leisure and hospitality
firms, with contin-uing closures in a slower-thanexpected recovery. Trans-portation and manufacturing
firms reported their desire to expand their workforce has
been stymied by a scarcity of workers. Many contacts
ascribed this scarcity to unemployment benefits and
other government aid: A grocery store contact expects
some warehouse workers will quit when they receive
another stimulus check, looking to return to work at a
later time. Some reported turning to automation, with one
contact emphasizing that robots were doing jobs for
which they couldn’t find workers. COVID-19 exposure
has also depressed existing work-ers’ hours: One
manufacturer reported more than 10 percent of his
workforce was quarantined on any given day.
Wages grew slightly. On net, 23 percent of respondents
reported wages higher than a year ago. Many contacts
emphasized the need to raise wages while workers
remained scarce; some, however, reported more
stagnant wages, especially in the worst-hit sectors. One
restaurant owner reported recently giving his workers
much-delayed raises, fearing they would otherwise be
lured away by other businesses as the recovery
continues.
Consumer Spending
Reports from general retailers, auto dealers, and hospitality contacts indicated that consumer spending has
H-1
Federal Reserve Bank of St. Louis
been mixed since our previous report. General retailers
reported sales met or fell short of expectations over the
past six weeks, but they have an improved outlook for
the coming quarter due to vaccines and stimulus payments. A local furniture store reported that sales increase the same weekend that customers receive stimulus checks. Auto dealers reported that sales over the
past six weeks generally fell short of expectations. The
outlook for auto sales for the coming quarter was mixed,
with contacts citing stimulus, low inventories, and interest rates as determining factors. Restaurants continue to
struggle. A local restaurant owner expects conditions to
hold steady until at least the third quarter. Hospitality
contacts reported low business activity but remain optimistic that when vaccines are widely distributed the
industry will recover quickly.
sales in Little Rock have dropped sharply since early
January. Contacts reported that home inventory remains
low and expect it to remain so. A contact in Arkansas
reported local rents are rising at an unreasonable rate.
Residential construction activity has risen this quarter,
with many expecting further increases. A contact in St.
Louis reported residential construction projects are severely backlogged due to labor and material shortages.
Contacts also reported problems and price increases
stemming from high lumber and steel prices. Also, shipping delays and production issues have increased lead
times on most building supplies and appliances.
Commercial real estate activity has been mixed since
our previous report, as office and retail demand are
lower this quarter. A contact in Louisville reported the
increase in telework has decreased demand for office
space, and, going forward, contacts are uncertain if and
how telework will continue to impact demand. Meanwhile, demand for industrial properties is up due to ecommerce and micro-fulfillment facilities. Commercial
construction is similarly mixed, as multi-family projects,
warehouses, and logistics facilities are the main projects
currently being built. Some developers also reported
switching hotel projects for apartment buildings.
Manufacturing
Manufacturing activity has modestly increased since our
previous report, though the change from firm to firm
varied considerably. Contacts reported that production
and capacity utilization remained unchanged, while new
orders have modestly increased. However, some firms
reported strong upticks in production and new orders.
Several firms in the region reported labor force shortages have inhibited production. Beyond that, auto manufacturers in the region reported the semiconductor shortage has led to temporary production shutdowns. On
average, firms reported they expect moderate increases
in production, capacity utilization, and new orders in the
second quarter. One salt products manufacturer in the
region reported the expected closure of a mine poses
future supply chain challenges.
Banking and Finance
Banking conditions have been unchanged since our
previous report. Banking contacts continued to report a
slight decrease in overall loan demand. Consumer loan
demand declined modestly, particularly for credit cards,
while commercial and industrial (C&I) loan demand rose
slightly. Low loan demand, combined with consistently
high deposit levels, further increased reserves held at
District banks. A contact reported trying to deploy excess
funds through bond purchases but faced challenges as
bonds were harder to obtain due to high demand. Overall delinquencies decreased primarily in auto and C&I
loans. All bankers contacted expect this year to be a
relatively slow year but hope activity will pick up toward
the end of 2021.
Nonfinancial Services
Activity in the nonfinancial services sector has decreased slightly since our previous report. Passenger
traffic at regional airports remains depressed, down 60
percent from one year ago. Half of all nonfinancial
services contacts reported sales below expectations this
quarter, reflecting clients who are cautious to spend due
to uncertainty about the near-term economic recovery,
as well as pandemic-related difficulties meeting new
clients. Revenues at several small regional colleges
have fallen due to declines in enrollment. Logistics
contacts reported first-quarter sales were stronger than
expected despite the post-holiday slowdown. Most
contacts expect sales next quarter to be at least as good
as this quarter given vaccinations are becoming more
widespread.
Agriculture and Natural Resources
Agriculture conditions have improved moderately relative
to the previous reporting period. The number of acres of
winter wheat planted this season throughout the District
increased sharply relative to the previous year, although
acres planted declined slightly in Kentucky. Despite
pessimism in early 2020, farmers expressed optimism
after a strong finish in 2020, with prices and sales up
well above what was expected. ■
Real Estate and Construction
Residential real estate activity has slipped since our
previous report. Pending home sales in St. Louis, Memphis, and Louisville have fallen slightly while pending
H-2
Federal Reserve Bank of
Minneapolis
The Beige Book ■ February 2021
Summary of Economic Activity
Economic activity in the Ninth District increased modestly since early January. Employment was flat, with rising labor
demand offset by labor supply constraints. Wage and price pressures were both modest. Sources reported growth in
consumer spending, residential construction and real estate, manufacturing, energy, and agriculture. Commercial real
estate was mixed, and commercial construction activity declined. Conditions for minority- and women-owned businesses were difficult.
Employment and Wages
Worker Experience
Employment was flat since the last report, though hiring
demand appeared to be picking up. Job postings
increased steadily across the District through the first
five weeks of the year. Staffing firms also reported
healthy demand in job orders but reported difficulty filling
available jobs. “There are way more job orders than
available workers,” especially for jobs paying less than
$20 an hour, said a Minnesota staffing contact. A midJanuary survey (with more than 1,000 respondents)
found that nearly 30 percent of firms Districtwide had
reduced staff since October, while just 8 percent added
staff. However, small firms were much more likely to
report staffing cuts and large firms to add staff, balancing
net employment levels to some extent. Recent
employment losses continued to be more prevalent in
entertainment, hospitality, and retail firms, while firms
adding staff were more evenly spread across sectors,
led by finance and manufacturing.
Despite increased job openings, labor supply constraints
contributed to a continued disconnect between workers
and opportunities. Multiple workforce contacts noted
greater demand for employees to fill 12-hour and/or
rotating shifts. But prospective employees continued to
find these shifts unattractive for a variety of reasons—
family care responsibilities, remote learning in many
school districts, fears of infection—that have increased
the relative cost of work and imposed limits on flexibility.
Other contacts noted that transportation remained a
hurdle for low-wage workers. A staffing contact reported
that there was less migration of laid-off hospitality
workers to opportunities in fields like manufacturing than
they expected. A job service contact suggested that
some of the inertia may be due to employers providing
false hope that workers will be called back to their
previous jobs. Some contacts said the prospective
continuation of enhanced unemployment benefits
created a disincentive to return to work; however, others
noted that the closure of workforce offices also
eliminated a high-touch opportunity to push job openings
and other services to the unemployed when applying for
or collecting benefits.
Wage pressures were modest overall, but stronger in
some sectors seeing higher labor demand. Construction
firms reported the strongest wage pressure, followed by
finance and manufacturing firms. Wage pressures in
many other sectors were soft but were expected to
increase modestly over the coming year. Staffing firms
consistently reported growing wage pressures due to
healthy hiring demand but persistent lack of interested
workers.
Prices
Price pressures increased moderately since the last
report. According to the January survey of District
businesses, half of respondents reported that prices for
I-1
Federal Reserve Bank of Minneapolis
final goods and services were unchanged compared with
pre-pandemic levels, but more than a third reported that
nonlabor input prices were up by more than 5 percent.
Contacts in manufacturing reported greater ability to
pass on increases in costs for transportation and certain
other inputs to customers. Retail fuel prices in District
states have increased briskly since the previous report.
Prices received by farmers increased in December from
a year earlier for corn, soybeans, wheat, chickpeas, and
hogs, while prices for potatoes, dry beans, hay, milk,
chickens, eggs, and cattle decreased.
sectors like office and retail saw increases in vacancy
rates and available sublease space. Residential real
estate saw strong growth. January home sales grew by
double digits over last year across much of the District.
Manufacturing
District manufacturing activity increased moderately
since the previous report. Respondents to the
Minneapolis Fed’s annual survey of manufacturers
indicated that orders, production, employment, profits,
productivity, and investment all decreased in 2020 on
average (with substantial variability among firms).
Expectations for 2021 called for growth to resume, likely
due to stronger activity in recent months. However,
nearly half of respondents reported that they don’t
expect to return to pre-pandemic activity levels for six
months or longer. An index of regional manufacturing
activity indicated brisk expansion in North Dakota in
January compared with the previous month; activity in
Minnesota and South Dakota grew more moderately.
Consumer Spending
Consumer spending rose moderately, likely spurred by
federal stimulus to households. January gross and
taxable sales both grew robustly in South Dakota.
Vehicle sales were strong. A dealership in the western
part of the District reported robust sales of new vehicles
in December and January. Minnesota vehicle sales
taxes through the first six weeks of the year were notably
higher than last year. Winter and other recreational
vehicle sales were also positive, held back in some
cases by lack of inventory. Firms catering to outdoor
recreation generally reported good traffic. However,
extreme cold for an extended period in February
dampened activity Districtwide. Increased sales were
reported at eating and drinking establishments in
Minnesota and Montana after COVID-19 infection rates
fell and operating restrictions were lessened, but
conditions in that sector remained difficult. Passenger
activity out of the District’s eight largest airports
remained flat at low levels through the first seven weeks
of the year.
Agriculture, Energy, and Natural Resources
District agricultural conditions improved moderately since
the previous report, due to continued rallies in
commodity prices and to government support programs.
Respondents to the Minneapolis Fed’s fourth-quarter
(January) survey of agricultural credit conditions reported
increased farm income and capital spending compared
with a year earlier, and the outlook for the next quarter
was for continued growth in farm incomes. District oil
and gas exploration activity increased slightly compared
with the previous report. Iron ore mines continued to
operate at normal capacity since a previously idled plant
resumed operations in mid-December.
Construction and Real Estate
Minority- and Women-Owned Business Enterprises
Commercial construction continued to slow overall. Total
active, major construction projects across the District
were lower than a year earlier. A majority of contacts
reported that recent revenue fell compared with both
2019 and fall of 2020, and expectations for the first
quarter of this year were similar. The frequency of
project delays and cancellations has potentially peaked,
according to sources; however, more reported a
decrease in new projects out for bid than those reporting
increases. Some places, like Rapid City, S.D., and
certain subsectors, like utilities, reportedly have not seen
a similar slowdown. Residential construction also
remained a bright spot, with contacts reporting healthy
demand and January permitting activity seeing increases
over last year in many locations.
Most minority- and women-owned business enterprises
(MWBEs) reported negative revenue trends compared
with the same period last year and with the previous
quarter. Some expected modest improvement for the
first quarter of 2021. A strong majority said federal
stimulus programs have helped their business to some
degree; among those not benefiting, most did not either
qualify or apply for assistance. Contacts noted hesitancy
among immigrant business owners to apply for
assistance out of concern for jeopardizing the
immigration status of themselves or family members.
Financial instability was high among these firms. In a
survey across the District, a significantly higher share of
MWBEs said they would be insolvent within three
months if current economic conditions persisted
compared with non-MWBEs. They were also more likely
to have cut wages, for staff or for themselves. ■
Commercial real estate was mixed. Industrial property
remained generally stable, with steady leasing activity
and low vacancy rates in many markets. However, other
I-2
Federal Reserve Bank of
Kansas City
The Beige Book ■ February 2021
Summary of Economic Activity
The Tenth District economy expanded slightly in January and February, with conditions strengthening in most sectors.
Contacts in almost every sector anticipated stronger activity in the months ahead, although the majority also noted that
the COVID-19 vaccine rollout was somewhat or very important to their outlook. Consumer spending increased slightly in
January—driven by gains in retail, restaurant, and healthcare spending—but fell in February. Manufacturing production
and new orders expanded modestly, with gains at both durable and nondurable plants. Contacts reported modest gains in
professional and high-tech sales and moderate gains in wholesale trade sales. Residential real estate activity rebounded
after slowing in December, and commercial real estate conditions showed signs of stabilizing, albeit at levels below a year
ago. Energy activity edged higher amid stronger commodity prices and demand for natural gas. Agricultural conditions
also strengthened, with the majority of contacts indicating that farm income had moved above year-ago levels. Employment continued to expand slightly, and wages rose modestly. Input prices continued to rise faster than selling prices, and
a large majority of firms reported being negatively affected by higher materials prices or a lack of available materials.
Employment and Wages
60 percent of services firms reported being negatively
affected by the rise in materials prices or the lack of
availability. Prices of raw materials for manufactured
goods rose moderately over the survey period, while
selling prices increased modestly. Selling prices also
increased modestly in the services sector, with slightly
faster growth for input prices. Construction supply contacts noted a moderate increase in selling prices, and
they expected prices to increase at a slightly faster pace
in the next few months. Manufacturing and services
contacts expected both input and selling prices to rise in
the months ahead and anticipated that stronger input
price growth would continue to put pressure on profit
margins.
District employment continued to increase at a slight
pace but remained slightly below year-ago levels. Overall employment growth in the services sector was driven
by moderate gains in retail and wholesale trade, while
employment fell slightly in the transportation, tourism and
restaurant sectors. Looking ahead, contacts from all
service industries expected employment to remain unchanged or to increase in the coming months. Manufacturers noted slight increases in employment levels and
hours and expected similar gains in the next few months.
The majority of contacts reported labor shortages, with
strong demand for technicians, truck drivers, and information technology professionals. More generally, contacts reported severe shortages for skilled hourly workers and notable shortages for unskilled hourly positions.
Wages rose modestly since the last survey, and contacts
expected wages to rise at a slightly faster pace in the
coming months. Although the majority of firms expected
vaccinations to affect their business outlook, less than
one-third of firms anticipated that the COVID-19 vaccine
rollout would impact their hiring plans this year.
Consumer Spending
Overall consumer spending increased slightly in January
but declined modestly in February. Sales rose moderately in retail, restaurant, and health services sectors in
January as additional stimulus payments were distributed, but then declined in February. Restaurant sales
remained modestly below year-ago levels as the pandemic continued to suppress in-person dining. Sales in
the auto and tourism industries fell moderately in January, but tourism sales rose slightly in February. Contacts
expected moderate gains over the next few months in
the retail, health services, and tourism industries, while
auto sales were expected to pick-up modestly. Restau-
Prices
Input prices in both the services and manufacturing
sectors continued to rise at a faster pace than selling
prices. More than 80 percent of manufacturing firms and
J-1
Federal Reserve Bank of Kansas City
rant contacts expected sales to remain roughly flat in the
coming months. A large majority of contacts indicated
that widespread COVID-19 vaccination was somewhat
or very important to their firm’s overall business outlook.
in January and February, driven by increased demand
for residential and commercial real estate loans. However, demand fell for agricultural, consumer, and commercial and industrial loans. In the past few weeks, many
banking respondents indicated that interest rates
charged on new commercial and industrial loans moved
moderately lower. Overall credit standards generally
remained stable, although standards tightened slightly
for commercial and residential real estate and for agricultural lending. Consumer loan standards eased slightly.
Bankers reported a slight increase in loan quality compared to a year ago and expected similar quality over the
next six months. Deposit levels continued to expand
robustly.
Manufacturing and Other Business Activity
Manufacturing activity expanded modestly since the
previous survey, and activity levels rose slightly above
year-ago levels. Production and new orders increased
modestly for durables and slightly for nondurables. Capital expenditures rose for both durable and nondurable
goods to a level slightly above a year ago. Durable and
nondurable manufacturing activity was expected to increase moderately in the next few months, but the vast
majority of manufacturing firms indicated that widespread COVID-19 vaccination was somewhat or very
important to their firm’s overall business outlook.
Energy
District energy activity edged higher since the previous
survey period but continued to slightly lag year-ago
levels. Revenues and profits varied by firm, while employment levels continued to decline. The number of
active oil and natural gas rigs was flat across the District
overall, with a slight uptick in active oil rigs in Colorado.
Oil and natural gas stocks eased somewhat lower in
early 2021 after expanding in 2020. Commodity prices
rose further since the last survey period, due in part to
stronger demand for natural gas across the District and
country. Moving forward, regional firms indicated that the
changing regulatory landscape may impact business
activity and profitability in the future. Expectations for
future drilling and business activity were generally positive though as District firms anticipated widespread
vaccination rollouts to boost mobility and transportation
activity in the coming year.
Outside of manufacturing, sales rose modestly in professional and high-tech services and moderately in the
wholesale trade sector. Transportation sales rose slightly
in January but contracted in February. Contacts noted
that sales remained below year-ago levels within the
transportation and professional and high-tech services
sectors, but wholesale trade sales were moderately
higher than a year ago. Capital expenditures rose modestly in the transportation and wholesale trade sectors
but edged lower in professional and high-tech services.
Respondents from all industries expected sales to increase modestly in the coming months.
Real Estate and Construction
Residential real estate activity expanded moderately,
while the deterioration in commercial real estate conditions stabilized somewhat. All residential real estate
contacts reported an increase in home prices and the
majority indicated a decrease in inventories. Home sales
also increased modestly, following a moderate decline
during the previous survey period. Home sales were
expected to rise further in the coming months despite
low inventories and higher prices. Commercial vacancy
rates decreased for the first time in over a year, and
absorption rates remained flat. In addition, commercial
construction activity increased slightly. However, sales,
prices, and rents fell modestly, and developers’ access
to credit became modestly more difficult. Overall, commercial real estate conditions remained worse than a
year ago. Expectations for further declines in vacancy
rates and increases in absorption and construction pointed to a gradual improvement in the commercial real
estate sector over the next few months.
Agriculture
The Tenth District farm economy strengthened alongside
a sharp rebound in farm income and agricultural credit
conditions. In the most recent survey period, a majority
of District contacts indicated that farm income was higher than a year ago for the first time since 2013, leading
to increased loan repayments and slight increases in
farm real estate values. Crop prices rose modestly since
January and remained considerably higher than a year
ago. Contacts located in regions more dependent on
livestock revenues and exposed to severe drought,
however, were less optimistic. Although cattle prices also
increased modestly since January, they remained lower
than a year ago, and higher crop prices could lead to
higher feeding costs for livestock producers in the coming months. ■
Banking
District bankers reported modest growth in loan demand
For more information about District economic conditions visit:
https://www.kansascityfed.org/research/regional-research/
J-2
Federal Reserve Bank of
Dallas
The Beige Book ■ February 2021
Summary of Economic Activity
The Eleventh District economy expanded at a moderate pace, though output in most industries remained below normal
levels. Growth in the manufacturing and nonfinancial services sectors picked up in early February after stalling in January, while retail activity remained flat. Unprecedented winter storms and widespread power outages in mid-February
severely disrupted economic activity, though the impact is mostly expected to be transitory. The housing market continued to be a bright spot, with vigorous new home construction. Overall loan volume decreased slightly, though real estate
lending continued to rise. Energy activity improved further. Employment rose and wages increased moderately. Marked
price increases were seen in the manufacturing and retail sectors, due in part to supply chain disruptions. Outlooks were
generally positive, but uncertainty persisted.
Employment and Wages
Prices
Employment was up overall, with solid hiring continuing
in manufacturing and service-sector hiring picking up in
February after easing in January. Employment reports
were mixed in the energy sector, with some reporting
lingering layoffs and others reporting hiring to meet
needs for drilling and completion activity. Modest job
losses were seen in the retail sector, where work hours
also dipped. Some firms reported short-term problems
maintaining workflow while others closed temporarily
amid widespread power outages and water problems
from winter storms. Roughly 47 percent of contacts say
headcounts are down from pre-COVID levels, by about
25 percent on average, according to a Dallas Fed survey
of over 300 Texas businesses in February. Twenty-one
percent of firms reported increased headcounts, and 32
percent reported no change from February 2020 levels.
Input costs continued to increase at a moderate pace
overall, except in the manufacturing and retail sectors
where supply chain disruptions drove prices up more
strongly. Some contacts also noted substantial increases
in agricultural commodity prices, as well as lumber and
steel. Selling prices were flat to up slightly outside of the
retail and manufacturing sectors where above-average
price growth was seen. A wholesaler noted that cost
increases were happening so fast that they could not
raise prices fast enough to keep up, and margins were
suffering as a result.
Manufacturing
The Texas manufacturing recovery slowed dramatically
in January but picked up pace in early February, with
production and demand growth accelerating markedly.
February growth was widespread and led by nondurables, particularly food and chemicals. Petrochemical
contacts noted strong demand for consumer packaging,
PPE, and construction materials like PVC. Refineries
said fuel demand was decent over the past six weeks
but still down year over year. A majority of manufacturers
noted supply chain shortages were disrupting business,
as was worker absenteeism due to COVID-19 quarantines. The full impact of the mid-February winter storms
is not yet known, but some contacts reported temporary
Wage growth was moderate, though there were some
reports of more significant wage pressure in segments
experiencing difficulty finding and retaining workers. An
investment firm said they had to increase wages 5–15
percent to keep employees from being lured away. Several contacts voiced concern over the prospect of a $15
minimum wage.
K-1
Federal Reserve Bank of Dallas
facility shutdowns. Outlooks improved further, though
some contacts voiced concern about the prospect of
adverse effects resulting from increased oil and gas
regulation.
Outlooks were favorable, with some concern about tight
lot supply, labor and material availability and costs, and
an unexpected rise in mortgage rates.
Apartment demand was mostly steady, and rent collections were generally holding up in major Texas markets.
Industrial construction and leasing activity remained
strong. Office leasing stayed weak, but contacts said
market conditions appeared to be slowly stabilizing.
Retail Sales
Texas retail activity remained fairly flat over the past six
weeks. Auto sales were weak, in part from low new
vehicle inventories due to supplier issues. Demand for
building materials was booming, but sales growth was
limited by supply constraints. Overall, more than 60
percent of retail contacts said they were experiencing
supply chain disruptions, which they noted were driving
up costs and delaying order fulfillment. Severe winter
storms in mid-February depressed sales activity, and
outlooks worsened overall.
Financial Services
Overall loan volume decreased slightly over the past six
weeks, with increases in commercial and residential real
estate loans offset by declines in consumer loans and
commercial and industrial loans. Loan pricing continued
to decline, and credit standards tightened further. General business activity increased, and contacts expect
higher loan demand and general business activity six
months from now.
Nonfinancial Services
Growth in the nonfinancial services sector stalled out in
January amid rising COVID-19 cases but resumed at a
modest pace in early February. Despite the ongoing
recovery, more than half of contacts report that revenues
were still down from normal, though this share has slowly but steadily declined over the past eight months. Professional and technical services continued to outperform
other segments, with generally robust revenue growth.
Staffing firms reported increased demand as business
among customers broadly recovered, with particular
strength in healthcare, IT, and construction. In transportation services, air cargo volumes were up over the past
six weeks with growth driven by e-commerce, while
small parcel volumes were down seasonally but well
above year ago levels. Airlines reported flat demand at
low levels.
In a Dallas Fed survey of more than 70 Eleventh District
financial Institutions, 80 percent were issuing loans
through the current round of PPP, though the majority
expect the total number and total value of these loans to
be substantially lower than the PPP loans they issued
last year.
Energy
Activity in the oil and gas sector improved somewhat,
and sentiment was very cautiously optimistic. Drilling and
completion activity were more robust than contacts had
expected. The number of new executive orders aimed at
the oil and gas industry was concerning to some contacts. Many smaller firms that operate on federal lands
will not be able to shift to private lands, but most midsized and larger firms will. The lack of permitting and
leasing in the Gulf of Mexico, if sustained, could be a
more significant issue. The looming threat of tighter
federal regulations and depressed global demand
weighed on contacts’ minds, but improving COVID-19
statistics, OPEC production discipline, and higher oil
prices were tailwinds.
Severe winter storms and power outages in midFebruary significantly and adversely impacted many
businesses in the short term, but overall outlooks improved, with some contacts pointing to the COVID-19
vaccine as a particular driver of optimism.
Construction and Real Estate
Activity in the single-family housing market remained
robust. New home construction continued to be vigorous,
though there were reports of delays due to increased
lead times for building materials and appliances, skilled
labor shortages, and permitting delays. As a result of
these production constraints, several builders noted
capping sales and putting prospective buyers on wait
lists. Lot supply remained very tight, and one contact
said buyers camped out for lot selection at a subdivision
in suburban Austin. Builders continued to increase prices
to offset rising construction costs, particularly for lumber,
and to slow down sales as backlogs remained high.
Agriculture
Precipitation over the reporting period eased drought
conditions somewhat. Higher crop prices boosted optimism among farmers heading into spring planting,
though there was some concern over higher input costs.
The extent of the losses from the severe winter storms
are not yet known, but will likely span the livestock and
dairy sectors, produce, and wheat. ■
For more information about District economic conditions visit:
www.dallasfed.org/research/texas
K-2
Federal Reserve Bank of
San Francisco
The Beige Book ■ February 2021
Summary of Economic Activity
Economic activity in the Twelfth District expanded at a modest pace during the reporting period of January through midFebruary. Employment levels decreased somewhat, while wages increased slightly on net. Inflation has picked up,
driven largely by increases in energy prices. Retail sales continued to expand, while activity in the consumer and business services sectors declined moderately due to ongoing pandemic-related restrictions. Manufacturing activity continued to expand modestly, and conditions in the agriculture sector improved marginally. Contacts reported ongoing
strength in residential real estate markets, but weak conditions in the commercial sector. Lending activity continued to
grow robustly, mostly concentrated in origination of second-round PPP loans.
Employment and Wages
Prices
Employment levels decreased slightly, although conditions varied significantly by region and industry. Employers in the hospitality and tourism sectors generally reduced their workforce and extended furloughs due to the
ongoing effects of the most recent wave of COVID-19
infections. An increasing number of contacts reported
difficulty filling open positions, both for high-skilled and
low-skilled workers. Employers in the construction, manufacturing, auto mechanics, and healthcare sectors
continued to be constrained by shortages in qualified
labor. Rising employee turnover was another commonly
cited concern, mainly due to workers switching industries, moving, or leaving the workforce altogether. A few
contacts in financial services, energy, and logistical
services reported implementing hiring freezes or plans to
reduce their workforce later in the year. On the other
hand, demand for labor in consulting, legal services,
technology, and healthcare sectors remained stable.
Inflation picked up modestly over the reporting period.
Most of this increase was driven by hikes in oil and electricity prices, with only a few firms being able to pass on
the higher costs to final consumers. Prices of building
materials, such as lumber, wallboard, steel, and asphalt,
continued to rise from already high levels. Select agricultural products also saw modest price increases, including wheat, corn, and soybeans. Contacts in the hospitality and financial services sectors reported either flat or
decreasing prices.
Retail Trade and Services
Retail sales growth has improved overall, partly owing to
the effects of the second round of fiscal relief transfers to
households. Online sales continued to be strong, as did
sales by brick-and-mortar grocery and convenience
stores. Although most contacts reported reduced foot
traffic in retail centers, a contact in Southern California
noted that thrift and secondhand stores experienced a
rise in demand. Auto sales have continued to increase,
although more purchases are being made online rather
than in person at auto dealerships. Contacts across the
District noted ongoing supply chain disruptions and port
delays, especially for imports from China.
Wages increased marginally on balance. In addition to
mandatory minimum wage increases in some areas, a
few contacts also reported increasing compensation for
frontline essential workers. Employers in manufacturing,
construction, and health-care services also noted upward wage pressures, mainly due to labor supply issues.
By contrast, a few contacts in the financial services and
hospitality sectors mentioned plans for decreased wages
and merit-based bonuses compared to previous years.
Most other reports mentioned little to no change in wages.
Activity in the consumer and business services sector
declined moderately. Conditions in the tourism, leisure,
and hospitality industries continued to be severely impacted by ongoing restrictions due to the pandemic, with
one contact in Southern California anticipating its weak-
L-1
Federal Reserve Bank of San Francisco
est quarterly performance since the onset of the pandemic. Many restaurants continued to only offer delivery
or pickup services to limit operating costs. Automotive
service providers continued to see decreasing sales
volumes, reflecting a general trend in reduced vehicle
miles driven. Some production work in the entertainment
industry returned in February, but many producers chose
to further delay projects halted in January. The inability
to secure business insurance coverage against pandemic-related risks continued to limit activity in the film, television, and sports production industries. In health care,
activity has mostly rebounded back to pre-pandemic
levels, with increasing demand for mental health and
related services. Demand for logistics and transportation
services continued to be strong. A medical laboratory in
the Mountain West noted that demand for COVID-19
testing has substantially fallen in recent weeks as vaccines and point-of-care rapid testing has reduced the
reliance on traditional testing.
Real Estate and Construction
Residential construction activity continued to grow at a
brisk pace. Demand for residences continued to increase, especially for multifamily homes, although inventories were at historically low levels. Construction of
single-family homes continued to fail to meet the high
demand. Home prices climbed further, which raised
some concern among contacts in California and the
Pacific Northwest about the decrease in affordable housing, especially in coastal metropolitan areas. Contacts
across the District noted ongoing constraints due to
shortages of construction labor, raw materials, and available land. As a result, several in the Pacific Northwest
noted that construction projects are sold as soon as they
are started, and most builders are at capacity. Demand
for remodeling projects was also noted to have increased. Rents fell in metropolitan areas but increased
slightly in suburban areas. One contact in Oregon noted
that the upcoming enforcement of stricter green codes
for energy consumption might put even greater upward
pressure on construction costs.
Manufacturing
Activity in the manufacturing sector continued to
strengthen modestly, although the pace of expansion
has slowed somewhat since the last reporting period.
Demand for metals and wood products remained strong,
driven by the continued expansion in residential construction. Sales of recycled metals and fabricated steel
products have declined somewhat since their multi-year
highs at the end of 2020, which one contact attributed to
the potential effects of chip shortages in the auto manufacturing industry. Capacity utilization rates in renewable
energy and steelmaking industries picked up, although
they are still below U.S. historical averages. Energy
usage has returned to pre-pandemic levels for most
manufacturers, except for those in the aerospace sector.
Activity in the commercial real estate market weakened
slightly on net. Demand for retail spaces, office buildings,
and hospitality real estate continued to be negatively
affected by disruptions stemming from the pandemic. On
the other hand, demand for warehouse and industrial
properties remained strong, and a few contacts also
noted a rise in public construction projects. One contact
in the Mountain West reported that demand for office
space held steady in the area, partly due to the redesign
of some offices to better accommodate social distancing
measures.
Financial Institutions
Lending activity grew robustly during the reporting period. Most banks reported significant growth in new loan
originations, concentrated in second-round PPP loans.
Several contacts noted that demand was lower compared with the first round of PPP loans, primarily due to
changes in eligibility requirements and the increasing
ability of businesses to remain open through the pandemic. Demand for residential mortgages also remained
strong, particularly for refinancing. Banks reported ample
liquidity, high asset quality, and low delinquency rates,
which a few contacts attributed to individuals using stimulus checks to pay down existing loans. One contact in
Hawaii noted the increasing importance of community
development financial institutions (CDFIs) in providing
access to capital and technical assistance to low-income
communities. ■
Agriculture and Resource-Related Industries
Agricultural activity expanded marginally across the
District. Demand for wheat, fruits, and nuts increased
among both domestic and international consumers. Most
growers benefitted from a depreciating dollar, although a
few noted the ongoing negative effects of international
trade restrictions on U.S. exports. Several contacts in the
Pacific Northwest and California mentioned that COVIDrelated labor and supply chain disruptions continued to
put upward pressure on costs and to reduce inventories
in some cases. A large energy provider in Southern
California reported that lower-than-normal revenue from
non-residential customers was mostly offset by higherthan-normal revenue from residential customers, although the number of overdue payments has increased.
L-2
Cite this document
Federal Reserve (2021, March 16). Beige Book. Beige Book, Federal Reserve. https://whenthefedspeaks.com/doc/beige_book_20210317
@misc{wtfs_beige_book_20210317,
author = {Federal Reserve},
title = {Beige Book},
year = {2021},
month = {Mar},
howpublished = {Beige Book, Federal Reserve},
url = {https://whenthefedspeaks.com/doc/beige_book_20210317},
note = {Retrieved via When the Fed Speaks corpus}
}