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The Beige Book

Summary of Commentary on Current Economic Conditions

By Federal Reserve District

For use at 2:00 PM EDT


July 12, 2017

June 2017

Federal Reserve Districts


New York

Philadelphia Cleveland




St. Louis Kansas City



San Francisco

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.

Alaska and Hawaii

are part of the

San Francisco District.

National Summary 1

Boston A-1

First District

New York B-1

Second District

Philadelphia C-1

Third District

Cleveland D-1

Fourth District

Richmond E-1 Fifth District

Atlanta F-1

Sixth District

Chicago G-1

Seventh District

St. Louis H-1 Eighth District

Minneapolis I-1

Ninth District

Kansas City J-1

Tenth District

Dallas K-1

Eleventh District

San Francisco L-1

Twelfth District

What is The Beige Book? The Beige Book is a Federal Reserve System publication about current

economic conditions across the 12 Federal Reserve Districts. It charac-

terizes regional economic conditions and prospects based on a variety

of mostly qualitative information, gathered directly from District


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. Be-

cause this information is collected from a wide range of business and

community contacts through a variety of formal and informal methods,

the Beige Book can complement other forms of regional information


How is the information collected? Each Federal Reserve Bank gathers anecdotal information on current

economic conditions in its District through reports from Bank and

Branch directors, plus phone and in-person interviews with and online

questionnaires completed by businesses, community contacts, econo-

mists, market experts, and other sources.

How is the information used? The anecdotal information collected in the Beige Book supplements the

data and analysis used by Federal Reserve economists and staff to

assess economic conditions in the Federal Reserve Districts. This

information enables comparison of economic conditions in different

parts of the country, which can be helpful for assessing the outlook for

the national economy. The Beige Book also serves as a regular sum-

mary of the Federal Reserve System’s efforts to listen to businesses

and community organizations.

This report was prepared at the Federal Reserve Bank of Kansas City

based on information collected on or before June 30, 2017. This docu-

ment summarizes comments received from contacts outside the

Federal Reserve System and is not a commentary on the views of

Federal Reserve officials.


National Summary

Highlights by Federal Reserve District

Overall Economic Activity Economic activity expanded across all twelve Federal Reserve Districts in June, with the pace of growth ranging from

slight to moderate. In addition, the majority of Districts expected modest to moderate gains in the months ahead. Con-

sumer spending appears to be rising across a majority of Districts, led by increases in nonauto retail sales and tourism.

However, many Districts noted some softening in consumer spending, particularly in auto sales which declined in half

of the Districts. Manufacturing and nonfinancial services activity continued to grow, with most Districts reporting modest

to moderate gains since the last report. Loan demand was steady to increasing in most Districts. Residential and non-

residential construction activity was flat to expanding in most Districts. Most Districts cited low home inventory levels in

certain market segments which were constraining home sales in many areas. Agricultural conditions were mixed

across the nation as moisture conditions varied considerably; several Districts continued to report weakness in dairy

and some crop sectors due to low prices. Energy activity generally improved since the last survey, particularly for oil

and natural gas. Coal production remained sluggish although higher than year-ago levels.

Employment and Wages Employment across most of the nation maintained a modest to moderate pace of expansion, although the Atlanta and

St. Louis Districts noted flat employment levels. Labor markets tightened further for both low- and high-skilled positions,

particularly in the construction and IT sectors. Contacts across a broad range of industries reported a shortage of quali-

fied workers which had limited hiring. Wages continued to grow at a modest to moderate pace in most Districts, and

many firms attributed these wage gains to tighter labor market conditions. Wage pressures generally trended with

employment conditions, and rising wage pressures were noted among both low- and high-skilled positions. A few Dis-

tricts also reported rising costs of benefits and variable pay.

Prices Prices continued to rise modestly in the majority of Districts, and a few Districts noted that price pressures had eased

slightly. Several Districts reported higher construction materials costs and freight prices, while gasoline prices fell.

Retail prices held steady or slightly increased, and the manufacturing sector noted steady to modestly rising input

costs. Low agricultural prices were causing stress for some farmers, although some food retailers reported improved

margins due to lower commodity prices. Home prices continued to increase in most Districts.

Boston Economic activity in the First District expanded at a

modest pace in recent weeks. Hiring activity was mixed,

proceeding at a moderate pace on average. Wage in-

creases remained moderate with not much variation.

Prices were mostly stable with some noteworthy excep-

tions. Contacts were cautiously optimistic concerning

prospects for further growth.

New York Economic growth has picked up to a modest pace in

recent weeks. Labor markets have tightened further, as

hiring has picked up. Input cost pressures have become

somewhat less widespread, while selling prices contin-

ued to rise modestly. Housing markets have strength-

ened, whereas commercial real estate markets have

softened slightly.

The Beige Book ■ June 2017


National Summary

Philadelphia Overall, economic activity appeared to slow to a slight

pace of growth, as consumer spending declined sharply

for apparel, and demand softened for autos, new home

construction, and nonresidential construction. Most other

sectors continued to grow at a modest pace. On bal-

ance, employment and wages continued to grow mod-

estly, and prices grew only slightly.

Cleveland Reports from business contacts were somewhat less

positive, and the overall pace of growth was modest.

Price and cost pressures eased slightly. Labor markets

continued to tighten. Manufacturing activity increased,

but at a slower pace, especially for consumer packaged

products. Demand for IT services was particularly strong.

Richmond Economic activity expanded modestly, but at a some-

what faster pace. The manufacturing sector improved

further, which boosted the transportation sector as more

goods were moved through ports and around the coun-

try. Retail sales increased and tourism and travel reports

were mostly upbeat. Construction and real estate mar-

kets continued to improve modestly. Labor markets

remained tight, and price increases were modest.

Atlanta Economic activity modestly expanded since the previous

report. Labor market tightness continued. On balance,

wage growth remained steady. Input costs were sub-

dued. Consumer spending softened. Home sales in-

creased and prices appreciated modestly. Nonresidential

construction increased; however, multifamily construc-

tion showed signs of slowing. Manufacturing activity

grew, albeit at a slower pace.

Chicago Growth picked up to a moderate pace and prices rose

modestly. Employment, business spending, and manu-

facturing grew at moderate rates, while consumer spend-

ing and construction and real estate activity increased

modestly. Conditions were little changed in the financial

and agricultural sectors.

St. Louis Economic activity has slightly improved since our previ-

ous report. Employers reported minimal hiring due to

difficulties finding qualified candidates putting upward

pressure on both wages and benefits. There were posi-

tive developments on consumer spending as contacts

reported a rebound in sales after a string of weak re-


Minneapolis Ninth District economic activity increased modestly

during the reporting period. Professional services, com-

mercial construction, manufacturing, energy, and mining

saw growth, while employment was held back by tight

labor availability. The already struggling agricultural

sector weakened as severe drought conditions spread

through the Dakotas and Montana.

Kansas City Economic activity in the Tenth District expanded moder-

ately in June, and most sectors expected additional

gains in the months ahead. Consumer spending, manu-

facturing, services, construction and energy activity

increased since the previous survey. The pace of growth

in the energy sector was anticipated to ease slightly. The

agriculture sector remained weak, with subdued farm

revenue and low commodity prices.

Dallas Economic activity grew moderately in the Eleventh Dis-

trict, and outlooks remained positive. Growth in retail

sales decelerated, but there were reports of sales im-

proving in energy-related areas and in the border region.

Activity in the energy sector expanded further, partly

driving increased manufacturing production. Demand for

staffing services remained strong. Apartment demand

improved following a sluggish first-quarter.

San Francisco Economic activity in the Twelfth District continued to

expand at a moderate pace. Overall price inflation was

flat, while upward wage pressures strengthened. Sales

of retail goods were modest, and growth in the consumer

and business services sectors remained strong. Condi-

tions in the manufacturing sector improved. Activity in

the residential housing market was robust. Conditions in

the financial services sector remained solid.


Federal Reserve Bank of Boston

Summary of Economic Activity

Business activity in the First District expanded at a modest pace on average, but reports were mixed across firms and

industries. Revenues are up by moderate margins on average among manufacturing and retail contacts, with year-over-

year gains that varied from slight to robust. Software and information services firms reported year-over-year growth

figures that ranged from a modest decline in one case to double-digit gains. Commercial real estate activity was flat or

up slightly across the District, while residential real estate sales were held back by declining inventories despite robust

demand. Some firms planned to increase headcounts by moderate or even large margins, while others expect to hold

employment fixed. Planned wage increases remained moderate, and price increases were small to moderate, with

some exceptions. Contacts expect either flat activity moving forward or further growth consistent with their own recent


Employment and Wages Hiring plans among First District contacts ranged from

flat to robust, and planned wage increases were stable

at a slow-to-moderate pace. Some retail contacts found

it slightly harder to hire workers, but were not much

concerned by that fact. Employment was flat or increas-

ing at manufacturing firms. A furniture manufacturer

reported difficulty in retaining production workers but not

salespeople. A manufacturer of cardboard boxes was

hiring additional workers without raising wages, but

noted that finding qualified workers was difficult because

production jobs increasingly involve using computers.

Manufacturing firms reported year-over-year wage

growth in the vicinity of 3 percent. A data storage firm

plans to make double-digit percentage increases in its

net headcount in 2017, while a healthcare IT firm ex-

pects a more modest 2 percent personnel increase. One

enterprise software firm is keeping its headcount flat, but

shifting its hiring focus to growth areas such as the inter-

net of things. Another software firm is hiring at a moder-

ate pace and has had to increase starting salaries for

engineers and sales positions. Firms are struggling to

hire engineers and fill technical positions in greater

Boston. On average, software and IT firms are budgeting

for moderate wage increases.

Prices Reports on price movements were mixed. Most manu-

facturing contacts reported stable prices. However, a

cardboard box manufacturer increased its prices by 10

percent in response to a 10 percent increase in the price

of linerboard, a key input, and a frozen fish manufacturer

expects pollock prices to fall in the coming year. Retail

output prices saw very little movement, although some

retailers plan to post moderate price increases for premi-

um fall merchandise and small price increases for basic


Retail and Tourism Retail contacts reported that recent sales numbers re-

flect increases over one year ago ranging from roughly 2

percent to almost 10 percent, results that helped balance

lackluster sales in early 2017. All retail contacts feel that

the outlook rests on positive consumer sentiment trans-

lating into actual sales. One noted that the movement of

consumers away from in-store shopping and towards

online shopping is accelerating faster than anticipated.

For the first four months of 2017, the hotel occupancy

rate for the Boston area was up 0.9 percent from the

same period a year earlier, and the average room rate

was up 1 percent. However, not including activity at new

hotel rooms, the hotel occupancy rate for Boston was

effectively flat year-over-year, a marked contrast to the

robust annual increases seen over the last six years. At

The Beige Book ■ June 2017


Federal Reserve Bank of Boston

the same time, contacts perceive that, between mid-May

and late June, Boston experienced strong tourism activi-

ty. The recently concluded Sail Boston event boosted

area restaurants in particular. The midyear outlook is

that hotels will end 2017 with a net increase in annual

revenues, but may not achieve the 5 percent increase in

average room rates initially predicted for 2017.

Manufacturing and Related Services Of the 7 firms contacted, all but one reported higher

sales. The exception was a drug company, which at-

tributed flat sales to increased competition. A cardboard

box manufacturer reported 10 percent year-over-year

growth resulting from increased e-commerce. A manu-

facturer of sensors reported strong sales growth largely

due to demand from the auto industry. A manufacturer of

power supply devices reported a major revision to capital

spending plans. After many years of reconfiguring exist-

ing plants to meet demand, the firm will build a new,

highly automated plant in New England, in order to save

on labor costs and bring engineers in close proximity to

production. The outlook among contacts remains posi-

tive but cautious. The drug manufacturer remained un-

certain about the prospects for the health care industry,

and the sensor manufacturer expressed concerns about

slower growth moving forward in the auto industry.

Software and Information Technology Services Software and IT firms reported year-over-year revenue

growth ranging from -2 percent to 10 percent. A data

storage and security firm experienced strong revenue

growth, spurred by the high cyber-threat environment. A

healthcare software provider also had strong year-over-

year revenue growth. A manufacturing enterprise soft-

ware provider had flat revenue, but anticipates increased

demand moving forward. Data backup and healthcare IT

contacts were optimistic about future growth. Contacts

expressed concerns and doubts about the impact of

proposed national policy changes on business, and

uncertainty related to health care policy was seen as

putting a damper on business for health care IT firms.

Commercial Real Estate Conditions in the First District’s commercial real estate

markets were mostly unchanged in recent weeks. Office

leasing activity remained very light in Hartford and light-

to-moderate elsewhere in the District. In Boston, leasing

demand remains uneven across submarkets within the

city. Investment sales demand held steady across the

District, and Boston’s premier properties remain in favor

among foreign investors. In both Portland and Provi-

dence, demand for industrial space exceeds the very

limited supply, but the impetus for new construction

remains low in light of high construction costs relative to

rents. In Connecticut, however, plans were announced

for construction of significant new warehouse space.

Also, a modestly-sized user-built office building is slated

for downtown Portland, and in and around Portland three

hotel projects are underway. Contacts expect stable (if

slow) leasing demand going forward, as well as ongoing

changes in the retail landscape favoring entertainment

and services over goods-selling businesses.

Residential Real Estate Residential real estate markets in the First District head-

ed into the summer with continued upward pressure on

prices and depleted inventories. Four of the six First

District states reported year-over-year changes to May

2017, while Vermont and the Boston area reported year-

over-year changes to April 2017. For single family

homes, closed sales were down by moderate margins on

average in four of the six states and in the Greater Bos-

ton area, but increased by moderate-to-robust margins in

Rhode Island and Connecticut. The lower sales numbers

were attributed to declines in inventories over the same

period rather than weak demand—inventories declined

year-over-year in all six states while median sale prices

increased by modest-to-robust margins in all states

except Vermont, which reported a moderate decline in

prices. Pending sales increased in every reporting state

but Rhode Island and the Greater Boston area. In Rhode

Island, single family home sales posted an all-time high

since the association began keeping records in 1998.

For condos, closed sales increased in every state but

Massachusetts and Maine. In a promising sign for inven-

tories, Massachusetts experienced an increase in new

listings for the first time in over a year.

Most contacts seemed optimistic about market activity

and continued strong buyer demand, despite the low

inventories. Many noted that low unemployment has

helped spur consumer confidence, which contributes to

demand for residential real estate. Despite the fact that

interest rates have increased, contacts noted that rates

are still relatively low and that prospective homeowners

are eager to buy now before they increase more. Some

expressed concern that continued upward pressure on

prices will price out first-time home buyers.■

For more information about District economic conditions visit: www.bostonfed.org/regional-economy


Federal Reserve Bank of New York

Summary of Economic Activity

Economic activity in the Second District has expanded at a modest pace since the last report, while labor markets have

tightened further. Input price pressures have eased slightly, while selling prices have continued to rise modestly. Manu-

facturers noted a pickup in business activity, while the various service industries indicated mixed results. Consumer

spending has picked up a bit since the last report, and consumer confidence has remained close to a cyclical high.

Housing markets have strengthened, while commercial real estate markets were mixed but slightly softer. New residen-

tial construction activity has been steady at a subdued level, while commercial construction has picked up modestly.

Banks reported that loan demand was steady to softer, while delinquency rates continued to decline.

Employment and Wages The labor market has continued to tighten since the last

report. Contacts at employment agencies noted that

hiring has picked up and that jobs have become harder

to fill. A major New York City employment agency noted

a pickup in hiring, especially from financial firms. In

upstate New York, there has been a pickup in demand

for both full-time and temporary workers—particularly for

administrative and customer-care workers. Contacts also

noted an ongoing shortage of software developers and

skilled workers more generally.

Manufacturers have continued to add jobs but at a

somewhat slower pace than in the last report. Business-

es in the finance, wholesale trade, real estate and con-

struction sectors report that they are hiring, on net, while

those in the restaurant & hotel industry indicated some

cutbacks in staffing levels. Businesses in manufacturing

and most service industries expected to add jobs, on net,

in the months ahead.

Overall, wages are reported to have risen moderately,

though contacts in the transportation, warehousing,

wholesale trade, and leisure & hospitality industries

report more widespread increases in wages.

Prices Businesses generally reported upward pressure on input

prices but to a lesser degree than in the last report, while

selling prices continued to rise modestly. Those in the

wholesale and transportation industries reported modest

increases in selling prices, on balance, while businesses

in other sectors indicated little change.

General merchandise retailers reported that prices have

been steady, while New York City hotels indicated that

room rates have slipped modestly. In contrast, Broadway

theaters noted rising ticket prices, with the average price

up 10-15 percent from a year earlier.

Consumer Spending Retailers reported that sales have weakened, on bal-

ance, while they expect business to be generally steady

for the second half of the year. Retailers in upstate New

York reported that both shopper traffic and sales have

been flat at weak levels. A major retail chain noted that

sales were roughly on plan, though they weakened a bit

from May to June. Retail business in New York City,

which had been particularly soft, improved slightly. In-

ventories were generally at or below normal levels, while

prices were steady to up modestly.

The Beige Book ■ June 2017


Federal Reserve Bank of New York

Auto dealers in upstate New York reported that sales of

new vehicles picked up in May and early June and were

up from a year ago. Vehicle inventory levels have crept

up, but dealers are generally optimistic about the out-

look. One contact noted that used vehicle sales have

picked up, while another reports that they are steady.

Retail and wholesale credit conditions were character-

ized as favorable, but credit remains tight on sub-prime

auto loans.

Consumer confidence in the Middle Atlantic states (NY,

NJ, PA) edged down in June but remained near its cycli-

cal high set in March.

Manufacturing and Distribution Manufacturers reported that business activity has picked

up substantially since the last report. Businesses in the

wholesale trade and transportation industries, however,

continued to report subdued growth. Similarly, while

manufacturers remain broadly optimistic about the out-

look for the second half of this year, those in transporta-

tion and wholesale trade remain only mildly upbeat.

Services Businesses in most service industries reported steady to

moderately growing business activity. Contacts in profes-

sional and business services noted a pickup in activity

and expressed widespread optimism about the near-

term outlook. Contacts in education & health services

noted a slowdown in growth, while information industry

contacts reported little change in activity.

The leisure & hospitality sector has been mixed. A num-

ber of contacts have reported a pullback in activity, cou-

pled with increased pessimism about the outlook. While

tourism activity in New York City has remained fairly

buoyant, advanced travel bookings are reported to be

down, especially from abroad. In general, visitors are

reported to be spending less—partly reflecting a shift

toward more domestic and fewer international visitors.

On a more positive note, Broadway theater attendance

and revenues were reported to be fairly strong in May

and June. Tourism was described as strong in the Finger

Lakes region of upstate New York.

Real Estate and Construction Housing markets across the District have strengthened

somewhat. Sales volume has picked up throughout the

New York City area—particularly for moderately-priced,

single-family homes in outlying areas. In contrast, sales

activity has slowed a bit in parts of upstate New York,

restrained by a lack of homes on the market.

A real estate contact in upstate New York State reported

continued escalation in home prices, with homes in more

sought-after areas often selling for above the list price.

Selling prices of both single-family homes and apart-

ments have also picked up in and around New York City,

though prices of Manhattan condos and co-ops have

risen only marginally. New York City’s rental market has

remained mostly steady. Rents remain flat overall—

rising on smaller, less expensive units but declining on

larger and pricier apartments. Landlord concessions

have stopped rising but are more prevalent than usual.

Commercial real estate markets have been mixed but

slightly softer on balance. The market for office space

has been steady to slightly weaker: availability rates

edged up, while asking rents slipped in New York City

but were little changed elsewhere. However, the industri-

al market has strengthened further, with availability rates

declining and asking rents up roughly 10 percent over

the past year. In contrast, the market for retail space has

continued to slacken, with vacancy rates rising to multi-

year highs and asking rents little changed.

Both single-family and multi-family new home construc-

tion has been steady at a fairly subdued level, though

there is still a good deal of multi-family development

under construction. Commercial construction, on the

other hand, has picked up. New office construction has

expanded noticeably in northern New Jersey and New

York City’s outer boroughs but has been fairly restrained

in other parts of the District. Industrial construction has

picked up in northern New Jersey but has remained flat

and fairly subdued elsewhere.

Banking and Finance Small to medium sized banks reported weaker demand

for consumer loans, but no change in demand for resi-

dential mortgages, commercial mortgages, or commer-

cial & industrial loans. Refinancing activity decreased for

all types of loans. Bankers reported slightly easier credit

standards for residential mortgages, and unchanged

standards in other loan categories. Bankers indicated

narrowing spreads of loan rates over cost of funds for all

types of loans. Respondents also noted an increase in

the average deposit rate. Banks reported lower delin-

quency rates across all loan categories—particularly on

consumer and residential mortgage loans. ■

For more information about District economic conditions visit: www.newyorkfed.org/data-and-statistics/regional-data-center/index.html


Federal Reserve Bank of Philadelphia

Summary of Economic Activity

Aggregate business activity in the Third District grew slightly over the current Beige Book reporting period — a retreat

from modest growth that had occurred during the prior period. Manufacturing continued at a moderate pace of growth,

while nonfinancial services, new home sales, and tourism continued to grow modestly. However, auto sales and con-

struction activity exhibited essentially no growth, if not a slight decline, and nonauto retail sales declined modestly. On

balance, employment and wages continued to grow at a modest pace, while prices edged only slightly higher. Overall,

firms appear to have lowered their expectations somewhat to modest growth over the next six months.

Employment and Wages

Employment has continued at a modest pace of growth.

Manufacturing firms reported little change in employment

and in the average hours worked compared with the

prior period. Employment indicators from nonmanufac-

turing firms were mixed, as contacts noted more net

additions to full-time staff, fewer net additions to part-

time staff, and a slight increase in hours.

On balance, wage pressures continue to be muted; the

percentage of nonmanufacturing firms that noted rising

wage and benefit costs is as low as any time in the past

three years. Wage pressures continued to be greater in

those markets with low unemployment rates.

Pennsylvania staffing firms struggled to find qualified and

committed workers. Staffing contacts reported spending

more time and money on recruiting labor and refilling

positions after the initial hire quit, sometimes after just a

few days. Workers appear to have less loyalty to the job,

and more job-hopping is showing up on résumés. How-

ever, one large retailer reported having no difficulty

getting quality job candidates in locations throughout the

District after raising its base wage last year.


On balance, price levels rose slightly as price pressures

appeared to have eased off a prior modest pace. Of

contacts responding, about two-thirds reported no

change at all in prices paid and prices received. General-

ly, prices have held firmer for raw inputs to and interme-

diate goods from manufacturers, while nonmanufacturing

contacts reported significant drops in prices paid for their

inputs and received for goods sold.

Retailers and food service providers noted that ongoing

low commodity prices have helped their margins, while

homebuilders are facing 20 percent higher lumber costs

caused by trade tariffs against Canada. Contacts noted

that the added cost can be more easily absorbed while

building high-end homes, but can make low-end homes

less viable to bring to market.


On balance, manufacturing firms continued to report

moderate growth in general activity; however, the pace

eased off once more. During the prior period, the pace of

new orders lessened; this period, the pace of shipments

slowed. Still, the pace of activity appears somewhat

stronger than is typical of expansionary periods in the

Third District.

The Beige Book ■ June 2017


Federal Reserve Bank of Philadelphia

The makers of paper products, chemicals, fabricated

metal products, and industrial machinery continued to

note gains in activity; these were joined by gains report-

ed by the makers of electronic products. Firms in the

primary metal sector appeared to be gloomier, noting

reductions of new orders and shipments.

Generally, manufacturing contacts continued to expect

growth over the next six months; however, the percent-

age of firms expecting future increases edged down

slightly for employment, capital expenditures, and gen-

eral activity.

Consumer Spending Nonauto retail contacts noted modest declines in sales

overall, as apparel sales “continued to be hammered.”

Operators of outlets and traditional malls have been

buffeted by a surge in retail bankruptcies. Even conven-

ience store contacts noted that sales growth was below

expectations, as lower-income households have contin-

ued to reduce spending.

On balance, auto dealers reported a slight decline in

year-over-year sales during the current period, with

Pennsylvania sales edging up and New Jersey sales

declining modestly relative to last year’s high levels.

Falling used car prices have been a contributing factor to

softer demand for new cars. Dealer profitability contin-

ued to be a struggle, and some dealers and analysts are

revising year-end sales totals downward.

Tourism activity continued to grow at a modest pace,

according to several contacts. Delaware shore contacts

noted exceedingly heavy traffic on the roads and signifi-

cant tourist spending, but that last-minute bookings had

not lifted hotel occupancies as much as expected. Still,

bookings remained ahead of last season. Atlantic City

casino revenues also remained up over the prior year.

Nonfinancial Services Service-sector firms continued to report modest growth

in general activity, with some notable improvement in

sales (or revenues) over the prior period. One large

service-sector firm noted that growth remained slow and

a bit below expectations, prompting the firm to institute

discretionary delays in filling vacant positions. An area

advertiser noted lower demand from local auto dealers,

but more demand from the health-care and financial


Expectations about future growth have ebbed further

since the prior Beige Book period but have remained

positive with a little over 50 percent of the firms anticipat-

ing increased activity.

Financial Services Financial firms reported slight growth of overall loan

volumes (excluding credit cards) — a bit slower than the

modest growth that had occurred during the prior Beige

Book period. Commercial real estate loans and auto

loans exhibited strong growth in loan volume; in contrast,

mortgages and home equity loan volumes were essen-

tially flat, while commercial and industrial loan volumes

declined. Credit card volumes are highly seasonal but

have grown over the year at a modest rate and grew

during this Beige Book period at a robust pace similar to

the change observed over the same period last year.

Banking contacts tended to describe the economy as

stable and their loan portfolios as healthy with low delin-

quencies and few areas of concern.

Real Estate and Construction Homebuilders generally reported a slight decline in activ-

ity, following moderate growth in the prior period, alt-

hough one builder noted a pick-up in mid-June. Contacts

reported ongoing difficulty in securing skilled labor but

stated that as long as overall demand for new construc-

tion remains soft, so too will the wage pressures.

Brokers in most major Third District housing markets

continued to report modest growth of existing home

sales, but no increase of inventories. In the Greater

Philadelphia area, pending sales of houses (under con-

tract) dropped slightly. Overall, existing home prices

continued to edge up with some variance across markets

and price categories.

Nonresidential real estate contacts reported essentially

no change in construction activity, which had grown

modestly last period, although individual markets do vary

by sector and geography. One contact noted that the

construction pipeline may have begun to diminish. Leas-

ing activity continued to exhibit little change overall.

Rents were rising nearly everywhere for industrial/

warehouse space; contacts noted plenty of demand and

that new buildings continue to lease up before comple-

tion. However, rent concessions have emerged for multi-

family units in the city of Philadelphia. ■

For more information about District economic conditions visit: www.philadelphiafed.org/research-and-data/regional-economy


Federal Reserve Bank of Cleveland

Summary of Economic Activity

Growth in economic activity across the Fourth District slowed to a modest pace during the reporting period. Labor mar-

kets continued to expand, with wage pressures noted primarily for high-skilled workers. Upward pressures on prices

paid and received eased slightly. Contacts facing higher input prices experienced little pushback from customers when

raising their selling prices. Consumer spending at brick-and-mortar establishments remained stable, while new motor

vehicle sales rose. Production increased at manufacturing plants, although at a slower pace than in the previous report-

ing period. Nonfinancial services firms experienced moderate revenue growth overall, but demand was strong for IT and

management consulting. Housing market activity picked up as year-to-date unit sales remained above year-ago levels

and selling prices were higher. Activity in the commercial real estate market remains elevated. Lending pipelines were

satisfactory, but contacts noted softer loan demand in select categories.

Employment and Wages District payrolls continued to expand, although at a

slightly slower pace than in the previous reporting period.

Increases were notable in the construction and nonfinan-

cial services industries. Brick-and-mortar retailers again

noted decreases in staffing levels. Banking contacts

mentioned tight labor market conditions and wage pres-

sures for skilled workers, including personnel in compli-

ance and statistical modeling positions. Building contrac-

tors experienced difficulty hiring workers in skilled trades,

especially drywallers. Construction contacts also noted

increased hiring for management and office staff posi-

tions. Freight haulers mentioned difficulty recruiting

enough qualified drivers despite increasing driver wages

recently. Manufacturing contacts experienced little

change in hiring, which was mostly replacements or

normal turnover. Staffing firms noted an increase in the

number of listings for both temporary and permanent

positions, especially for occupations requiring specific

skills or advanced degrees, while workforce develop-

ment officials observed rising job placements for workers

with less than four-year degrees.

Prices Upward pressures on prices paid eased during the peri-

od. Some manufacturers remarked that changes in input

costs were modest. Construction contacts mentioned

higher prices for lumber and other materials such as

copper and steel, and several contacts saw rising con-

struction subcontractor prices. Freight haulers saw rising

tire prices. Similar to observations made in the previous

period, contacts in the manufacturing and construction

sectors noticed they were able to pass on increased

costs to customers. Freight haulers reported improved

pricing ability, and some contacts cited rising rates be-

cause of tightening capacity. Retail contacts observed

little change in shelf prices except for some declines in

food items. Similarly, retailers saw little change in vendor

prices except for lower prices for some raw food ingredi-


Consumer Spending Consumer spending at District brick-and-mortar retailers

remained largely unchanged from that of the previous

reporting period. Sales of fresh food items were doing

well, whereas electronics were selling poorly. Sales of

apparel items at large chain retailers were soft. Retail

The Beige Book ■ June 2017


Federal Reserve Bank of Cleveland

inventories were generally in good shape. Year-to-date

sales of new motor vehicles through May increased

more than 3 percent compared to those of the same

period a year ago. Dealers saw higher-than-usual inven-

tories because of lower demand for passenger cars.

Industrial Production Manufacturing output grew at a slight pace during the

reporting period, somewhat slower than earlier. The

small pickup in demand from energy-related companies

was more than offset by a decline in the motor vehicle

and consumer packaged-product industries. Demand

from the construction sector remains strong. Year-to-date

production through May at District auto assembly plants

fell about 9 percent when compared to that of the same

time period during 2016. The large majority of manufac-

turing contacts were allocating capital spending budgets

toward maintenance, although some contacts were also

allocating monies toward new equipment and technolo-


Reports through May indicate that the number of drilling

rigs operating in the District continued to increase com-

pared with that of a year ago. A contact remarked that

investment in regional oil and gas is up, and both pipe-

lines and mid-stream plants are being built. Contacts

credited increases in natural gas demand in part to addi-

tional demand in gas-fired power generation. Contacts

indicated that coal production declined during the report-

ing period because of reduced demand, but they antici-

pate higher output in the coming months.

Real Estate and Construction Year-to-date unit sales through May of new and existing

single-family homes increased 2 percent compared to

those of a year earlier. The average sales price rose 5

percent. Homebuilders described the housing market as

improving at a steady pace, with higher unit sales com-

pared to a year ago. One builder attributed strong sales

to a strengthening labor market. Another builder ob-

served that although demand is quite adequate, it is

difficult to meet demand across price points because of

rising costs for land, lot development, and construction.

Nonresidential real estate activity remains strong at

elevated levels. Nonresidential contractors report strong

demand for education and healthcare related buildings

and for commercial buildings for ecommerce distribution.

In contrast, contacts noted low demand for retail space

in both enclosed malls and shopping centers. Contacts

reported little change in overall inquires and backlogs

from the previous reporting period.

Financial Services Bankers generally reported that loan demand for the first

half of 2017 is below expectations. Businesses and

consumers may be looking for more clarity on potential

changes to the tax code and regulatory reform before

proceeding with spending plans. While most lending

categories are slowing, CRE loans and residential pur-

chase mortgages are performing relatively well. While

most contacts cited stable consumer loan demand, some

contacts noted softer demand, especially for credit

cards, and indicated that consumers are deleveraging.

Some contacts stated that credit standards for consumer

loans, including credit cards, have eased somewhat.

There has been some credit tightening for financing

multifamily and retail developments and for subprime

auto loans. Bankers noted generally improving loan

quality for both commercial and consumer loans.

Nonfinancial Services Activity in the nonfinancial services sector grew at a

moderate pace during the period. Strongest demand was

for IT, management consulting, and logistics services. IT

consulting contacts noticed opportunities among retailers

that are incorporating ecommerce into their business


The pickup in freight volume seen during the past few

months has diminished; however, the volume remains

above year-ago levels. Freight haulers saw increased

demand from oil and gas and strong demand from con-

struction material producers. ■


Federal Reserve Bank of Richmond

Summary of Economic Activity

The Fifth District economy expanded modestly, and at a somewhat faster pace since the last report. Labor demand

remained firm but hiring was constrained by worker shortages. Prices rose slightly, on balance. Manufacturers’ ship-

ments increased but new orders softened due to a typical seasonal slowdown. The volume of freight moving through

district ports was robust and continued to increase, while trucking firms reported renewed momentum in shipments.

Retail sales increased and reports on tourism and travel spending were mostly upbeat. Home sales were up, despite

labor shortages in homebuilding and low existing home inventories. On balance, commercial construction and real

estate leasing picked up moderately. Loan demand increased, and while overall credit quality was said to be good,

some lenders expressed concern over lenient terms for auto loans and leases. Non-financial services firms saw modest

increases in revenues.

Employment and Wages Labor demand strengthened moderately in recent

weeks, and firms increased their focus on retaining and

recruiting qualified employees. Employment agencies

reported a moderate seasonal increase in new job open-

ings across all sectors, but only a slight increase in

applicants. Wage increases remained modest for most

firms. Several transportation industry executives, howev-

er, noted recent moderate wage increases and stronger

wage pressures compared to the previous report. Em-

ployment agencies said that entry-level salary offers

increased at a higher rate across all job categories, since

the previous report.

Prices In general, prices were little changed to up modestly

since our previous report. According to our most recent

manufacturing survey, input prices increased slightly,

and a little faster than final goods prices. Meanwhile, our

services survey showed slight price increases overall,

with the pace of growth in retail goods outpacing that in

non-retail services. However, transportation executives

noted that spot freight prices were rising, in some cases

significantly. Most agriculture and energy prices varied

slightly, with the notable exception of a moderate in-

crease in metallurgical coal prices.

Manufacturing Manufacturing firms reported modest increases in ship-

ments, while new order volumes slowed somewhat due

to a typical summer slowdown. Machinery manufacturers

and producers of primary and fabricated metal noted

improved business conditions in recent weeks. Addition-

ally, textile mills indicated higher production. A few firms

reported increased productivity resulting from recent new

equipment purchases, and they expected further efficien-

cy gains once employees were trained on operating the

equipment. Most firms expect orders to increase in the

next six months.

Ports and Transportation Since our last report, freight volumes through district

ports were very strong and continued to increase mod-

estly, on balance. Moreover, the gains were reported to

be evident in imports and exports, and were widespread

across shipping categories. Meanwhile, momentum

appeared to be building in truck transportation as execu-

tives in the industry reported stronger than seasonal

increases in shipments during the second quarter. In

addition to being more robust, growth had also become

less volatile, with sequential increases in shipments in

the March through June timeframe, following a pro-

longed period during which freight was “up one month,

down the next.” While trucking firms expect some

The Beige Book ■ June 2017


Federal Reserve Bank of Richmond

seasonal slowing in the third quarter, most executives

indicated that conditions feel better than they have in a

very long time.

Retail, Travel, and Tourism Retail sales increased in recent weeks, with somewhat

mixed results across segments. Hardware and home

improvement stores reported strong sales, including for

big-ticket and seasonal items. A home furnishings store

attributed an increase in sales to more people buying

and building homes. Auto sales were mixed, with a deal-

er in central Virginia reporting a pickup in new car sales

in June, while a dealer in western North Carolina saw a

decline over the month. Clothing and shoe sales were

said to be flat to down in recent weeks, despite a good

Father’s Day weekend.

Tourism in coastal North Carolina was stronger in recent

weeks relative to the same time last year, prompting

higher retail sales and restaurant spending. Rental rates

remained flat, but included more offers of extra ameni-

ties. In western North Carolina, growth in tourist activity

had slowed relative to the fast-paced growth of prior

years, but room rates were holding steady as hotel sup-

ply continued to grow. An outdoor recreation facility in

western Virginia experienced increased bookings from

both leisure and business groups. In Washington, DC,

conference activity remained at normal seasonal levels,

while average daily rates on hotels increased.

Real Estate and Construction Residential real estate sales increased modestly since

the previous report. Generally, real estate agents report-

ed that buyer traffic was down due to a typical seasonal

slowdown. Inventories remained low, and Realtors were

working harder to attract sellers into the market. Average

days on the market decreased modestly. Brokers report-

ed that demand for lower to mid-range homes remained

strong, with multiple offers and rising selling prices.

Residential developers also noted that homes in the

$200,000 price range were in high demand. Homebuild-

ers continued to report that new home starts were con-

strained by labor shortages.

On balance, commercial real estate leasing and con-

struction rose moderately. Industrial leasing transactions

and speculative construction picked up, while retail leas-

ing and sales remained strong. Office leasing was still

constrained in most locations, with some agents report-

ing rising demand for Class A space. Rental rates in-

creased modestly in most industrial, retail, and office

markets. Retail and mixed-use construction remained

strong. Multifamily construction continued at a moderate

pace, although a few contacts noted fewer announced

new projects in urban areas with previous high levels of

multifamily development. Lastly, residential and commer-

cial real estate prices continued to rise at a modest pace,


Banking and Finance On balance, loan demand continued to grow at a moder-

ate pace. Residential mortgage demand remained solid

while refinance and home equity lending softened slight-

ly. On the commercial side, loan demand continued to

grow moderately; however, multifamily lending slowed

slightly and a rising number of retail establishments were

reportedly seeking to lease rather than purchase. Auto

lending remained robust, but some bankers expressed

concerns over an industry-wide trend towards negative

equity financing and extended purchase and lease

terms. Competition among banks intensified slightly,

according to a contact in North Carolina, as credit unions

have begun competing for commercial deals in some

markets. Credit standards were generally unchanged

and credit quality remained strong. Short term interest

rates rose slightly but long term rates remained stable.

Non-Financial Services Services firms generally reported modest revenue

growth, according to our most recent survey. Specifical-

ly, engineering, architectural, accounting, and housing

related services such as landscaping, home improve-

ment, and pest control reported revenue growth in recent

weeks. Demand for self-storage units rose moderately. A

few contacts in D.C. and Maryland cited concerns over

slowing federal procurement spending.

Agriculture and Natural Resources Reports on energy markets were somewhat positive.

Coal production was little changed in recent weeks but

rose moderately compared to the same time last year.

Exports remained elevated, particularly for thermal coal.

Meanwhile, agriculture conditions were unchanged as

the planting season got underway. ■

For more information about District economic conditions visit: www.richmondfed.org/research/regional_economy


Federal Reserve Bank of Atlanta

Summary of Economic Activity

On balance, reports from Sixth District business contacts indicated that economic activity continued to expand at a

modest pace from mid-May through June. The outlook among businesses remains positive as most expect an increase

in activity over the next year. District firms continued to report difficulties filling positions of all calibers. Wage growth,

aside from wages for jobs in high demand, remained steady. Businesses reported muted non-labor input costs. District

merchants noted sales activity softened since the previous reporting period. The pace of vehicle sales slowed from a

year ago. The tourism sector continued to report softness in activity in parts of the District. Reports from residential

brokers and builders indicated home sales increased from year earlier levels. Real estate contacts also noted that home

prices modestly appreciated. Commercial real estate contacts continued to cite improved demand for most property

types and construction increased from a year ago. Manufacturing activity grew, albeit at a slower pace than the previous

report. Bankers noted credit continued to be available for qualified borrowers.

Employment and Wages Contacts continued to describe a tightening labor market

in which they struggled to find and hold onto quality

workers, a narrative that has broadened across job types

and skill levels, from construction, information technolo-

gy (IT), finance, and transportation to low to mid-skill and

professional positions. Several contacts maintained that

labor market tightness was a major barrier to growth.

Some contacts reported that planned changes to immi-

gration policy made it more difficult to hire and retain

high-skill immigrants, including engineers, technicians,

and IT workers. Firms continued to deploy various tactics

in an effort to find and develop pipelines of talent and

retain workers; for example, developing partnerships

with workforce development entities, schools, and mili-

tary bases, expanding internal and external training and

apprenticeship programs, strengthening recruiting ef-

forts, and seeking out retirees to return to work. Some

firms also enhanced compensation and benefits packag-

es, particularly variable pay, healthcare contributions,

flexible work arrangement offerings, and added vacation

time. Additionally, firms continued to explore or deploy

technology as viable future replacements for labor, espe-

cially in hard-to-fill jobs. Contacts report that wage pres-

sures remained mostly stable, however there were also

continued reports of rising starting salaries for lower-skill

entry-level positions and ongoing upward wage pressure

for some high-skill, low-supply positions.

Prices In general, growth in input costs was restrained. Some

contacts reported ability to pass along commodity input

increases as they occurred. According to the Atlanta

Fed’s Business Inflation Expectations survey, year-over-

year unit costs were up 1.9 percent in June. Survey

respondents indicated they expect unit costs to rise 2.0

percent over the next twelve months.

Consumer Spending and Tourism District retail contacts reported that sales levels were

softer than expected in May. Retailers noted that overall

sales activity during Memorial Day weekend was at or

slightly below expectations and sales levels from interna-

tional shoppers weakened since the last report. Automo-

tive dealers reported a slow-down in the momentum of

auto sales from a year ago.

On balance, tourism and hospitality contacts across the

District reported slightly softer than expected activity

during the start of the summer season, which they attrib-

ute poor weather conditions. However, with the excep-

tion of South Florida, hotel occupancy and revenue per

available room were up year over year. Year-to-date

Mississippi casino gaming revenues decreased com-

pared with the same time period last year. The outlook

among most contacts for the remainder of the summer

season remains optimistic.

The Beige Book ■ June 2017


Federal Reserve Bank of Atlanta

Construction and Real Estate Reports on activity in May from District residential real

estate contacts continued to signal modest but steady

growth. Most builders said construction activity increased

from the year-ago level. Brokers and builders continued

to report that home sales were up relative to one year

earlier. The majority of builder and broker contacts noted

that buyer traffic was up from the previous year’s level.

Many residential contacts indicated that inventory levels

were down from the year-ago level. Both builders and

brokers reported modest gains in home prices. Home

sales expectations remained positive in May, with most

brokers and builders anticipating that sales would hold

steady or increase slightly over the next three months

compared to the year-earlier level. Most builders expect

construction activity to match or exceed the current pace

over the next three months.

Many District commercial real estate contacts reported

improvements in demand that have resulted in rent

growth and increased absorption, but they continued to

caution that the rate of improvement varied by metropoli-

tan area, submarket, and property type. The majority of

commercial contractors indicated that the pace of non-

residential construction activity had increased from one

year ago, with many reporting increasing backlogs.

While most reports indicated that the pace of multifamily

construction matched or exceeded the year-ago level, a

growing share of contacts are reporting that multifamily

construction is down. Looking forward, the majority of

District commercial construction contacts expect nonresi-

dential construction activity to increase, while expecta-

tions for the pace of multifamily construction was mixed.

Manufacturing On balance, manufacturing contacts continued to report

growth in overall activity. New orders and production

levels continued to rise, but at a slower pace than the

previous reporting period. Purchasing agents indicated

that supply delivery times continued to get longer and

finished inventory levels increased slightly. The outlook

for future production decreased somewhat, with just

under half of firms expecting higher production levels

over the next six months.

Transportation Most District transportation contacts reported an expan-

sion of activity during the reporting period. Logistics

companies noted steady growth in ecommerce ship-

ments, and trucking contacts reported notable increases

in freight volume and tonnage. District ports cited contin-

ued strength in shipments of automobiles and machin-

ery, and record container volumes. Rail contacts report-

ed a slight uptick in intermodal traffic; however, year-

over- year rail traffic was relatively unchanged since the

previous report.

Banking and Finance Credit remained readily available for most qualified bor-

rowers. Competition for loan customers increased

among financial institutions. Overall loan growth varied –

some institutions reported flat to slow growth while oth-

ers indicated strong growth. Small business loans were

up year over year at some institutions. Credit card usage

increased yet delinquency levels remained stable. De-

posit levels were up at many institutions.

Energy Reports from energy contacts indicated that Tropical

Storm Cindy caused limited disruptions to oil and gas

operations in the Gulf of Mexico. Contacts noted that

trends in continued gains in energy efficiency has slowed

growth among residential and commercial gas custom-

ers. Reports indicated that natural gas demand was

below normal and inventories remained above average

levels. Contacts reported that Gulf Coast refineries ran at

record high levels and crude oil inventories remained

above average levels.

Agriculture Agriculture conditions across the District were mixed. By

mid-June, rains had significantly improved drought con-

ditions in much of the District. However, recent heavy

rainfall due to Tropical Storm Cindy exacerbated areas’

crop moisture conditions in much of the District that were

already categorized as abnormally moist to excessively

wet, and there were early indications of some crop dam-

age. During the reporting period, the District’s cotton

crop was mostly on par with the five-year averages and

soybean planting in Louisiana, Mississippi, and Tennes-

see was ahead of their five-year averages. The June

forecast for Florida oranges was up slightly from May but

remained considerably lower than last season's produc-

tion. On a year-over-year basis, prices paid to farmers in

April were up for cotton, soybeans, and broilers but

remained down for corn, rice, beef, and eggs. ■

For more information about District economic conditions visit: www.frbatlanta.org/economy-matters/regional-economics


Federal Reserve Bank of Chicago

Summary of Economic Activity

Growth in economic activity in the Seventh District picked up to a moderate pace in late May and June and respondents’

outlooks for growth over the next 6 to 12 months also improved some. Prices rose modestly. Employment, business

spending, and manufacturing grew at moderate rates, while consumer spending and construction and real estate activity

increased modestly. Conditions were little changed in the financial and agricultural sectors.

Employment and Wages Employment growth continued at a moderate rate over

the reporting period, and contacts expected it to continue

at that pace for the next 6 to 12 months. Contacts indi-

cated that the labor market was tight and that it was

generally harder to fill high-skilled positions than low-

skilled positions. Hiring was focused on professional and

technical, sales, and production workers, and there was

an increase in the number of contacts hiring sales work-

ers. A staffing firm that primarily supplies manufacturers

with production workers reported a slight decline in

billable hours. Wage growth was modest overall, with

increases more likely for high-skilled occupations. A

number of contacts with union workers reported wage

increases that were well above inflation. Many contacts

said that the cost of benefits increased.

Prices Overall, prices again rose modestly in late May and

June. Retail prices increased slightly, with the exception

of gasoline and food prices, which declined a bit. Materi-

als costs were little changed overall and freight costs

were up slightly.

Consumer Spending Consumer spending increased modestly over the report-

ing period. Non-auto retail sales were up modestly, with

growth in the building materials, gardening equipment,

food and beverage, and personal care segments. Tour-

ism and entertainment contacts reported that the sea-

sonal pickup in activity was proceeding as expected. The

pace of auto sales changed little on net, with reports of a

pickup in May followed by a slowdown in June. Used-

vehicle sales were steady. Contacts indicated that low

fuel prices continued to shift the vehicle mix toward light

trucks and away from cars. Low fuel prices also helped

spur increased sales of recreational vehicles.

Business Spending Growth in business spending remained at a moderate

pace in late May and June. Retail inventories generally

were at comfortable levels, although stocks appeared

high for certain models of autos. Manufacturing invento-

ries were at comfortable levels overall, though invento-

ries at steel service centers remained low. Growth in

capital spending continued at a moderate pace, and

contacts expected growth to continue at that pace for the

next 6 to 12 months. Outlays were primarily for replacing

The Beige Book ■ June 2017


Federal Reserve Bank of Chicago

industrial equipment, IT equipment, and renovating

structures, though there was an increase in the number

of contacts reporting spending for expansion. Demand

for electricity was little changed and shipping volumes

increased slightly.

Construction and Real Estate Construction and real estate activity increased modestly

over the reporting period. Residential construction in-

creased slightly across home types and locations. Home

sales increased a bit and house prices increased mod-

estly on balance. Demand varied by price range, with

strong demand and tight inventories for homes under

$500,000 and modest demand and abundant inventories

for houses over $500,000. Nonresidential building

changed little. A highway construction contractor in

Illinois reported that they would stop work on all state-

funded projects at the beginning of July because the

state does not have a budget and that they have already

laid off some workers who were preparing for new pro-

jects. The pace of commercial real estate activity re-

mained strong and even picked up a bit, led by gains in

the industrial sector. Activity was especially strong in

West Michigan, and a contact there reported that activity

had increased moderately over the reporting period.

Commercial rents edged up, as vacancy rates and the

availability of sublease space decreased slightly.

Manufacturing Manufacturing production continued to grow at a moder-

ate rate in late May and June. Growth in steel production

remained at a moderate pace, as increased demand

from the energy and machinery industries offset softer

demand from the auto industry. Heavy machinery manu-

facturers themselves reported increased demand, driven

by the energy and mining sectors, particularly from over-

seas customers. Heavy truck manufacturers also report-

ed a pickup in demand. Sales for specialty metals manu-

facturers increased overall, with greater demand coming

from the aerospace, energy, and defense sectors. That

said, some contacts noted that recent growth had been

uneven, which raised concerns about future sales pro-

spects. Production in the auto sector declined some, but

remained at a solid level.

Banking and Finance Financial conditions were little changed on balance over

the reporting period. Financial market participants noted

that volatility continues to be low. Business loan demand

ticked up overall, and there was little change in loan

standards or quality. Contacts reported an increase in

demand for capital equipment and real estate loans.

Demand for consumer loans was little changed on bal-

ance. Home loan volume rose faster than the usual

spring seasonal pattern and pricing was little changed.

Home loan quality remained strong. Demand for auto

loans decreased slightly and there was no notable

change in quality.

Agriculture The agricultural sector continued to operate under stress

in late May and June, with reports of some crop and

dairy operations exiting or filing for bankruptcy. Crop

conditions and maturity lagged that of last year’s bumper

crop, but the overall harvest is still expected to be

around trend. Contacts expected a smaller corn harvest

than last year, but there is a small chance that the soy-

bean harvest will be larger because the wet spring led

some farmers to switch acreage from corn to soybeans.

Hog prices moved up, but cattle prices dropped. Milk

prices were lower, which contributed to mounting losses

for many dairy operations. ■

For more information about District economic conditions visit: www.chicagofed.org/publications/cfsbc


Federal Reserve Bank of St. Louis

Summary of Economic Activity

Reports from contacts suggest economic conditions have slightly improved since our previous report. Employers report-

ed little hiring and moderate wage pressures due to difficulties finding qualified candidates. Retailers indicated that

consumer spending modestly improved since our previous report. Manufacturing contacts continued to report modest

growth. Real estate contacts indicated that, while demand remained strong, residential activity continued to decline amid

supply constraints. Banking contacts indicate generally strong growth in loan demand from both businesses and house-

holds. Reports from the District’s agriculture sector suggest modest improvement after flooding last period, but that

generally conditions remain weak amid low prices.

Employment and Wages Anecdotal evidence suggests employment is little

changed since the previous report. Many contacts re-

ported a desire to hire, but they have been unable to find

suitable employees. Manufacturing contacts in Louisville

and Memphis reported difficulties finding experienced or

qualified employees, with some citing candidates' inabil-

ity to pass drug tests or to consistently report to work.

Hospitality contacts in Louisville noted that both entry-

level and experienced workers have been challenging to

find, and skilled positions in technical fields such as

information technology and engineering remain difficult

to fill.

Contacts reported moderate growth in wages since the

previous report, as tightness in the labor market has

resulted in upward pressure on wages. In addition, sev-

eral contacts reported enhancing benefits in an effort to

attract employees. However, some employers noted

factors holding back wage increases. A science and

technology contact reported that rising costs of benefits

have limited increases in wages, and a hospitality con-

tact in Louisville noted that wages remain unchanged

because any increases would result in higher prices

charged to customers.

Prices Price pressures in the District remained moderate. Low

commodity prices continue to put pressure on the agri-

culture sector. Since the previous report, cash prices of

wheat and sorghum have increased moderately and

prices of rice have increased slightly; there was no

change in the price of coal, and prices of soybeans,

corn, and cotton decreased modestly. A contact in Little

Rock reported farm equipment prices are down.

Across the District, home prices continued to increase

moderately. Contacts reported increased price pressures

on new homes from rising construction costs due to the

shortage in labor supply. Price changes of construction

materials were mixed. Contacts in the Little Rock area

reported solid wood prices decreased modestly due to

increased supply, whereas a contact in the Memphis

furniture industry reported higher wood and foam prices

were putting upward pressure on the price of their fin-

ished goods.

Consumer Spending Reports from general retailers, auto dealers, and hotel-

iers indicate consumer spending has grown modestly

since our previous report. May sales tax collections in

Arkansas, Kentucky, Missouri, and Tennessee were

higher than one year ago. Multiple auto dealers reported

The Beige Book ■ June 2017


Federal Reserve Bank of St. Louis

an increase in sales, albeit at a slower pace relative to a

year ago. Furthermore, dealers in north Mississippi

reported a shift in demand toward used vehicles. Hospi-

tality contacts in Missouri indicated that business activity

has increased since our previous report, while hotel

occupancy rates continue to decline in downtown Louis-


Manufacturing Manufacturing activity has increased modestly since our

previous report. Manufacturing activity was stronger than

one month earlier in both Missouri and Arkansas, alt-

hough the pace of growth slowed sharply in Missouri and

slowed slightly in Arkansas. In addition, contacts in the

furniture manufacturing industry reported a decrease in

orders. Several companies reported new capital ex-

penditure and facility expansion plans in the District,

including firms that manufacture fabricated metal prod-

ucts, paper products, and plastic and rubber products. A

contact in the aluminum industry reported record high

capital expenditures.

Nonfinancial Services Reports of plans in the service sector have been posi-

tive, on balance, since the previous report. Firms that

provide transportation, warehousing, utilities, and infor-

mation technology services reported plans to expand

facilities and hire employees. In the St. Louis area, re-

ports from the education sector were negative, as two

major universities announced layoffs due to budget cuts

and declining enrollment. News from the healthcare

industry is mixed. Some providers are cutting costs,

leading to closures in healthcare-related businesses;

however, other providers continue to expand operations

in urban areas.

Real Estate and Construction Residential real estate activity has declined modestly

since the previous report. Seasonally adjusted home

sales for May decreased slightly from the previous

month in most of the District’s four major MSAs. Local

real estate contacts continued to report that significant

shortages in inventory have hindered sales while de-

mand remains strong. Most contacts indicated that

changes in interest rates have had little to no impact on

the market.

May permit activity in District MSAs declined slightly

relative to the previous month. A Memphis contact indi-

cated that little new construction is occurring, while a

Little Rock contact noted that homebuilding in the region

is approaching levels consistent with fundamentals.

Commercial real estate activity has remained flat since

the previous report. Demand for industrial properties

continued to be robust, and a Louisville contact reported

that there is essentially no warehouse space available in

the area. Multifamily demand remained stable, but some

contacts reported an increase in demand for senior living

facilities. Contacts reported that rising interest rates have

had very little impact on commercial real estate markets.

Commercial construction activity continued to be strong.

Several Memphis contractors indicated that they are

optimistic about their future prospective projects. Indus-

trial construction activity remained robust, particularly in

Louisville. Contacts across the District expressed con-

cerns over the number of new hotels under construction.

Banking and Finance Lending activity in the Eighth District has expanded at a

robust pace since the previous report and markedly

outpaced the nation. Commercial real estate loan vol-

umes grew at a strong pace, rising by 14 percent on a

year-over-year basis. District bankers reported that

consumer loans—which comprise credit card, auto,

medical, and student loans—experienced robust growth

and have risen by 28 percent relative to year-ago levels.

Commercial and industrial lending exhibited moderate

growth over the period, though slightly softer than in

recent quarters. District bank deposits expanded at a

moderate pace and have been growing at roughly three

times the national rate over the past three years.

Agriculture and Natural Resources Agricultural conditions improved modestly by the end of

June as row-crop farms recovered from flooding. Con-

tacts reported a few Arkansas fields had still not dried up

enough to replant and many fields would be replanted

with soybeans because other crops’ planting windows

had passed. As of June, the percentages of District corn

and soybeans rated fair or better were below their 2016

values, but corn improved slightly from a month prior.

The percentage of rice rated fair or better was above the

year- and month-ago values, while the cotton percentage

was slightly better than a year prior and slightly worse

than a month prior.

Natural resource extraction conditions declined slightly

from April to May, with seasonally adjusted coal produc-

tion decreasing 3 percent. However, production was still

7 percent higher than one year ago. ■

For more information about District economic conditions, visit: www.research.stlouisfed.org/regecon/


Federal Reserve Bank of Minneapolis

Summary of Economic Activity

Since the last reporting period, the Ninth District economy experienced modest growth. Employment grew modestly,

held back by poor labor availability. Wages grew moderately to strongly, while price pressures remained modest. The

District economy showed growth in professional services, residential construction, manufacturing, energy, and mining.

Commercial and residential real estate, along with commercial construction, were mixed. Tourism activity was flat over-

all, while consumer spending fell, and agricultural conditions weakened.

Employment and Wages Employment grew modestly since the last report, held

back by poor labor availability. While total employment

grew across District states, it grew by less than normal

for this time of year. Job demand continued to be strong.

A Minnesota construction contact said, “Everyone is

hiring in all markets.” A Montana staffing contact said

second quarter orders overall were “stagnant,” but June

orders have seen an uptick. A staffing firm in

southeastern Minnesota said job openings over the

previous two months grew by 14 percent over the same

period a year earlier, and a general labor shortage had

clients “concerned that this was going to impact growth

of their business.” Tourism businesses across the

District reported difficulty finding workers; three

Minnesota resorts reported close to 200 unfilled

openings. Initial unemployment insurance claims over

the most recent six-week period dropped by 13 percent

in the District over the same period a year earlier, with

continuing claims dropping by 10 percent. An employer

survey in District states found a small increase in the

share of companies expecting to hire more staff in the

coming quarter compared with the current quarter; the

share of firms expecting to cut staff was low and roughly

unchanged. Job losses continued from large retailers,

and hiring in eastern North Dakota continued to be soft,

while employers in the western, oil-producing region of

the state were reportedly “hungry to hire,” according to a

regional source.

Wages grew moderately to strongly overall since the last

report. A central Minnesota contact said wage pressure

is “a big deal for companies with entry level jobs,” and a

regional survey there found that half of respondents

were increasing wages to deal with a tight labor market.

Average wages for 18 Minnesota construction unions

saw annual increases of between 3.3 percent and 5

percent in recent three-year contracts negotiated in May.

A Minnesota food processing company increased union

worker wages by close to 3 percent annually over four

years; a Montana natural resource company increased

wages by a total of 5 percent over a two-year period. In

North Dakota, state budget difficulties have resulted in a

freeze in salaries for many state and higher education


Prices Price pressures remained modest since the last report.

Pressure on construction materials prices has eased,

according to industry contacts. Recent bids for a large

highway construction project in Minnesota came in 18

percent below expectations. Iron ore prices have fallen in

recent months, while scrap metal prices, by contrast,

have been on an upward trend since late last year. Retail

fuel prices in District states decreased slightly in June

compared with a month earlier. Most prices received by

farmers decreased in May from a year earlier, with the

exception of hay, milk, cattle, chickens, and eggs.

The Beige Book ■ June 2017


Federal Reserve Bank of Minneapolis

Consumer Spending and Tourism Consumer spending was down slightly since the last

report. May sales tax collections in South Dakota were

down 2 percent from a year earlier. Recent sales of

passenger vehicles decreased, according to auto dealer

contacts, while sales of trucks increased slightly. In

contrast, a contact at a North Dakota mall reported that

sales were up slightly. A regional big box retail chain and

a supermarket chain were planning to add stores.

Tourism activity was flat overall since the last report.

May visits to national parks in the District were down 2

percent from a year earlier. Demand for hotel lodging in

Minnesota was flat in May from a year earlier. In

contrast, gaming revenues in Deadwood, S.D.,

increased 8 percent in May.

Services Activity in the professional services industry increased

moderately since the last report. According to preliminary

results from an annual survey of District services firms,

respondents reported that sales, productivity, and

employment all increased over the past year; firms

expected more growth over the coming year. An

accounting firm reported increased activity, even as the

busy tax season subsided. Contacts in the trucking

industry reported flat activity over recent months.

Construction and Real Estate Commercial construction was mixed since the last

report. According to industry figures, commercial building

and nonbuilding construction activity in May was lower

than a year earlier. A separate database of construction

projects out for bid across several District states through

mid-June was flat compared with a year earlier. But a

Minnesota industry association contact said most

members “seem to be having good years with full or

potentially full calendars of work.” Commercial permit

values in May grew considerably over a year earlier in

several larger cities in the Minneapolis-St. Paul region,

including the core cities; however, they were flat or lower

in a large majority of other larger cities in the District. In

Rochester, Minn., construction was described as “fairly

subdued,” but was expected to change. Residential

construction grew modestly. Single-family permits in May

rose in only a small majority of large District cities

compared with a year earlier. Multi-family construction

continued its strong activity, with more than 900 units

permitted in May across the Minneapolis-St. Paul metro,

the highest monthly figure in almost four years.

Commercial real estate was mixed since the last report.

A contact in Rapid City, S.D., said transaction activity

there has been strong. “Apartment complexes get sold

within a week of listing.” Retail vacancy was described

as “pretty stable,” while office vacancy appeared to be

rising thanks to new space coming to the market. Retail

vacancy rates have continued to rise slowly in

Minneapolis-St. Paul, thanks to a significant amount of

space vacated by large retailers. However, another

source noted that retail space under construction was

lower than a year earlier and grocery expansion

continued to eat up available space. Despite strong

construction activity, multi-family vacancy rates remained

low in the region, and rents were rising. Residential real

estate was mixed. Closed sales rose in northern and

western Wisconsin counties located in the District

compared with a year earlier; sales also grew in Sioux

Falls, S.D. Sales were mixed in Montana—strong in the

Flathead region, flat in Missoula, but lower in Helena. In

Minneapolis-St. Paul, May sales fell by almost 2 percent,

while sales in the rest of the state were flat, attributed

largely to low inventories of homes for sale.

Manufacturing District manufacturing activity increased moderately

since the last report. An index of manufacturing

conditions produced by Creighton University indicated

increased activity in May compared with a month earlier

in Minnesota and the Dakotas. Several contacts in the

metal-fabricating industry reported very strong recent

activity; one contact had record sales in May and was

expecting a similar level in June. A dealer of capital

equipment and services reported that orders were up. An

electronics producer announced a major new facility in


Agriculture, Energy and Natural Resources District agricultural conditions weakened since the

previous report. Severe drought conditions affected the

Dakotas and parts of Montana, hampering crop progress

and triggering disaster relief payments to ranchers in

some areas. By contrast, crop conditions in the eastern

parts of the District were mostly good or excellent as of

late June. Activity in the energy and mining sectors

increased slightly since the last report. District oil and

gas exploration activity increased in late June from a

month earlier, even as crude prices fell. Recent

production at Minnesota iron ore mines has been

running well ahead of levels a year earlier. ■



Summary of Economic Activity Economic activity in the Tenth District expanded moderately in June, and most sectors expected additional gains in the months ahead. Consumer spending increased at a moderate pace, with retail, restaurant and tourism contacts reporting stronger sales than the previous survey period. Manufacturing activity picked up moderately, and professional, high-tech, and transportation contacts reported strong increases in sales. Capital expenditures were anticipated to rise in the manufacturing, professional and high-tech industries, while wholesale trade and transportation firms expected a modest decline. Residential and commercial construction activity rose in June, but home sales declined slightly as low invento-ries constrained sales. The number of active drilling rigs continued to increase, but the pace of growth was expected to slow in coming months. District farm revenue remained subdued as most agricultural commodity prices remained low. Employment and wages increased modestly since the previous survey period, and contacts expected moderate wage growth in the coming months. Input prices were up modestly in most sectors, and selling prices were mixed.

Employment and Wages District employment and employee hours continued to increase modestly in June, and contacts expected addi-tional gains in the months ahead. Contacts in the retail, wholesale trade, professional and high-tech services, tourism, health services and real estate sectors reported a modest increase in employment since the previous survey period, while employment held steady in auto sales and restaurants. All sectors anticipated higher employment levels in the coming months except for the auto sector which expected a slight decrease. Average employee hours rose since the previous survey in the services and manufacturing sectors and were above year-ago levels. Several contacts noted a shortage of commercial drivers, salespeople, and service workers.

Wages rose modestly in most sectors in June, and mod-erate wage growth was anticipated in the coming months.

Prices Input prices were up modestly in most sectors compared to the previous survey period, while selling prices were mixed. In the retail sector, selling prices edged up, and input prices continued to rise, but at a slower pace than in the prior survey. Restaurant contacts reported slight declines in both input and selling prices, but expected both prices to pick up in the months ahead. Input prices

in the transportation sector rose at a modest pace, while selling prices increased slightly. Prices in the construc-tion sector rose modestly, with slight increases anticipat-ed in the coming months. Manufacturers reported slight decreases in finished goods prices, while raw material costs continued to edge higher. Manufacturers anticipat-ed modest growth in both finished goods and raw materi-al prices over the next few months.

Consumer Spending Consumer spending increased moderately, and addition-al moderate gains were expected in the months ahead. Retail sales rose at a moderate pace and were well above year-ago levels. Several retailers noted stronger sales for lumber and building materials, while luxury and higher-priced products sold poorly. Retail contacts antici-pated sales to grow moderately in the next few months, and inventory levels were expected to remain stable. Auto sales stabilized in June after declining for several months and were slightly above year-ago levels. Dealer contacts anticipated a moderate increase in auto sales in the months ahead. Restaurant sales picked up moder-ately since the previous survey, and modest gains were expected in the coming months. District tourism activity increased moderately and remained above year-ago levels. Tourism contacts anticipated moderate increases in activity during the summer months.

TheBeigeBook■ June2017



Manufacturing and Other Business Activity Manufacturing activity continued to expand at a moder-ate pace in June, and most other business contacts reported improved sales. Manufacturers reported moder-ate growth in production, particularly for aircraft, plastics, and chemical products. Shipments and new orders ex-panded modestly, and activity was considerably higher than a year ago. Manufacturers’ capital spending plans were mostly positive, and firms’ expectations for future activity remained strong.

Outside of manufacturing, professional, high-tech, and transportation firms reported strong sales increases, while wholesale trade contacts reported a more modest growth in sales. Most firms expected a moderate im-provement in sales in the next six months. Professional and high-tech firms expected capital spending to in-crease moderately heading forward, while wholesale trade and transportation firms anticipated a modest decline in capital expenditures.

Real Estate and Construction District real estate activity expanded slightly since the previous survey period, and respondents expected fur-ther gains moving forward. Residential home sales de-clined slightly from the previous month, with sales of low-and medium-priced homes outpacing sales of higher-priced homes. Residential home inventories moved modestly lower from year-ago levels. Contacts expected low inventories to constrain sales in the next few months and anticipated sales would be flat. Residential construc-tion activity grew slightly, as housing starts and traffic of potential buyers rose, while construction supply sales were stable. Respondents expected overall residential construction activity to increase moderately in the months ahead. Commercial real estate activity continued to expand modestly as vacancy rates declined and ab-sorption, completions, construction underway, sales, prices and rents increased. A modest expansion in the commercial real estate sector was anticipated in the coming months.

Banking A majority of banking respondents indicated stable de-mand for commercial and industrial, commercial real estate, residential real estate, and consumer installment loans. Demand for agricultural loans was mostly mixed in June. Most bankers indicated loan quality was un-changed compared to a year ago, and expected loan quality to remain essentially the same over the next six months. Credit standards remained largely unchanged in

all major loan categories, and a majority of respondents reported stable deposit levels.

Energy Energy activity rose at a modest pace, while expecta-tions eased slightly but remained positive. The number of active oil and gas drilling rigs continued to increase across the District, but respondents expected the pace of growth to slow in the coming months due to flat prices and the continued oversupply of oil. Contacts also re-ported a moderate decline in access to credit, particular-ly from banks, while private equity continued to be readi-ly available. Expectations for future oil and gas prices moderated somewhat as a result of the continued in-crease in U.S. oil production and ample natural gas supply. Furthermore, contacts said that although the oil and gas prices needed to increase drilling substantially has continued to decline modestly, it remained above their current one-year ahead price expectations.

Agriculture District farm revenue remained subdued since the previ-ous reporting period as most agricultural commodity prices remained low. Corn and wheat prices increased slightly, but were lower than a year ago due to elevated global supplies. Similar to last year, District contacts reported that corn and wheat prices remained below levels generally thought to be profitable and financial stress continued to increase at a gradual pace for many producers. Soybean prices declined slightly from the previous reporting period and were also slightly less than a year ago. Livestock operators were slightly more opti-mistic than earlier, as cattle prices increased modestly from a year ago. Hog prices also increased modestly from the previous reporting period as global demand for meat products remained relatively strong. ■



Federal Reserve Bank of Dallas

Summary of Economic Activity

The Eleventh District economy continued to expand at a moderate pace over the past six weeks. Manufacturing output

rose, and activity in nonfinancial services increased. Growth in retail sales slowed, while auto sales dipped. Housing

demand grew, lending activity increased, and the energy sector saw continued improvement. Crop conditions were

mostly favorable. Employment and wages rose, as did prices. Outlooks remained positive, although some contacts

noted uncertainty regarding changes in trade and healthcare policy as well as tax reform.

Employment and Wages Overall employment rose moderately, and wage pres-

sures were similar to the last report. Manufacturers

added to payrolls, with some noting that labor shortages

were pushing up wages. Hiring in the services sector,

including retail, continued. The construction labor market

remained tight, particularly in Dallas-Fort Worth and

Austin. Two staffing firms cited wage pressures across

most skill levels, while two reported that rising wage

pressures were limited to higher-skilled positions. Con-

tacts noted labor market tightness throughout the oil and

gas supply chain and continued to cite upward wage

pressures particularly for experienced personnel and for

certain skills sets.

Prices Selling prices increased at a slightly slower pace than in

the prior report. Some oilfield services firms noted a

weaker outlook for margins as costs were rising at a

faster pace than selling prices. Accommodation and food

services contacts noted higher prices. Staffing firms saw

stable billing rates, while airlines noted higher fees and

ticket prices. Cotton prices slipped in June on rising

expectations of strong cotton production this year. Retail

gasoline and diesel prices fell over the reporting period

following the decline in oil prices.

Manufacturing Expansion in the manufacturing sector slowed over the

past month. Among durables, output growth in primary

metals and machinery manufacturing strengthened, but

production was flat for fabricated metals and high-tech

manufacturing. Food manufacturers reported an in-

crease in demand. There were reports of strength in

energy-related manufacturing activity, but exports re-

mained a source of weakness for manufacturers who sell

internationally. Overall, outlooks stayed positive. A cou-

ple of contacts said they were uncertain about how long

the current strength in activity would last.

Refinery utilization rates along the Gulf Coast increased.

Refiner margins in 2017 will likely be lower than previ-

ously expected, reflecting large product inventories and

lower expectations of U.S. consumption growth. Chemi-

cal producers noted healthy global demand and good


Retail Sales Retail sales continued to rise, although at a slower pace

than the prior period. Some contacts noted that in-store

sales continued to be weak. There were a few reports of

sales improving along the Texas-Mexico border and in

energy-related regions. Auto sales fell during the report-

ing period. Auto lenders have tightened credit amid rising

The Beige Book ■ June 2017


Federal Reserve Bank of Dallas

delinquencies. Outlooks among retailers generally im-

proved compared with the prior report.

Nonfinancial Services Demand for nonfinancial services expanded moderately

over the past six weeks. Demand for staffing services

generally increased, with all contacts noting higher year-

over-year activity. Placements of health care profession-

als generally remained high. Contacts saw a pickup in

orders for mining-related work in East Texas and cited

broad-based demand for white-collar workers in Dallas-

Fort Worth. A contact in Houston noted surprisingly

strong demand for entry- to mid-level placements from

oil and gas firms.

Professional and technical service firms saw revenue

gains during the reporting period, with several firms

noting a pickup in activity. Accommodation and food

services contacts also noted slight increases in reve-

nues, although there were some reports of persistent

weakness in demand. Airlines said passenger demand

held steady over the past six weeks. Domestic travel

remained stable, while activity along transatlantic and

South American routes increased.

Transportation and warehousing firms noted higher

revenues and an increase in cargo volumes since the

last report. Rail cargo rose, led by strong gains in ship-

ments of fracking sand and grains, although shipments

of petroleum products and motor vehicles continued to

decline. Parcel shipments and seaport cargo increased,

while air and trucking freight volumes were flat. Outlooks

among nonfinancial services firms remained fairly opti-

mistic, although some contacts expressed concern about

economic and political uncertainty.

Construction and Real Estate Homes sales continued to trend upward during the re-

porting period. Contacts in Austin, Dallas-Fort Worth and

Houston noted that sales of low- to mid-priced homes

mostly remained strong, however, sales at the higher-

price points varied by submarket. Home prices were flat

to up, and more builders were focusing on bringing mod-

erately-priced products to the market.

Apartment demand improved and occupancy edged

higher in the second quarter, following a generally slow

first quarter. Leasing activity picked up in Houston where

overall market conditions were beginning to stabilize,

and landlords were able to reduce rent concessions on

select floorplans. Rental rates rose, with Dallas-Fort

Worth seeing the fastest growth. Outlooks were positive

and contacts expected continued, gradual improvement

in Houston’s multifamily market. Transaction volume

appeared to have slowed for multifamily properties as

there was not much inventory on the market for sale.

Office demand in Dallas-Fort Worth remained solid and

rent pressure persisted, although rental rates at the very

high end have been relatively flat. One contact ex-

pressed some concern about the elevated level of office

construction in the metroplex.

Financial Services Loan demand increased over the past six weeks, alt-

hough at a slightly slower pace than in the previous

reporting period. Growth in commercial real estate and

commercial and industrial loan volumes slowed. Resi-

dential real estate loan balances expanded at a faster

rate than in the previous reporting cycle, while consumer

lending declined slightly. Deposit volumes expanded,

and lenders cited higher net interest margins as well as

higher rates on loans. Contacts remained largely opti-

mistic regarding future business activity and loan de-

mand; however, several continued to express concern

about the regulatory environment.

Energy Demand for oilfield services continued to improve, and

oilfield services firms noted increased utilization of their

equipment. Drilling activity rose further, and exploration

and production firms reported an increase in oil and gas

production. Several contacts said that the pace of in-

crease in the rig count may not be sustainable and that

they expect it to taper off or even plateau past mid-2017.

Outlooks remained positive, although contacts were less

optimistic compared with the previous report.

Agriculture Moisture levels remained favorable across the district,

boosting crop conditions. The wheat harvest was wrap-

ping up, and production was down sharply from last year

because of lower yields and fewer acres planted. While

farmers were generally feeling positive about 2017 row

crop production, they remained concerned about low

crop prices and financial strain from not being able to

cover production costs. Export demand for U.S. cotton

will likely not be as strong this year due to average crop

quality and higher global supply. The cattle industry

continued to benefit from very strong beef demand, both

domestically and internationally. ■

For more information about District economic conditions visit: www.dallasfed.org/research/texas


Federal Reserve Bank of San Francisco

Summary of Economic Activity

Economic activity in the Twelfth District continued to expand at a moderate pace during the reporting period of mid-May

through June. Overall price inflation was flat, while upward wage pressures strengthened. Sales of retail goods were

modest, and growth in the consumer and business services sectors remained strong. Conditions in the manufacturing

sector improved, and activity in the agriculture sector picked up to a modest pace. Contacts reported robust activity in

residential real estate markets, and activity in the commercial sector picked up. Conditions in the financial services

sector remained solid.

Employment and Wages On balance, wage pressures ticked up, and conditions

in the labor market tightened further during the reporting

period. Wage pressures for skilled software engineers

intensified further as competition for programmers with

experience in cybersecurity and cloud computing re-

mained fierce. Demand for unskilled warehouse employ-

ees in the transportation and logistics services sector

increased. Contacts reported that they increasingly filled

job openings with older workers who were reportedly

seeking health-care benefits or supplemental income.

Shortages of labor and increasing wage costs fueled

investments in automation in the agriculture industry.

Sluggish sales growth and rising compensation costs

slowed the pace of hiring in the restaurant industry.

Prices Overall, price inflation was flat over the reporting period.

Prices of construction materials picked up. Hotel rates

firmed as tourism demand remained strong. Overall

prices for consumer electronics edged down slightly.

However, increased demand for computational memory

buttressed prices of some manufactured components.

Prices for cloud computing services declined as data

centers achieved greater economies of scale. Increased

capacity in renewable energy generation held down

energy price inflation. Overall, prices of agricultural

commodities slipped as the pace of supply growth out-

paced that of demand.

Retail Trade and Services On balance, retail sales were modest over the reporting

period. Contacts reported that, while retail sales picked

up overall, the shift in consumer preferences toward

online purchases slowed sales at traditional brick-and-

mortar retailers. Declines in gasoline prices reportedly

boosted sales of light trucks. Inventories of automobiles

grew as demand softened further, and contacts ex-

pected sales to remain weak for some time.

Activity in the consumer and business services sector

generally grew at a strong pace. Business demand for

security, cloud, and analytic services continued to boost

sales in the technology industry. E-commerce sales

supported strong volume growth in the transportation

industry. Tourism demand remained strong, although

contacts noted that continued uncertainty surrounding

immigration policy slowed international bookings at

hotels in Southern California. Restaurant sales re-

mained sluggish, and contacts expect the sluggishness

to continue through the end of the year.

Manufacturing Conditions in the manufacturing sector improved some-

what, but uncertainty around fiscal, trade, and immigra-

tion policies tempered views on future growth. Increas-

es in demand for memory on consumer devices boost-

The Beige Book ■ June 2017


Federal Reserve Bank of San Francisco

ed production of semiconductors, and contacts expect

double-digit growth through the end of the year. Demand

for primary and fabricated metals increased, buoyed by a

pickup of business investment and solid residential and

commercial construction. Production of manufactured

pharmaceuticals expanded moderately. Deliveries of

commercial aircraft slowed to a modest pace, but orders

rose from the same period last year. One contact report-

ed that improved sales at some manufacturers boosted

their expected capital investments.

Agriculture and Resource-Related Industries Activity in the agriculture sector picked up to a modest

pace over the reporting period. In the Central Valley of

California, yields of nuts and row crops were up over the

previous growing season. Ample water supplies boosted

cherry harvests. On balance, improved global economic

conditions nudged up demand for some agriculture

products, particularly pork. Increased global production

pushed raisin inventories higher, reducing profitability for

some growers. Demand for electricity was flat, and per-

sistent surpluses hampered profitability. Contacts report-

ed that financial distress at many independent power

generators continued to propel industry consolidation.

Use of fossil fuels, particularly coal, in energy generation

continued to decline, while demand for renewables con-

tinued to be robust.

Real Estate and Construction Real estate market activity picked up to a robust pace.

Residential construction activity continued to be strong in

much of the District, slowed only by a lack of available

land and labor. Inventories of new homes dropped fur-

ther. One contact in California reported extremely high

presales in the residential market. Supply shortages

continued to fuel strong price increases, and affordability

remained a concern in most metropolitan areas. Com-

mercial construction activity was solid. Contacts reported

an uptick in commercial investment aimed at remodeling

and repurposing large retail spaces for health-care and

entertainment services. Financing conditions for com-

mercial projects tightened slightly.

Financial Institutions On balance, conditions in the financial services sector

remained solid. Loan demand softened slightly, although

contacts in the Pacific Northwest noted that, after a soft

first quarter, lending activity picked up briskly in that

region. Credit quality, while strong by historical stand-

ards, deteriorated slightly for commercial and industrial

and auto loans. Deposits continued to increase but at a

slower pace than in previous months. Asset quality re-

mained solid, and capital levels were at all-time highs.

Net margins remained compressed, hindering bank

profitability, and contacts reported that community banks

continued to consolidate. ■

(PDF) The Beige Book - Federal Reserve System Beige Book Summary of Commentary on Current Economic Conditions By Federal Reserve District For use at 2:00 PM EDT Wednesday July 12, 2017 June - PDFSLIDE.NET (2024)
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