13 June 2001, 22:28 Fed Вeige book Summary
WASHINGTON (MktNews) - The following is the Summary of Commentary on Current Economic Conditions, also known
as the Beige Book, released Wednesday by the Federal Reserve:
Prepared at the Federal Reserve Bank of Minneapolis and based on
information collected before June 4, 2001. This document summarized
comments received from business and other contacts outside the Federal
Reserve System and is not a commentary on the views of Federal Reserve
officials.
Most districts report that economic activity was little changed or
decelerating in April and May. Retail sales and tourism have been slow
to flat across the nation. Most districts report that manufacturing
activity has declined or remained weak. Commercial real estate markets
have softened. New construction, while still at high levels in a number
of districts, appears to have leveled off. The agricultural sector has
been hurt by adverse growing conditions and higher input costs. Mining
activity is stagnant. The one bright spot is the continued growth in
energy exploration. Labor markets continue to ease in all districts,
although a shortage of workers is reported for some occupations. Wage
and price increases are moderate, but significant increases are noted in
energy and health care. Lending activity varies based on location and
type of loan, although credit quality has slipped in many districts.
Consumer Spending
Districts report that growth in consumer spending has been
lackluster. Boston reports spending at or below last year's levels.
Spending in New York, Philadelphia, Minneapolis and Kansas City in May
was little changed from a year ago. Richmond sees purchases slowing from
earlier in the year, and Chicago reports a disappointing May after a
stronger-than-expected April. Cleveland and Atlanta report modest
growth, and Dallas says consumer spending is flat or up slightly.
Weather was noted by a number of districts as a contributing factor to
recent slow retail sales.
Auto sales in Philadelphia are lower than last year. Auto sales
fell in Kansas City, particularly for trucks and SUVs, but dealers are
cautiously optimistic about summer prospects. Minneapolis reports auto
sales on par with a year ago in North Dakota, but new car and truck
registrations are down from last year in South Dakota. Sales for more
fuel-efficient vehicles are "picking up" in Chicago. In Dallas, auto
sales are increasing slowly, but year-to-date figures are still below
those of 2000. Houston auto dealers report very strong auto sales in
April.
Tourism is lackluster. New York reports that Manhattan's hotel
occupancy rates in March and April were 10 percentage points lower than
a year ago, and average room rates saw the biggest decline in eight
years. Atlanta, Chicago and Dallas report slow commercial air travel.
High fuel prices and consumer uncertainty appear to be restraining
travel to Hawaii, Las Vegas and other high-end destinations in the San
Francisco district. In contrast, Richmond reports strong Memorial Day
bookings and spending.
Manufacturing
Manufacturing activity decreased or slowed in May for all the
districts. Several districts report weak new orders and higher inventory
levels. Boston, New York, Philadelphia, Atlanta, Minneapolis, Dallas and
San Francisco report weakness in the telecommunications industry.
Richmond notes declines in furniture sales. Cleveland reports high steel
inventories, while San Francisco states rising inventories of
semiconductors. Kansas City indicates that factory stocks are still
above desired levels. However, Chicago reports that many contacts say
the worst of high inventory levels is over. St. Louis reports planned
expansions of output in the high-tech, tobacco and chemical industries.
Real Estate and Construction
Commercial real estate and construction have slackened somewhat in several
districts. "Softening," "stagnant," "weak," "flat" and "continued to cool"
describe overall activity in most districts. Exceptions include the St.
Louis district, where commercial construction is steady, and the San
Francisco district, where commercial real estate markets are sound, but
with signs of weakening. Nine districts report higher vacancy rates, with
increased subleasing activity as company downsizing has led to more
available space. Rental rates for leased space are steady to lower in
parts of the Boston, New York, Philadelphia, Richmond, Atlanta and Dallas
districts.
Residential construction is mixed, while home buying is generally
active. Homebuilding is strong in the St. Louis district and expanding
modestly in Kansas City; however, homebuilding is soft in the Chicago
and Minneapolis districts. Residential real estate markets are fairly
buoyant in the New York district, while recent sales increases are
reported in Cleveland, Richmond, Atlanta and Minneapolis. In the Kansas
City district home sales are flat, while sales have slowed in the
Philadelphia, Chicago and Dallas districts. The inventory of homes on
the market is low in Philadelphia, but is higher in at least parts of
the Minneapolis and Kansas City districts.
Agriculture
Spring plantings are nearly complete across the nation, but
difficulties persist. Weather problems are reported in Cleveland,
Chicago, St. Louis, Minneapolis, Kansas City and San Francisco. In
addition, pest damage is reported in the St. Louis and Dallas districts.
Atlanta, Kansas City, Dallas and San Francisco note higher production
costs.
Natural Resources Industries
Energy exploration activity is robust due to high prices for
natural gas and oil, while mineral mining activity is sluggish.
Minneapolis, Kansas City, Dallas and San Francisco report increases in
the number of oil and natural gas drilling rigs. The count of active
drilling rigs in the Kansas City district reached an eleven-year high.
Meanwhile, the Minneapolis district reports weak iron ore, copper and
aluminum activity. Iron ore shipments are down and a copper mine and an
aluminum smelter remain closed.
Labor Markets
Districts report overall easing in labor market conditions, with
tightness noted in some occupations. More people are looking for work,
and hiring is considered easier. Information technology workers are
having more difficulty finding jobs in the Boston, Cleveland, Chicago,
Minneapolis and Dallas districts. Demand for temporary staffing services
is soft in the Boston, Cleveland and Richmond districts. Some retailers
in New York report a decrease in employee turnover. However, examples of
worker shortages include nurses in Atlanta, warehouse and light
industrial workers in Richmond, construction workers in Kansas City, and
engineers, welders and office workers in some areas of the Dallas
district.
Wages and Prices
Most districts saw only modest pressure on wages. The Boston market
for all levels of tech workers "has softened dramatically" and dampened
wage pressure. Atlanta says new technology workers are being offered
smaller compensation packages than last year. Minneapolis sees limited
growth in manufacturing wages. In Kansas City, wage pressures "were
virtually nonexistent outside of the energy sector," and workers report
favoring job security over higher wages. San Francisco says the easier
labor market has reduced wage pressure. However, New York, Cleveland,
Atlanta, Minneapolis and San Francisco say costs are rising for health
care and other employee benefit items, with districts reporting examples
of annual increases running as high as 20 percent.
Non-energy prices are generally reported stable. Dallas says that
stiff competition, excess capacity and high inventories are keeping
prices in check in telecommunications and other industries. High
inventories are reportedly keeping prices down in the retail sector and
in some cases pushing them lower. Retailers -- particularly of high-end
goods -- in Boston, New York, Philadelphia, Atlanta and San Francisco
report deeply discounted prices to move overstocked inventories and
boost sales. Cleveland, Richmond, Atlanta, Dallas and San Francisco
report that manufacturer rebates and other incentives have helped lower
car and truck prices. Boston, Cleveland, Richmond, Atlanta and Dallas
all report higher lumber prices.
Districts report higher energy prices across the board, with mixed
consequences. Shipping costs are up in Cleveland; Dallas reports that
rail transport surcharges are increasing; San Francisco says that
surcharges are increasing but "price pass-throughs remained partial."
Banking and Finance
Lending activity and credit quality vary by sector and area.
Deterioration in credit quality is noted in New York, Cleveland,
Richmond, Chicago, Dallas and San Francisco, though not in Philadelphia.
Commercial loan demand is up in New York, Philadelphia and Chicago, but
down in Cleveland, Richmond, Atlanta, St. Louis, Dallas and San
Francisco. Consumer loan demand is subdued in Atlanta, Chicago, St.
Louis and Dallas, but mixed in Philadelphia, and up in New York,
Cleveland and Kansas City.
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