The Federal Reserve’s latest Beige Book survey of economic activity through the 12 regional bank districts Wednesday found little evidence of any V-shaped recovery, instead seeing “slight to modest” improvements in most regions.
Assembled by the St Louis Fed, the survey prepared for the next Federal Open Market Committee meeting November 4-5 was able to characterise only one of 12 districts, the five-state Chicago region, as having robust activity, in jobs and spending.
Otherwise the survey reflected the same steady demand for houses evident in the regular economic reports, an equally steady deterioration in commercial real estate, a moderate increase in manufacturing and a restaurant industry facing the uncertainty of cooler weather and a possible worsening of the pandemic.
The following is the Beige Book text of its overall summary and the abbreviated snapshots of each District, with bold-faced emphasis added:
Overall Economic Activity
Economic activity continued to increase across all Districts, with the pace of growth characterised as slight to modest in most Districts. Changes in activity varied greatly by sector. Manufacturing activity generally increased at a moderate pace. Residential housing markets continued to experience steady demand for new and existing homes, with activity constrained by low inventories. Banking contacts also cited increased demand for mortgages as the key driver of overall loan demand. Conversely, commercial real estate conditions continued to deteriorate in many Districts, with the exception being warehouse and industrial space where construction and leasing activity remained steady. Consumer spending growth remained positive, but some Districts reported a leveling off of retail sales and a slight uptick in tourism activity. Demand for autos remained steady, but low inventories have constrained sales to varying degrees. Reports on agriculture conditions were mixed, as some Districts are experiencing drought conditions. Districts characterised the outlooks of contacts as generally optimistic or positive, but with a considerable degree of uncertainty. Restaurateurs in many Districts expressed concern that cooler weather would slow sales, as they have relied on outdoor dining. Banking contacts in many Districts expressed concern that delinquency rates may rise in coming months, citing various reasons; however, delinquency rates have remained stable.
Employment and Wages
Employment increased in almost all Districts, though growth remained slow. Employment gains were reported most consistently for manufacturing firms, although firms continued to report new furloughs and layoffs. Most Districts continued reporting tight labour markets, attributing it to workers’ health and childcare concerns, with many firms consequently offering increased schedule flexibility; a few Districts, however, noted some firms were finding it easier to hire workers. Wages increased slightly in most Districts, often tied to firms’ difficulty finding workers, especially for low-wage or high-demand jobs. Some firms reported returning wages (and raises) to normal levels, but many reported more stable wages.
Prices rose modestly across Districts since the previous report. Input costs generally increased faster than consumer prices; however, some sectors – notably construction, manufacturing, retail, and wholesale—passed along the higher costs to consumers. Overall, consumer prices across Districts rose modestly with the notable exceptions of food, automobiles, and appliances, which increased significantly. Retail gasoline prices declined. Input costs increased at varying degrees, mostly led by increases in materials costs, particularly steel and lumber. Multiple Districts reported continued additional costs for firms due to COVID-19, including personal protective equipment, sanitation equipment, testing equipment, and technology needed for remote work. Changes in row crop prices were mixed, while Districts reported declines in prices for animal proteins.
Highlights by Federal Reserve District
Economic activity continued to improve during the end of August through September. Revenues of responding firms were generally ahead of the year-earlier period, albeit not strongly. Housing markets saw strong demand and limited supply, leading to home price increases. Outlooks were mostly positive, but contacts expressed considerable uncertainty.
The regional economy has grown slightly in recent weeks, with activity still well below pre-pandemic levels. Manufacturing, housing markets, and tourism have all picked up somewhat, while consumer spending has leveled off. Employment and wages have held steady. Selling prices have been little changed, on balance, though more firms plan to raise their prices in the months ahead.
Business activity grew slightly during the current Beige Book period, but remained well below levels attained prior to the onset of COVID-19. Employment sustained a modest rebound, while wages rose slightly and firms struggled to attract workers. Prices also rose modestly amid price spikes. With the pandemic ongoing and the stimulus ended, uncertainty remained extremely high in anticipation of layoffs, foreclosures, and bankruptcies.
The Fourth District economy expanded at a moderate pace, and more firms increased staffing to keep up with rebounding demand. However, labour shortages persisted, with many workers sitting out of the labour force. While firms expect conditions to improve further in coming months, elevated uncertainty resulted in many firms’ opting to hold cash and forgo capital expenditures.
The Fifth District economy expanded modestly in recent weeks, but economic activity was below pre-pandemic levels. Employment rose, as demand for part-time and temporary workers increased, but wages and prices held fairly steady. Shipments and manufacturing activity increased, and the housing market was strong, but commercial real estate and lending were soft, and the hospitality market remained weak.
Economic activity improved somewhat. Labour market conditions improved modestly, and non-labour costs were generally stable. Retail activity was soft. Activity in tourism and hospitality remained muted. Residential real estate demand increased, and home prices rose. Commercial real estate conditions stabilised. Manufacturing activity improved. Conditions at financial institutions stabilised.
Activity increased robustly, but growth slowed and activity remained below pre-pandemic levels. Employment and consumer spending increased robustly; manufacturing increased moderately; construction and real estate increased modestly; and business spending increased slightly. Wages increased slightly and prices rose modestly. Financial conditions were little changed. Rising prices lifted farm income.
Reports from contacts suggest economic activity has increased slightly, but remains highly variable across sectors. Auto dealers continued to report strong sales despite inventory shortages. Restaurants reported some improvement but expect activity to decline due to cooler weather. Most District crop yields and production are up significantly over the prior year, with only cotton production lower.
Ninth District economic activity grew slightly. Employment was flat overall, but volatile, with many firms either adding or cutting workforce. Labour availability tightened, and wages gained some traction. Growth continued in manufacturing and residential construction and real estate. But most other sectors were either flat or down; agriculture conditions improved thanks to a good crop outlook, but remained weak due to low prices.
Economic activity continued to increase in September, albeit at a slower pace than during the summer months. Consumer spending declined modestly, with drops in retail, auto, restaurant, and tourism sales. However, activity rose in the manufacturing, residential real estate, wholesale trade, and transportation sectors. In addition, the energy sector stabilised somewhat and the agriculture sector improved slightly.
Growth in the Eleventh District economy picked up pace, particularly in services and manufacturing, though activity remained well below normal levels. The housing market continued to perform well. Energy activity remained depressed but started to show some signs of improvement. Outlooks were largely positive but highly uncertain, particularly with regard to the presidential election and the unknown trajectory of the COVID-19 pandemic.
Economic activity in the Twelfth District expanded moderately. Employment levels increased modestly, while price inflation rose marginally. Sales of retail goods rose noticeably, while conditions in the consumer and business services sectors improved somewhat. Manufacturing expanded moderately, and conditions in the agriculture sector improved modestly. Residential real estate activity increased further, while the commercial market was broadly unchanged. Lending picked up at a fair pace.