Seventh District Update, May 2017

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A summary of economic conditions in the Seventh District from the latest release of the Beige Book and other indicators of regional business activity:

  • Overall conditions: Growth in economic activity in the Seventh District slowed to a modest pace in April and early May. Respondents’ outlooks for growth over the next 6 to 12 months also pulled back some, but remained positive on balance.
  • Employment and Wages: Employment growth remained at a moderate rate. While contacts indicated that the labor market was tight, wage growth was only modest.
  • Prices: Prices again rose modestly. That said, retail and materials prices changed little.
  • Consumer spending: Consumer spending decreased slightly overall. Non-auto retail sales levels were flat and sales of light vehicles slowed some.
  • Business Spending: Growth in capital expenditures picked up to a moderate pace. Retail and manufacturing inventories were generally at desired levels, though auto dealers thought inventories were too high.
  • Construction and Real Estate: Residential construction rose moderately, though the pace of home sales was little changed. Nonresidential construction and commercial real estate activity were up slightly.
  • Manufacturing: Manufacturing production again grew at a moderate pace. Growth was widespread across industries, helped by greater demand from the energy sector.
  • Banking and finance: Market participants reported stable market conditions and low volatility. Business loan demand increased slightly and consumer loan demand was unchanged.
  • Agriculture: The outlook for crop income was unchanged, incomes for hog and cattle operations improved, and incomes for dairy farmers deteriorated a bit.

The Chicago Fed Survey of Business Conditions (CFSBC) Activity Index decreased to –9 from +14, suggesting that growth in economic activity slowed to a modest pace in April and early May. The CFSBC Manufacturing Activity Index declined to +19 from +45, while the CFSBC Nonmanufacturing Activity Index moved down to –25 from –5.

The Midwest Economy Index (MEI) increased to +0.70 in April from +0.61 in March, reaching its highest value since June 2014. All four broad sectors of nonfarm business activity and all five Seventh Federal Reserve District states made positive contributions to the MEI in April. The relative MEI rose to +0.64 in April from +0.44 in March. All four sectors and four of the five states made positive contributions to the relative MEI in April.