October 10, 2012
Seventh District Update
by Norman Wang and Scott Brave
A summary of economic conditions in the Seventh District from the latest release of the Beige Book and from other indicators of regional business activity:
• Overall conditions: Economic activity in the Seventh District continued to expand in late August and early September, but again at a slow pace.
• Consumer spending: Growth in consumer spending was little changed. Contacts noted that the rise in gasoline prices had further deterred consumers from increasing discretionary spending and retailers lowered their expectations for the holiday shopping season.
• Business Spending: Business spending continued to increase slowly. Capital expenditures were proceeding as planned and inventories were generally indicated to be at comfortable levels.
• Construction and Real Estate: Growth in construction moderated some. Single-family construction continued to rise at a slow but steady pace, while multi-family construction was stronger and nonresidential construction weaker by comparison.
• Manufacturing: Manufacturing production edged lower, with contacts reporting that new orders had slowed considerably. Nonetheless, a number of contacts also indicated that quoting activity for next year had picked up.
• Banking and finance: Credit conditions continued to improve, with both credit spreads and market volatility decreasing. Banking contacts reported continued weak demand for business loans.
• Prices and Costs: Cost pressures increased some, primarily due to a rise in food and energy prices. Prices for construction materials also increased while most metal prices were steady. Wage pressures remained moderate.
• Agriculture: The corn and soybean harvest began a few weeks earlier than normal, as plants were dry due to the drought. In some areas, late rains helped produce higher-than anticipated yields, but these made only a small dent in the large drought-related losses. Crop quality was also an issue in parts of the District.
The Midwest Economy Index (MEI) decreased to –0.38 in August from –0.11 in July, reaching its lowest value since December 2009. The relative MEI declined from +0.05 in July to –0.30 in August—its lowest value since August 2011. Estimates of annual growth in gross state product for the five Seventh District states were updated through the second quarter of 2012 in this release. Estimates for Illinois, Iowa, and Michigan were slightly below the national rate of growth, while those for Indiana and Wisconsin were higher.
The Chicago Fed Midwest Manufacturing Index (CFMMI) decreased 1.2% in August, to a seasonally adjusted level of 94.1 (2007 = 100). Revised data show the index was up 1.5% in July. The Federal Reserve Board’s industrial production index for manufacturing (IPMFG) decreased 0.7% in August. Regional output rose 10.1% in August from a year earlier, and national output increased 4.0%.
Posted by Testa at October 10, 2012 1:10 PM
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