December 12, 2013
Seventh District Economic Update
by Thom Walstrum 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: The rate of growth in economic activity in the Seventh District continued to be modest, but slowed a bit in October and early November. Contacts remained hopeful for improvement in 2014, although they were slightly less optimistic than they were during the previous reporting period.
• Consumer spending: Consumer spending growth remained modest in October and early November. Auto sales in the District slowed during the government shutdown, but subsequently picked up in late October and November. Non-auto retailers reported typical sales levels during the lull between the back-to-school and holiday season. They expected moderate growth in sales during the holiday season.
• Business Spending: Growth in business spending flattened out in September. Growth in capital spending slowed slightly and inventories were at comfortable levels for most retailers and manufacturers. The pace of hiring edged lower and retailers indicated that seasonal hiring plans were about the same as last year.
• Construction and Real Estate: Construction and real estate activity increased moderately over the reporting period. Demand for residential construction grew slightly and conditions in the residential real estate market continued to improve, but at a slower pace. Nonresidential construction grew modestly and commercial real estate activity continued to expand.
• Manufacturing: Growth in manufacturing production remained moderate. The auto and aerospace industries were again a source of strength. Steel production fell slightly, as did demand for specialty metals. Demand was up for construction materials and heavy- and medium- duty trucks; demand for heavy equipment remained soft.
• Banking and finance: Credit conditions changed little on balance over the reporting period. Volatility decreased significantly across several asset classes and equity markets saw significant improvements. Demand for commercial and industrial loans remained relatively unchanged. Contacts noted increased consumer borrowing, but saw declining residential mortgage activity as the increase in borrowing rates discouraged refinancing.
• Prices and Costs: Cost pressures changed little since the last report. Overall, commodity prices were up slightly. Retailers noted that heavy promotional activity is planned for the holiday season. Wage pressures were up slightly and non-wage labor costs were steady.
• Agriculture: Harvesting took longer this fall because of delays from precipitation and a larger crop. Pastures and winter wheat fields were in better shape than they were last year. Crop and hog prices fell; milk and cattle prices were a bit higher.
The Midwest Economy Index (MEI) decreased to +0.22 in October from +0.34 in September, and the relative MEI fell to +0.19 in October from +0.62 in September. October’s value for the relative MEI indicates that Midwest economic growth was higher than would typically be suggested by the growth rate of the national economy.
The Chicago Fed Midwest Manufacturing Index (CFMMI) increased 0.4% in October, to a seasonally adjusted level of 97.4 (2007 = 100). Revised data show the index was up 0.3% in September. The Federal Reserve Board’s industrial production index for manufacturing (IPMFG) moved up 0.3% in October. Regional output rose 5.7% in October from a year earlier, and national output increased 3.6%.
December 6, 2013
OECD Chicago Economy Conference
By Emily Engel and Susan Longworth
On Friday September 27, 2013, The Federal Reserve Bank of Chicago hosted the Summit on Regional Competiveness (Summit) with The Alliance for Regional Development (Alliance) and the Chicagoland Chamber of Commerce. The Alliance is an economic development group working to implement recommendations contained in a 21-county, tri-state (Illinois, Indiana, and Wisconsin) analysis completed by the Organization for Economic Co-operation and Development (OECD).
According to the OEDC report, cooperative and regionally oriented economic development offers opportunity for sustainable growth in key industries within the Chicago MSA. Please read our blog from last year to learn more about how ‘Federal Agencies Align to Support Regional Growth'.
The goal of the Summit was to demonstrate that the tri-state region can cooperate to find solutions to the challenges in the OECD report.The agenda included welcome remarks from Daniel Sullivan, Director of Research and Executive Vice President, Federal Reserve Bank of Chicago, and a keynote address from Austan Goolsbee, the Robert P. Gwinn Professor of Economics, University of Chicago’s Booth School of Business (link to http://www.ustream.tv/search?q=ChicagoFed). The emcee for the event was Theresa E. Mintle, President and Chief Executive Officer, Chicagoland Chamber of Commerce. Governors Scott Walker of Wisconsin; Governor Pat Quinn of Illinois; and Governor Mike Pence of Indiana all attended the Summit. Video from the summit is available here.
The Summit addressed the following topics:
• Matching Skills to Jobs in the Tri-State Region—to explore potential regional approaches and programs that satisfy business needs while closing the skills gap;
• Innovation in the Tri-State Region—to explore how best to enhance the region’s performance in innovation-driven business clusters;
• Transportation and Logistics in the Tri-State Region—to explore how connectivity including, air, road, port, and rail transportation can help grow the region’s future as a mega-logistics hub; and
• Increasing the Region’s Competitiveness through Green Growth—to explore environmental factors impacting economic growth and development.
Takeaways from the Summit included the following points.Panelists highlighted the need to brand the region in a manner that capitalized on regional assets like the Great Lakes and a central location. Concerns were raised about balancing municipal needs with regional ambitions. As municipalities struggle to retain and raise revenue and jobs, there is unresolved tension between collaboration and competition that is most acutely felt by local officials.The region’s significant transportation assets were mentioned frequently, along with the need to address growing congestion and manage natural resources, such as the Great Lakes and other inland waterways responsibly. Workforce development was discussed at length and strategies for engaging and training new workers were emphasized. Panelists recognized the increasingly technical nature of today’s jobs and the challenges faced by those seeking higher education.
For the full agenda, please see the Federal Reserve Bank of Chicago’s website.
For more background information, please read the Chicago Tri-State Metropolitan Area OECD report.