![]() |
July 23, 2008
Federal Reserve Districts
|
||||
Skip to content
|
Most contacts in the Eleventh District reported steady, moderate economic growth in June and early July. The main exception was home builders, who reported a steeper decline in demand. Most contacts reported increased concern about price pressures and uncertainty about the national outlook. Rising prices for energy and transportation were reported as boosting costs for a wide range of industries and were said to be likely to lead to future increases in final product prices. Prices Since early June, light sweet crude prices have been fluctuating while setting record highs. Natural gas prices have also been high and volatile. Natural gas inventories are well below the inflated levels of last year. Futures prices for distillates (heating oil and diesel), spot gasoline, and oil- and natural gas-based chemicals have also increased sharply over the past six weeks. Labor Market Manufacturing Although still solid and above year-ago levels, demand for commercial construction materials continued to soften and is expected to weaken steadily. Respondents in fabricated metal production said that demand was flat to slightly down, that backlogs are decreasing and that new orders and expectations of declining nonresidential building suggest further weakening. Primary metal producers report that sales have been flat to slightly down while costs have shot up. One contact reported that his natural gas bill increased 100 percent over a year ago. High-tech manufacturers reported continued moderate sales growth. Firms selling products outside the U.S. with most inputs priced in dollars are performing well. Semiconductors are seeing upward pressure on prices, although a recent effort to raise prices did not stick. Demand was reported as steady for communication devices. Sales to Asia remained strong but were weak in the U.S. and Western Europe. Demand in the food products industry has been moderate with contacts reporting some recent improvement in sales growth. While demand from restaurants has slowed slightly, a pickup in retail demand has more than offset the slowing. High food prices continue to be a major concern, and manufacturers of processed food report that they have not yet been able to pass along all of the increases. Specialty transportation manufacturers such as aircraft parts and emergency vehicles say that sales remain solid and their outlook is positive. Oil-based ethylene producers are operating at relatively low rates, while those that use natural gas are enjoying large cost advantages and operating full out. Meanwhile, demand for polyethylene is strong because weak domestic sales have been offset by strong exports. Retail Sales Auto dealers reported mixed demand. The switch to small, fuel efficient cars has continued and has led to a shortage of such vehicles. Consumers are paying sticker prices for some small cars while domestic auto producers are offering rebates and large discounts, especially on trucks. Services Demand for legal services continued to grow moderately, with most of the growth concentrated in litigation and bankruptcy. With the exception of continued strength in oil and gas, legal services to support transactions have declined. Demand for accounting services remained modest. Trucking companies reported reduced shipping volumes in the last month. Import volumes have declined and are not being completely offset by exports. Record fuel prices, along with price increases in almost every area of operations are having a major impact on the industry. Railroad cargo volumes have been steady over the last 30 days. Rail shipments of residential construction materials continued on a downward trend and those of nonresidential building materials were only up slightly. Rail shipments of primary forest material--a leading indicator for residential construction-have edged up over the last four weeks. Shipments of motor vehicles fell sharply. Airline demand has not changed much since the last survey. In response to rising jet fuel prices, airlines are reducing capacity, laying-off workers, and increasing fares. Construction and Real Estate Respondents say that nonresidential construction activity is beginning to slow and there are signs that activity may decline further. Commercial real estate respondents noted a continued decline in investment deals getting done, particularly for larger projects. There were reports of a general drying up of liquidity in the market and a flight of capital out of real estate. On the upside, higher quality assets did not see a major deterioration in value. Industrial and office leasing continued to weaken. Financial Services Energy Agriculture
|