| Skip to content
|
Reports from Beige Book contacts indicated a moderate pace of overall economic activity in the recent survey period, with slowing from previous periods. Retailers reported solid sales volumes but slower growth, while District service providers noted continued high demand for their products. Manufacturing activity was flat in recent weeks, constrained by depressed export demand from East Asia and general slowing in the high-tech sector. District agricultural producers reported weak conditions as falling commodity prices and poor yields continued to reduce profitability. Residential and commercial real estate activity generally remained at high levels, although the pace of growth slowed in most areas and financing of commercial projects weakened noticeably. In general, commercial borrowers in the District faced tighter terms as general economic uncertainty made lenders more cautious. Looking forward, respondents expressed considerable concern about future financial and economic developments.
Business Sentiment
District respondents expect weaker growth from the national economy and their respective regional economies in the coming year. About three-quarters of the respondents expect U.S. GDP growth to fall below its long-run average pace, easing labor market pressures and pushing the national unemployment rate above its current level. Most respondents expect inflation to remain stable or increase slightly, although a growing number (about one-fifth) predict that inflation will fall in coming quarters.
An increasing number of respondents expect economic growth in their region to be at or below the national pace over the next year. Respondents have grown pessimistic about the strength of business investment and consumer spending in their areas, with more than three-quarters predicting that conditions in these markets will deteriorate over the next year. Pessimism also is apparent in the outlook for housing starts; more than 50 percent of respondents expect housing starts to decrease over the next four quarters. Global financial and economic turmoil continues to depress net export expectations in the District, with more than 90 percent of District respondents anticipating further deterioration in their regions' foreign trade balances.
Retail Trade and Services
District contacts reported solid retail sales in recent weeks, although growth has slowed from earlier in the year. Respondents noted increased cautiousness among consumers, particularly for purchases of big-ticket items such as jewelry, autos, high-end electronics, and other consumer durables. Retailers of apparel and other soft goods also reported slowing sales, and some expressed concerns about unplanned inventory accumulation. Some District contacts noted that consumers are shopping for bargains and beginning to purchase second-level brands rather than premium brands. Overall, District retailers reported adequate to heavy inventory levels and no supply bottlenecks.
Service providers in most District states reported brisk growth. Demand for telecommunications, data communications, and cable television services remained high, outstripping supply in some cases and putting upward pressure on prices. Tourism-related restaurant sales, car rentals, and hotel occupancy rates were solid throughout the District, although growth moderated in areas dependent on Asian visitors. Conditions in the shipping industry remained strong in recent weeks; growth in import volumes continued to offset declines in exports, keeping activity levels high at District ports.
Manufacturing
Reports on District manufacturing activity were mixed. Contacts in California and the Pacific Northwest noted that excess capacity among makers of computer chips and semiconductor equipment continues to squeeze profits in those industries, resulting in layoffs, temporary furloughs, and some plant closures. In contrast, sales of personal and business computers reportedly strengthened in recent weeks, reducing inventory buildup in production and delivery channels. Conditions among manufacturers of other durable and non-durable goods remained stable. In general, District manufacturers reported no difficulties obtaining materials or supplies, few capacity constraints, and declining prices on key inputs such as energy. Finding skilled employees remained a major concern among many manufacturers, although respondents noted that the labor market has loosened slightly in recent weeks.
Agriculture and Resource-Related Industries
District agricultural conditions weakened over the past six weeks. Producers throughout the District reported that declining East Asian demand and excess supply of many crops continued to drive commodity prices down and reduce profitability for many farmers. In California, late harvests and poor yields added to these difficulties. Harvests of cotton, wine grapes, prunes, and nuts are as much as three weeks late, and prices for these products remain low. In Idaho, the third consecutive year of poor wheat and potato prices has forced some farmers into bankruptcy.
Real Estate and Construction
Real estate construction and sales remained at high levels in most District states. In California, residential construction remained strong, but demand slowed for new and existing commercial properties. In the Pacific Northwest, real estate markets cooled in recent weeks. Activity in Washington remained at high levels, but demand slowed, particularly for residential properties. In Oregon, sales of residential real estate slowed substantially, and new building activity declined in both commercial and residential markets. Respondents throughout the District reported that rents and sales prices are stabilizing in the hottest real estate markets. Respondents also noted that financing of commercial real estate ventures became significantly more costly in recent weeks.
Financial Institutions
Twelfth District financial conditions tightened during the last survey period. Commercial loan demand at banks increased as many businesses had difficulty obtaining funds through other channels. At the same time banks have become increasingly cautious, resulting in tighter conditions for borrowers. On the consumer side, lower interest rates are creating abundant demand for mortgages and auto loans. However, some contacts noted that general economic uncertainty has begun to slow loan demand and spur deposit growth.
|
Dallas