National Summary
Overall Economic Activity
Reports from the twelve Federal Reserve Districts indicated that the economy continued to expand at a modest pace across most regions from late November through the end of the year. Manufacturers in most Districts reported increased sales with several citing a turnaround versus earlier in 2016. Growth in the energy industry was mixed; two Districts reported weakness in coal production but others reported improvements in coal, oil, or gas activity. Most Districts said that non-auto retail sales had expanded, but several noted that sales over the holiday season were disappointing and reports in more than one District suggested that growth in e-commerce had come at the expense of bricks-and-mortar retailers. All Districts reported varying degrees of growth in employment and a majority described their labor markets as tight. Residential construction and sales were generally mixed, although San Francisco reported strong real estate market activity throughout the 12th District. Financial conditions were stable. Firms across the country and industries were said to be optimistic about growth in 2017.
Employment and Wages
Labor markets were reported to be tight or tightening during the period. Employment growth ranged from slight to moderate and most Districts indicated that wages increased modestly. A couple of Districts mentioned layoffs, but even in those Districts, as in other regions, most responding firms were said to have added employment, on net. District reports cited widespread difficulties in finding workers for skilled positions; several also noted problems recruiting for less-skilled jobs. Wages in some Districts were pushed up a bit by increases in the states' minimum wages and most Districts said wage pressures had increased. Many Districts said contacts expect labor markets to continue to tighten in 2017, with wage pressures likely to rise and the pace of hiring to hold steady or increase.
Prices
Pricing pressures intensified somewhat since the last report. Eight out of twelve Districts saw modest price increases and the remainder experienced slight increases, or flat prices in the case of the Atlanta District. Increases in input costs were more widespread than increases in final goods prices. Cost increases were reported for coal, natural gas, and selected building and manufacturing materials. Retailers' selling prices were mixed, but on balance were flat or down amidst competitive discounting. Prices of most agricultural commodities stayed flat at very low levels. Home prices were stable or up modestly. Businesses in several districts reportedly expect further modest increases in input costs and selling prices in 2017.
Highlights by Federal Reserve District
Boston
Economic activity in the First District expanded at a modest to moderate pace in the final weeks of 2016. Firms undertaking hiring cited difficulties finding employees; a contact in the restaurant industry, in particular, noted worker shortages. At the same time, most employers said they were not raising wages substantially. Business contacts remained optimistic about 2017.
New York
Economic activity has held steady. Labor markets remained tight and wages continued to grow moderately. Input cost increases have become increasingly widespread, and selling prices have increased at a somewhat faster pace. Housing markets have continued to weaken at the high end, while commercial real estate markets have slackened.
Philadelphia
Overall economic activity appeared to pick up to a modest pace of growth in the Third District with nonauto retail sales, nonfinancial services, and manufacturing providing the boost from the prior period of slight growth. Hiring also rose to a modest pace, and tightening labor markets sustained modest pressure on wages and prices.
Cleveland
Economic activity in the Fourth District grew slightly. Labor markets showed signs of tightening. Upward pressure on selling prices increased. Retail sales disappointed, while motor vehicle unit sales increased. Residential and commercial construction activity remains elevated. Activity in the energy sector edged higher, and manufacturing output was little changed.
Richmond
Economic activity increased at a moderate pace on balance, with strengthening in the manufacturing sector. Retail sales also grew at a faster pace since the previous report. Real estate agents reported strong industrial leasing, with more e-commerce tenants looking for large facilities. Stronger multi-family construction was reported in Washington, D.C., Charlotte, North Carolina, and Charleston, South Carolina.
Atlanta
Economic activity expanded modestly. Retailers cited an increase in sales. Home prices increased modestly. Commercial real estate contacts continued to indicate improving demand. Manufacturers noted an increase in new orders and production. The labor market remained tight and wages were stable. Non-labor input costs remained relatively unchanged.
Chicago
Growth in the Seventh District continued at a modest pace. Manufacturing production grew at a robust rate, business spending grew at a moderate rate, consumer spending increased modestly, and construction and real estate activity edged up. Financial conditions improved some, prices increased modestly, and farm incomes were little changed.
St. Louis
Economic conditions in the Eighth District continued to expand at a modest pace. On a positive note, District contacts anticipate an uptick in consumer spending activity in early 2017. Conversely, low commodity prices continue to put many agricultural parts of the District under financial stress.
Minneapolis
Economic activity in the Ninth District grew modestly. Consumer spending was lower than expected through the holidays, though winter tourism started well. Manufacturing activity picked up, and the outlook for the sector appeared more optimistic. Commercial construction held steady at high levels, but heavy and residential construction lagged. Homes sales were strong in most regions.
Kansas City
Economic activity in the Tenth District expanded modestly in late November and December. Consumer spending increased, and contacts expected moderately higher sales in the months ahead. Manufacturing production, shipments, and new orders grew at their fastest pace in over two years. The energy sector expanded further, and higher energy prices led to continued optimism in the sector.
Dallas
Economic activity grew moderately in the Eleventh District, and outlooks were more optimistic than the previous report. The energy sector noted improved demand and an uptick in employment, following depressed activity for nearly two years. Manufacturing activity expanded, although job growth remained weak. Retail sales continued to be weak in energy-related and peso-sensitive areas.
San Francisco
Economic activity in the Twelfth District continued to expand at a moderate pace. Holiday retail sales picked up, and activity in the services sector remained strong. Conditions in the agricultural sector were mixed, while activity in the manufacturing sector was stable. Contacts reported strong activity in the housing market and moderate growth in overall lending activity.