November 30, 2011
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Prepared at the Federal Reserve Bank of Minneapolis and based on information collected before November 18, 2011. This document summarizes comments received from business and other contacts outside the Federal Reserve System and is not a commentary on the views of Federal Reserve officials.
Overall economic activity increased at a slow to moderate pace since the previous report across all Federal Reserve Districts except St. Louis, which reported a decline in economic activity. District reports indicated that consumer spending rose modestly during the reporting period. Motor vehicle sales increased in a number of Districts, and tourism showed signs of strength. Business service activity was flat to higher since the previous report. Manufacturing activity expanded at a steady pace across most of the country. Overall bank lending increased slightly since the previous report, and home refinancing grew at a more rapid pace. Changes in credit standards and credit quality varied across Districts. Residential real estate activity generally remained sluggish, and commercial real estate activity remained lackluster across most of the nation. Single family home construction was weak and commercial construction was slow. Districts mostly reported favorable agricultural conditions. Activity in the energy and mining sectors increased since the previous report.
Hiring was generally subdued, although some firms with open positions reported difficulty finding qualified applicants. Wages and salaries remained stable across Districts. Overall price increases remained subdued, and some cost pressures were reported to have eased.
Consumer Spending and Tourism
Motor vehicle sales increased in a number of Districts. Gains in auto sales were noted in Philadelphia, Cleveland, Richmond, Atlanta, St. Louis, and Minneapolis. Chicago also reported gains in sales during October, but noted the pace of sales slowed in November and that dealers suspected consumers may be waiting for potential end-of-year deals. Upstate New York dealers reported that sales were steady to stronger and that dealers' service and parts departments continued to perform well. Auto sales were solid in Kansas City, while demand held steady in Dallas. Inventory levels were generally lean or lower than dealers would like in Philadelphia, Cleveland, and St. Louis. In Dallas, vehicle inventories had mostly normalized, while inventory levels increased in Kansas City. Both Philadelphia and Dallas noted supply disruptions for some foreign nameplates due to the flooding in Thailand.
Tourism showed signs of strength. New York and Atlanta described tourism as robust and strong, while activity increased in Minneapolis and posted moderate improvement in Richmond. Boston noted that the travel and tourism sector continued to see strength in overseas and business travel, while discretionary domestic leisure spending was fueled by the affluent customer. In Richmond, tourism was largely flat, but some contacts were cautiously optimistic about the winter season. Airline contacts in Dallas expected to see stable demand through year-end. Strength in hotel bookings and occupancy were noted in Boston, New York, Richmond, Atlanta, Minneapolis, and San Francisco.
Banking and Finance
Changes in credit standards and credit quality varied across Districts. Philadelphia noted that credit quality continued to improve but at a slower rate. Kansas City saw stable or improving loan quality. Dallas noted that the quality of loans outstanding continued to improve, with contacts reporting a decline in problem loans. San Francisco saw a slight improvement in overall credit quality. Cleveland, Chicago, and St. Louis noted relatively unchanged credit quality. Boston, Richmond, and Atlanta saw some tightening of standards. In New York, bankers reported declining delinquency rates for commercial and industrial loans, but no change in delinquencies for other loan categories.
Real Estate and Construction
Commercial real estate markets remained sluggish across most of the nation. Boston, New York, Chicago, Minneapolis, and San Francisco indicated roughly unchanged activity. Atlanta and Kansas City noted slight improvement. Philadelphia and Dallas indicated mixed activity. However, Richmond and St. Louis noted that vacancy rates increased. Commercial construction was somewhat mixed. Cleveland saw steady to slowly improving commercial construction; Chicago and Minneapolis experienced modest to moderate increases. New York and Philadelphia noted generally weak conditions; Richmond and St. Louis reported slow activity, although industrial construction picked up.
Agriculture and Natural Resources
Activity in the energy and mining sectors increased since the previous report. Cleveland, Minneapolis, Kansas City, Dallas, and San Francisco saw increases in oil exploration. Cleveland and Dallas also reported growth in shale gas extraction. Coal production was flat in Cleveland and decreased slightly in St. Louis, though it is still up for the year. Minneapolis reported that more wind energy projects were planned. Mining activity increased in San Francisco and remained at elevated levels in Minneapolis.
Employment, Wages, and Prices
Wages and salaries remained stable across Districts, although some exceptions were noted. In Cleveland, wage pressures emerged for truck drivers as the pool of available drivers shrank relative to job openings. Manufacturing wage growth strengthened in Richmond, while hiring stabilized and the average workweek was unchanged. Some wage growth was noted among the highly skilled trades in Atlanta. In Minneapolis, wages increased sharply at some fast food restaurants in western North Dakota. Kansas City reported that some energy and information technology firms raised wages for skilled workers; Dallas reported the same for airlines and a few construction-related manufacturers. San Francisco noted persistent upward pressure on benefit costs, especially for employee health care.
Overall price increases remained subdued, and some cost pressures were reported to have eased. Boston, Atlanta, Chicago, and Kansas City noted a moderation in input cost pressures. In Cleveland, manufacturers' reports on changes in raw materials prices were mixed; the transportation sector noted higher prices for tires, parts, and equipment; and fuel prices exhibited some volatility. Richmond reported that raw materials, retail, and services prices grew at a somewhat faster pace. Restaurants in Kansas City expected higher menu prices due to rising food costs. In Dallas, prices for new cars rose slightly, and staffing and legal services firms noted modest increases in billing rates, but natural gas prices remained low. San Francisco reported a recent uptick in the prices for energy inputs, particularly oil, and for assorted food items at the retail level. Atlanta noted that most businesses had limited ability to pass on increases in input prices from earlier in the year.