The Federal Reserve Board eagle logo links to home page

Beige Book logo links to Beige Book home page for year currently displayed January 12, 2011

Federal Reserve Districts

Third District--Philadelphia

Skip to content

New York
St. Louis
Kansas City
San Francisco

Full report

Business conditions in the Third District have improved somewhat since the last Beige Book. Manufacturers, on balance, reported increases in shipments and new orders in December. Retailers achieved moderate year-over-year increases in sales during the holiday shopping period. Motor vehicle dealers also posted year-to-year sales increases as 2010 came to a close. Third District banks reported slight increases in loan volume outstanding since the last Beige Book, mainly in personal loans. Residential real estate agents and homebuilders indicated that sales have been seasonally slow. Contacts in the commercial real estate sector said leasing and construction activity have remained at low levels since the last Beige Book. Service-sector firms reported that activity has been moving up slowly. Business contacts reported more instances of price increases for inputs recently than they did in the previous Beige Book, and several said they expect output price increases to become more common in 2011 than they were in 2010.

Most Third District business contacts foresee improving economic conditions in 2011, but they do not expect strong growth. Manufacturers forecast a rise in shipments and orders during the next six months. Retailers expect sales to continue to move up on a year-over-year basis. Bankers expect modest growth in lending. Contacts in residential real estate expect activity to increase slightly. Contacts in commercial real estate expect only marginal strengthening in market conditions. Service-sector companies expect continued slow growth in the early months of 2011.

Third District manufacturers reported increases in shipments and new orders from November to December, on balance. However, gains were not spread among all of the region's major manufacturing industries. Increases in demand for their products were common among producers of furniture, chemicals, testing and measuring instruments, and food products. In contrast, producers of metals, other industrial materials, lumber products, electrical equipment, and machinery generally had month-to-month declines in orders, and other manufacturing sectors reported no change. Overall, the region's manufacturers continued to report that the flow of new orders has been erratic. Several used the words "hand to mouth" and "choppy" to describe the recent trend in orders.

Third District manufacturers expect business conditions to improve during the next six months, on balance. Among the firms surveyed in December, slightly more than half expect increases in new orders and shipments, and less than one-tenth expect decreases. Capital spending plans among area manufacturers have been increasing since mid-year, and in December one-third of the manufacturers polled said they planned higher capital outlays in the next six months, and less than one-tenth planned cutbacks.

Third District retailers generally reported year-over-year increases in line with plans for the year-end holiday shopping period. On balance, stores posted moderate increases in sales without significant unscheduled price reductions. Sales of winter outerwear and jewelry rose fairly well from year-ago levels, but sales of big-ticket electronic items were not strong. A snowstorm on the day after Christmas deterred some shoppers and forced some store closings, but merchants said sales picked up in subsequent days. "The shoppers came. We still did well," one merchant said. Looking ahead, most of the retailers surveyed for this report said they expect continued year-over-year increases in sales, although they also noted that consumer confidence remains fragile.

Third District auto dealers reported rising sales as 2010 came to a close. Dealers said that inventories were increasing as they took delivery of new models, but dealers generally considered their stocks of new and used vehicles appropriate for the current sales rate. Dealers expect sales to be somewhat higher in 2011 than in 2010, although several expressed concern that rising gasoline prices could restrain sales of less fuel-efficient models.

At most of the Third District banks contacted for this report, total outstanding loan volume has increased slightly since the last Beige Book. In general, banks reported increases in lending on home equity lines and credit cards but indicated that other types of lending were practically flat. Some bank lending officers noted that usage of credit lines by business firms continued to be low. Commercial bank officers generally indicated that credit quality measures have been slowly improving. The outlook among Third District bankers surveyed for this report is that lending to both consumers and businesses will move up slowly in 2011. Bankers foresee gradual increases in consumer lending if employment moves up, little or no gain in real estate lending, and a slight increase in commercial and industrial lending.

Real Estate and Construction
Third District residential real estate activity has slowed seasonally since the last Beige Book. Both homebuilders and residential real estate agents generally indicated that the usual winter lull in construction and sales had taken hold. In contrast, some real estate agents reported an increase in rental activity of single-family homes. Real estate agents attribute the rise in home rentals to several factors: relocated owners unable to sell their houses at their asking prices, buyers unable to obtain mortgages, and tightening of credit qualifications for renters of apartments. Sales of higher-priced homes have continued to be slower than sales of lower-priced homes in most parts of the region. Home prices have been flat to down in most markets. Residential real estate contacts expect sales to remain sluggish until economic conditions, especially employment, improve. However, several contacts noted that sellers have recently become more willing to reduce asking prices, and this appears to be giving some lift to the sales trend. As one agent remarked, "When sellers get realistic, buyers respond."

Nonresidential real estate firms indicated that there has been little change in commercial and industrial markets since the last Beige Book, although some noted a few signs of improvement. Contacts said that vacancy rates and rents have been nearly steady, but more tenants have signed long-term leases recently compared with most of 2010, during which short-term leases were more common. Several contacts in commercial construction reported that building owners have recently shown more interest in renovation and new construction, although the contemplated projects are not large. Commercial real estate contacts expect market conditions to improve gradually in 2011. One contact said, "The outlook is considerably less bearish, although it's not bullish," and another noted that "the lack of new construction underway will support the beginning of a recovery in leasing."

Service-sector firms generally reported slightly rising activity since the previous Beige Book. Contacts said that the health care sector continued to have relatively better gains than other sectors and that service-sector activity related to construction continued to be weak. The outlook for the services sector as a whole is modestly positive. One contact said, "We see some slight improvement in the near term, but it will be well into 2011 before there is stronger growth."

Prices and Wages
Reports from manufacturers since the last Beige Book indicated spreading increases in input costs, but mostly steady output prices. Goods mentioned as rising in price were food products, chemicals, petroleum products, metals, and electrical equipment. Several manufacturers noted evidence of upward price pressure developing in their industries and said they expect more widespread price increases for finished products during 2011. Retailers generally noted more signs of rising costs since the last Beige Book. They cited increases for food products, textile products, shipping charges, and energy. However, many said that competition among stores was limiting increases in retail prices.

Business firms in the region reported mostly steady wages since the last Beige Book. Staffing firms and employment agencies said they have recently seen some growth in demand for temporary workers and slight increases in permanent hiring, but no significant changes in wages or salaries.

Return to topReturn to top

Previous New York Cleveland Next

Home | Monetary Policy | 2011 calendar
Accessibility | Contact Us
Last update: January 12, 2011