The Federal Reserve Board eagle logo links to home page

Beige Book logo links to Beige Book home page for year currently displayed March 2, 2011

Federal Reserve Districts

Twelfth District--San Francisco

Skip to content

New York
St. Louis
Kansas City
San Francisco

Full report

Economic activity in the Twelfth District posted further gains during the reporting period of mid-January through mid-February. Despite notable price increases for assorted raw materials and commodities, overall price pressures for final goods and services remained modest, as did wage gains. Sales of retail items and services expanded relative to seasonal norms. District manufacturing activity continued to grow at a solid pace overall. Agricultural producers reported robust sales, and providers of energy resources continued to expand on net. Activity in District housing markets remained very subdued, and demand for commercial real estate stayed weak overall. Reports from District banking contacts indicated modest increases in loan demand and increased interest in lending to smaller businesses.

Wages and Prices
Price increases for final goods and services remained modest overall during the reporting period. Further increases were noted for an assortment of raw materials and commodities, such as oil, grains, cotton, lumber, and various metals, along with finished apparel and other products sourced from overseas. However, stiff competition among domestic firms, combined with continued low levels of demand, generally precluded pass-through of cost increases to final prices for retail goods and services, with the notable exceptions of gasoline and groceries. Looking ahead, contacts in most sectors expect that prices for their products will increase modestly over the next six months, with larger gains expected for food.

Upward wage pressures generally were quite modest, held down by high unemployment and limited demand for new employees in most sectors. Scattered reports pointed to continued downward wage pressures, but contacts more generally reported modest planned wage increases for 2011, in the aftermath of widespread wage freezes over the past few years. Wage gains remained most pronounced for workers with specialized technical skills, especially in information technology fields.

Retail Trade and Services
Retail sales continued to improve relative to seasonal norms. Although consumers remained oriented toward spending on necessities and lower-priced options, the reports pointed to a gradual shift back toward discretionary spending. Discount retail chains and traditional department stores alike reported modest increases in sales, with inventories that were close to desired levels. By contrast, conditions remained challenging for sellers of furniture and major appliances, and grocers reported that their pace of sales slowed somewhat. Demand for new automobiles continued to strengthen, although higher-than-expected sales in December left some dealers with depleted inventories and an inability to fully meet demand in January. Sales of used vehicles remained robust.

Demand for consumer and business services improved further overall. Sales rose significantly for providers of technology services, spurred in part by rising demand for digital media services used for mobile communication devices. Demand for transportation services continued to expand, and suppliers of energy services reported additional growth in deliveries to households and businesses. Customer traffic rose further for restaurants and other food-service providers. Contacts noted ongoing improvements in business travel and tourism activity. By contrast, demand remained largely flat for providers of health-care services and also professional services, such as law and accounting.

Manufacturing activity in the District showed further solid growth during the reporting period of mid-January through mid-February. Demand continued to expand for manufacturers of semiconductors and other technology products, with reports pointing to robust sales, high levels of capacity utilization, and inventories near targeted levels given the pace of sales. For makers of commercial aircraft and parts, modest increases in new orders combined with an existing order backlog to keep production rates high. Demand grew further for metal fabricators, with ongoing order backlogs and extended lead times noted. Utilization rates at petroleum refineries were above their levels from twelve months earlier, despite elevated gasoline inventories. Demand remained weak for manufacturers of wood products.

Agriculture and Resource-related Industries
Demand was robust for agricultural products and improved on balance for natural resources used for energy production. Sales and orders continued to grow for assorted crops and livestock products, although revenue growth has been partly offset by rising input costs, particularly for fertilizer and livestock feed. Rising export sales boosted activity somewhat for timber companies. Strong global demand continued to support an increase in oil extraction activity during the reporting period, and extraction activity for natural gas remained largely stable.

Real Estate and Construction
Demand for housing in the District appeared to be little changed from the previous reporting period, and demand for commercial real estate remained at very low levels. The pace of home sales continued to be feeble throughout the District. In response to sluggish sales, new home construction has remained at depressed levels, although a few reports pointed to tentative signs of a pickup in the planning phases for new construction. Demand for rental space continued to expand in some areas, eliminating prior downward pressure on rents in some cases. Conditions in commercial real estate markets generally remained weak, as vacancy rates stayed at elevated levels in many parts of the District. However, further improvements in leasing activity, with tenants increasingly committing to longer-term leases, were noted for some of the District"s major markets.

Financial Institutions
Reports from District banking contacts indicated that loan demand was up somewhat compared with prior reporting periods. Although businesses reportedly remained cautious in regard to their capital spending plans, demand for commercial and industrial loans rose a bit. Demand for consumer credit grew modestly as well. A few reports indicated that lenders' willingness to extend credit to small and medium-sized businesses improved in recent weeks, which respondents attributed primarily to perceived improvements in the outlook for existing business plans. Nonetheless, lending standards for consumer and business lending remained relatively restrictive. Venture capital financing showed further signs of improvement, with contacts noting ongoing increases in investor interest and IPO activity.

Return to topReturn to top

Previous Dallas Full report Next

Home | Monetary Policy | 2011 calendar
Accessibility | Contact Us
Last update: March 2, 2011