The Federal Reserve Board eagle logo links to home page

Beige Book logo links to Beige Book home page for year currently displayed July 29, 2009

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 appeared to hold largely steady on net during the reporting period of June through mid-July, with continued signs of stabilization or improvement in some sectors. Upward price pressures remained very modest on net, and upward wage pressures generally were absent. Retail sales remained sluggish, while demand for services weakened further. Manufacturing activity in the District stayed mired at very low levels on balance, although demand and activity improved further for manufacturers of information technology products. Sales continued at a solid pace for agricultural producers, while demand fell further for providers of natural resource products. Housing sales and construction picked up in some areas but were weak on net, and demand for commercial real estate continued to fall. Banking contacts reported very weak loan demand and ongoing declines in credit quality.

Wages and Prices
Upward price pressures continued to be very limited on balance during the reporting period. Oil prices fell from recent highs, and the prices of other commodities remained largely stable. Final prices on various retail goods were held down by continued discounting, and weak demand led to further price reductions for assorted services, such as transportation, hotel rooms, and professional services. With few exceptions, contacts reported that they anticipate prices in their respective industries to stay mostly stable during the second half of 2009.

Upward wage pressures remained virtually nonexistent. Contacts continued to report the use of wage freezes or cuts, reductions in benefits, and mandatory furloughs as cost-saving measures in various industries. Hiring remained quite limited, and reports pointed to rising reliance on temporary workers in some sectors, putting additional downward pressure on wages.

Retail Trade and Services
While retail sales remained sluggish overall, reports suggested that they were stable or improved slightly compared with the previous reporting period. With consumers staying focused on necessities such as food and sundries, discount chains and grocers continued to see sales growth. By contrast, demand remained quite soft for department stores and many smaller retail outlets, and sales of furniture and household appliances remained anemic. Sales of new automobiles and light trucks continued at exceptionally low levels. Demand for used automobiles stayed comparatively strong, but contacts noted that a lack of suitable inventory has held down sales somewhat. Contacts pointed to ongoing job losses and rising unemployment as the primary factors constraining consumer spending.

Demand for services continued to soften on net since the last reporting period. Conditions remained challenging for restaurants throughout the District, with contacts noting significant revenue declines and further closures. Likewise, demand for professional and media services continued to be very weak, resulting in additional layoffs. Demand for transportation services dropped, with reports pointing to further declines in container traffic at ports. Travel and tourism activity in the District fell further; the sharpest declines were evident in the business and luxury segments of the market, which reduced airline traffic. By contrast, providers of health-care services saw a slight increase in patient volumes, reversing the trend of prior reporting periods.

Manufacturing activity in the District remained feeble on net during the reporting period of June through mid-July. Metal fabricators continued to experience very weak demand, which held their capacity utilization rates at extremely low levels. Following the seasonal peak in gasoline demand, activity at petroleum refineries declined. Production activity by commercial aircraft manufacturers continued to slow, and their order backlog declined as new aircraft orders were outnumbered by cancellations of existing orders. By contrast, conditions improved further for manufacturers of semiconductors and other information technology products, as sales increased and capacity utilization rates rose significantly. New orders and sales remained strong for food manufacturers.

Agriculture and Resource-related Industries
Demand remained solid for agricultural products but stayed somewhat weak for producers of natural resources. Sales mostly held steady for a variety of crop and livestock products, and contacts noted largely stable input costs, with transportation costs reported to be at the lowest levels recorded at any time during the last three years. Oil extraction activity has expanded in response to earlier increases in the price of oil, but contacts noted that recent declines in oil prices may reverse this trend. Extraction of natural gas has been held down by weak demand and falling prices, with activity reportedly near the lowest levels seen since 2002.

Real Estate and Construction
Conditions in District housing markets remained very weak but showed further signs of improvement, while demand for commercial real estate continued to erode. Sales prices for new and existing homes fell further in most parts of the District, and home construction activity remained at very low levels. Combined with low mortgage rates, however, price declines have propelled a sustained pickup in the pace of home sales in many areas. Demand for commercial real estate fell further, and with rising vacancy rates, tenants have successfully been requesting rent concessions and other new terms on existing leases. Construction activity for commercial properties also continued to fall, and contacts noted that a lack of available credit remained a constraint for construction activity and investment transactions in some areas.

Financial Institutions
District lending activity fell further, and credit conditions remained tight during the reporting period. Demand for commercial and industrial loans continued to fall, as business owners remained pessimistic about near-term prospects and continued to restrain their capital spending. Demand for consumer loans also was characterized as weak on net. Banking contacts reported further deterioration in credit quality for business and consumer loans, with bankruptcies and foreclosures staying on an upward trend.

Return to topReturn to top

Previous Dallas Full report Next

Home | Monetary Policy | 2009 calendar
Accessibility | Contact Us
Last update: July 29, 2009