The Federal Reserve Board eagle logo links to home page

Beige Book logo links to Beige Book home page for year currently displayed October 20, 2010

Federal Reserve Districts

Third District--Philadelphia

Skip to content

New York
St. Louis
Kansas City
San Francisco

Full report

Business activity in the Third District has been mixed since the last Beige Book. Manufacturers, on balance, reported slight decreases in shipments and new orders in September. Retailers posted modest year-over-year increases in sales during the back-to-school shopping period. Motor vehicle dealers generally reported steady sales in September and year-over-year gains for the month. Third District banks reported level loan volume outstanding in the past few weeks. Residential real estate agents indicated that sales of existing homes have edged up in the past few weeks, but homebuilders indicated a mostly flat sales pace for new homes. Contacts in the commercial real estate sector said there has been practically no change in market conditions since the last Beige Book. Service-sector firms reported mostly marginal increases in activity in the past month. Business contacts indicated that prices of most goods and services have shown no change, although there were continued reports of rising prices for metals and new reports of increases in lumber prices. Some retailers said there have been increases in some wholesale prices and international freight charges.

The outlook among Third District business contacts is positive, on balance, but not robust. Manufacturers forecast a rise in shipments and orders during the next six months. Retailers expect sales to expand slightly through the end of the year. Bankers expect only minimal growth in lending in the near term. Contacts in both residential and commercial real estate expect flat to slowly rising activity into the middle of 2011. Service-sector companies also expect slow growth during the next six months.

Third District manufacturers reported slight decreases in shipments and new orders from August to September, on balance, as well as a decrease in order backlogs. Despite the generally slower activity among the region's manufacturing industries, some sectors reported increases in demand for their products, notably makers of industrial machinery and equipment, producers of wood products, and food processers.

Third District manufacturers expect business conditions to improve during the next six months, on balance. Among the firms surveyed in September, about 45 percent expect increases in new orders and shipments, and about 20 percent expect decreases. Manufacturing executives continued to remark that recovery in their business has been slow and halting. One said, "Some parts of our business begin to pick up but others decline," and another described business as "choppy." Capital spending plans among area manufacturers remain positive, overall, but are not strong. About 20 percent of the firms polled in September plan to increase expenditures for new plant and equipment and about 10 percent expect to reduce spending.

Third District retailers reported modest year-over-year gains for the back-to-school shopping period, and most of those contacted for this report said sales have continued to move up in recent weeks. Some store executives noted that customer traffic and discretionary spending appeared to be increasing somewhat. One said, "Sales of home goods have begun to pick up, as well as sales of things that are not necessarily must-have, but the price has to be right. The consumer is incredibly price-sensitive." Looking ahead, most of the retailers contacted for this report said they expect sales to continue to increase at around the current growth rate through the end-of-year shopping period. Most agreed that stronger growth will not set in until economic conditions, particularly employment, show clear evidence of significant improvement.

Third District auto dealers reported steady sales during September at a rate slightly above the year-ago pace. Inventories were generally described as light, and supplies of popular models were said to be particularly lean. Dealers expect sales to improve slowly during the rest of this year and into next year.

Total outstanding loan volume at most of the Third District banks contacted for this report has been level since the last Beige Book. Commercial bank lending officers said there has been virtually no change in any credit category. Bankers continued to report slack demand for both consumer and business loans. "Business loan demand is incredibly weak," one said. Another banker said, "Credit line usage is well below normal." With low demand for credit, some bankers reported increased competition among lenders, especially for business loans. Commercial bank officers indicated that credit quality has continued to improve as borrowers work down debt.

The consensus outlook among the Third District bankers surveyed for this report is that there will be minimal growth in lending until both consumers and businesses regain confidence that the economy is improving. Several bankers said that in recent discussions with their commercial customers, both business owners and managers said they are postponing expansion and other capital spending programs until current political and economic uncertainties are resolved.

Real Estate and Construction
Contacts in residential real estate markets reported some increases in sales of existing homes in recent weeks but relatively flat sales of new homes. However, the recent sales rate remained below the year-ago rate for both new and existing homes. Contacts continued to report that lower-priced homes are selling at a relatively better pace than higher-priced homes. Residential real estate contacts expect sales to remain slow until overall economic conditions and the employment situation begin to improve. Real estate contacts generally indicated that prices of existing homes have shown little change recently. However, one agent reported that "more sellers are just saying no to offers substantially below the asking price."

Nonresidential real estate firms indicated that conditions have been mostly unchanged in commercial and industrial markets since the last Beige Book. Contacts reported that vacancy rates and rents have moved very little since mid-year in most parts of the District. Among property types, market conditions were said to be weakest for retail space. Some contacts also noted declining demand for industrial space, where many firms have taken a "wait and see" attitude toward new construction, according to one contact. Commercial real estate contacts expect market conditions to improve very slowly, and some estimate that a significant increase in nonresidential construction will not begin until mid-2011 at the earliest.

Service-sector firms generally reported marginal increases in activity since the previous Beige Book. Some contacts said growth in customer counts, measures of output, or dollar value of sales had recently fallen below their forecasts. Among firms providing services to both businesses and individuals, there were several reports of increasing competition in terms of pricing or level of service. In the current environment, "a lot of growth is market share gains," one contact noted. Looking ahead, most of the service firms contacted for this report expect growth to be slow for the rest of this year and into next year.

Prices and Wages
Reports on input costs and output prices indicate little change since the last Beige Book. Most of the manufacturing firms polled in September reported no change from August in the costs of the commodities they use or the products they make. However, some producers of primary metals raised prices. Construction firms gave mixed reports on prices, with some noting steady materials costs and some indicating increases for steel, lumber, and rubber products. Retailers generally noted that most wholesale costs and retail prices have been steady, although some contacts noted recent increased costs for some commodities and higher costs for international shipping. One large retailer said foreign suppliers have indicated that they plan to raise wholesale prices next year.

Business firms in the region reported no major changes in wages, although many continued to report current or prospective increases in costs for employee health care benefits. Employers generally reported that they were not having difficulty finding workers with requisite skills at current compensation levels. Employment agencies reported that client companies are filling positions as workloads increase, but do not appear to be adding employees in anticipation of increased activity.

Return to topReturn to top

Previous New York Cleveland Next

Home | Monetary Policy | 2010 calendar
Accessibility | Contact Us
Last update: October 20, 2010