Macro Economy
Economic activity continues to expand but at a slow pace
Manufacturing
Still expanding with many districts reporting increases in new orders. Semiconductors in particular showed strength along with Auto production.
The problem is that hiring within the manufacturing industry remains very weak. Companies seem to be comfortable with current production, and capital spending is expected to remain limited, except for the St. Louis district which saw an increase in future capital spending.
Non-Financial Services
Remained flat to slightly positive led by strong demand for IT services. Demand for transportation services declined, in particular freight volumes. Railroads continue to report positive volumes but growth is at a slower rate than in the past.
Consumer Spending & Tourism
All districts reported an increase in retail sales except for the Richmond and Atlanta districts. Back to school spending is looking good. Retailers reported that consumers are still price conscious and hesitant to purchase large discretionary items.
Tourism also saw an increase but still remain weak. The Atlanta district saw continues weakness because of the oil spill in the Gulf. Airline traffic remains soft but has improved considerably over the past year thanks to business traveling.
Real estate and Construction
This remains the weakest sector of the economy. Home sales are declining and in some districts are below year-ago levels. The only districts which reported slight increases in home sales were Philadelphia, Dallas, and Kansas City. Housing inventories remain high in all districts while home prices were stable since the last report. Declining home prices were reported in Kansas City, New York, and Minneapolis. Home builders remain in a tough situation and continue to report declining price pressures. Construction activity remains at depressed levels with most industry respondents expecting the situation to remain soft through the end of the year.
Commercial real estate remains subdued with reports of falling rent rates. The only sub-sector which showed any strength was apartments. With continued softness in commercial real estate, developers remain on the sidelines. Most respondents expect commercial real estate to remain weak for a prolonged period of time.
Banking and Finance
Lending activity and demand for loans remain weak. This is especially true for businesses who have delayed future capital spending until the economic outlook improves. Consumer demand for loans was flat with some reports of slight increases (mainly in refinancing activity).
Prices and Wages
Input prices rose across the board, but were not passed through to consumers. Agricultural and shipping prices accounted for most of the increase.
Wage pressures remained contained expect for an expected increase in health care related costs.
Corporations do not have future plans to hire permanent workers, although demand for temporary work has been strong.
Nice survey
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