Seventh District Update
A summary of economic conditions in the Seventh District from the latest release of the Beige Book and from other indicators of regional business activity:
- Overall conditions: Economic activity in the Seventh District again expanded at a modest pace.
- Consumer spending: Growth in consumer spending increased slightly. Auto sales were moderately higher. New vehicle sales fell short relative to expectations, but used vehicle sales increased at a faster pace.
- Business Spending: Growth in business spending slowed. Inventory investment decreased. Capital expenditures were limited by uncertainty over the economic outlook, but labor market conditions continued to improve slowly.
- Construction and Real Estate: Growth in construction and real estate activity picked up. Demand for residential construction grew steadily, as multifamily construction remained strong and conditions for single-family construction continued to improve. Nonresidential construction increased at a modest pace.
- Manufacturing: The decline in manufacturing production growth flattened out. Although the auto industry remained a source of strength, it too grew at a more moderate pace. Specialty metal manufacturers reported small increases in new orders, noting that their customers had become more cautious.
- Banking and finance: Credit conditions eased some over the reporting period. Corporate borrowing costs declined and demand increased in corporate debt markets. Banking contacts reported modest growth in business loan demand, with greater competition for high quality assets among larger banks.
- Prices and Costs: Cost pressures were steady. Commodity prices were generally somewhat lower. Wage pressures were again moderate, although many contacts noted rising healthcare costs and uncertainty about future employee healthcare obligations associated with the Affordable Care Act.
- Agriculture: Heavy precipitation in the District aided the recovery from last year’s drought. Corn, soybean, milk, and hog prices rose, while cattle prices were flat.
The Midwest Economy Index (MEI) decreased to +0.03 in April from +0.25 in March, and the relative MEI declined to –0.21 in April from +0.10 in March. Significantly lower contributions from the Midwest’s service sector led to declines in both indexes. April’s value for the relative MEI indicates that Midwest economic growth was somewhat lower than would typically be suggested by the growth rate of the national economy.
The Chicago Fed Midwest Manufacturing Index (CFMMI) decreased 0.5% in April, to a seasonally adjusted level of 95.9 (2007 = 100). Revised data show the index was up 0.3% in March. The Federal Reserve Board’s industrial production index for manufacturing (IPMFG) moved down 0.4% in April. Regional output rose 3.3% in April from a year earlier, and national output increased 1.7%.