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 continued to expand at a slow pace in late November and December.
- Consumer spending: Consumer spending increased somewhat. Multiple retailers reported that store traffic volumes fluctuated more throughout the holiday season than in recent years. Auto sales in the District lagged the national pace, with several dealers indicating that lower consumer confidence hurt year-end sales.
- Business Spending: Growth in business spending remained tepid. Inventory investment was little changed while spending on equipment and structures continued to slowly increase. Labor market conditions were unchanged.
- Construction and Real Estate: Construction and real estate activity was mixed. Residential construction continued to rise. Demand for nonresidential construction remained weak, but some improvement was noted in the light industrial and office markets.
- Manufacturing: Growth in manufacturing production continued to be moderate over the reporting period. Capacity utilization in the steel industry increased slightly, the auto sector remained a source of strength, and activity in the energy industry appeared to slow.
- Banking and finance: Credit conditions continued to gradually ease. Credit spreads and financial market volatility remained low, and asset quality continued to improve. Banking contacts also reported moderate growth in demand for small business loans and consumer loan demand continued to increase.
- Prices and Costs: Cost pressures eased in late November and December. Most raw material prices moved lower and wage pressures remained moderate.
- Agriculture: Although drought conditions eased, depleted soil moisture remained a concern in much of the District. Corn, soybean, and milk prices slid during the reporting period while cattle and hog prices increased.
The Midwest Economy Index (MEI) improved to –0.21 in November from –0.47 in October, but remained negative for the fifth consecutive month. The relative MEI jumped to +0.63 in November from –0.09 in October. Estimates of annual growth in gross state product for the five Seventh District states were updated through the third quarter of 2012 in this release. Estimates for Illinois, Iowa, and Michigan were lower than the national rate of growth, while those for Indiana and Wisconsin were higher.
The Chicago Fed Midwest Manufacturing Index (CFMMI) increased 1.6% in November, to a seasonally adjusted level of 93.7 (2007 = 100). Revised data show the index was down 1.1% in October. The Federal Reserve Board’s industrial production index for manufacturing (IPMFG) moved up 1.1% in November. Regional output rose 7.3% in November from a year earlier, and national output increased 3.1%.