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: The rate of growth in economic activity in the Seventh District slowed a bit in September. Contacts remained generally optimistic, although several expressed concern about the potential impact of the federal government shutdown.
- Consumer spending: Consumer spending grew modestly in September, falling short of retailers’ expectations. Auto sales increased at a slower pace and back-to-school spending was less than last year. Retailers expected holiday season spending to be similar to last year.
- Business Spending: Growth in business spending flattened out in September. Growth in capital spending slowed slightly and inventories were at comfortable levels for most retailers and manufacturers. The pace of hiring edged lower and retailers indicated that seasonal hiring plans were about the same as last year.
- Construction and Real Estate: Construction and real estate activity continued to increase in September. Demand for residential construction grew moderately, as did activity in the residential real estate market. Nonresidential construction grew modestly and commercial real estate activity continued to expand.
- Manufacturing: Growth in manufacturing production decreased slightly in September. The auto and aerospace industries were again a source of strength. Steel production was steady, demand for specialty metals, construction materials, and household appliances declinedslightly, and demand for heavy equipment remained soft.
- Banking and finance: Credit conditions changed little on balance over the reporting period. Banking contacts noted competitive pressures for commercial and industrial loans, with narrowing spreads and easing standards. Consumer loan demand was steady, with a decrease in mortgage lending and an increase in auto lending.
- Prices and Costs: Cost pressures changed little in September. Overall, commodity prices were down slightly. Retailers again noted a slight increase in wholesale prices. Wage pressures remained mild and non-wage labor costs increased.
- Agriculture: Although the year’s drought affected the harvest, corn and soybean yields in parts of the District were higher than expected in September though rains slowed harvesting. Corn, soybean, hog, and fruit prices decreased, while milk and cattle prices increased.
The Midwest Economy Index (MEI) increased to +0.41 in August from +0.22 in July, and the relative MEI rose to +0.73 in August from +0.45 in July. August’s value for the relative MEI indicates that Midwest economic growth was higher than would typically be suggested by the growth rate of the national economy.
The Chicago Fed Midwest Manufacturing Index (CFMMI) increased 1.5% in August, to a seasonally adjusted level of 96.7 (2007 = 100). Revised data show the index was down 0.7% in July. The Federal Reserve Board’s industrial production index for manufacturing (IPMFG) moved up 0.7% in August. Regional output rose 4.0% in August from a year earlier, and national output increased 2.8%.