Seventh District Update, December 2015
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: Growth in economic activity in the Seventh District continued at a modest pace in October and early November.
- Consumer spending: Growth in consumer spending continued at a modest pace, though new and used vehicle sales continued to be strong.
- Business Spending: Most retailers reported comfortable inventory levels. Current capital spending slowed and now appears in line with modest plans for capital outlays. The pace of hiring slowed notably, particularly for non-auto-related manufacturers, and hiring plans remained modest.
- Construction and Real Estate: Demand for residential construction increased moderately, though home sales and the pace of home price growth have slowed. Commercial real estate activity continued to increase moderately, while commercial rents increased slightly.
- Manufacturing: Manufacturing production growth slowed to near zero in October and early November. Although the auto industry continued to experience solid gains, most other industries saw limited growth or reported declines in activity.
- Banking and finance: Credit conditions were little changed on balance. Loan demand from large and middle market firms fell; however, small business lending ticked up. Consumer loan demand increased slightly, with multiple contacts citing strong demand for auto loans.
- Prices and Costs: Cost pressures continued to be subdued. Steel prices declined, while the prices of other primary metals and energy remained low. Most retailers reported stable pricing and wage pressures were mild.
- Agriculture: District corn and soybean harvests exceeded expectations, and most agricultural commodity prices fell.
The Midwest Economy Index (MEI) moved up to –0.14 in October from –0.17 in September. The relative MEI increased to –0.23 in October from –0.34 in September. October’s value for the relative MEI indicates that Midwest economic growth was somewhat lower than what would typically be suggested by the growth rate of the national economy.