Seventh District Update, July 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 was moderate in late May and June, with the pace of advance appearing to be a bit slower than during the previous reporting period.
- Consumer spending: Growth in consumer spending continued at a moderate pace. Non-auto retail sales slowed in late May but strengthened in June. Auto sales strengthened further, leading dealers to revise up their expectations for 2015.
- Business Spending: Growth in business spending remained moderate. Overall, inventory levels were comfortable, though steel service center inventories remained elevated. Both the pace of capital spending and hiring was little changed.
- Construction and Real Estate: Demand for residential construction was steady. Home sales, home prices, and residential rents all increased modestly. Nonresidential construction activity also increased modestly, while commercial real estate activity increased moderately.
- Manufacturing: Growth was again moderate, as the auto industry continued its strong advance. Capacity utilization in the steel industry picked up some, but remained low. Sales of heavy trucks grew steadily, while sales of heavy machinery remained weaker.
- Banking and finance: Credit conditions were little changed. Financial market volatility was slightly higher, while credit spreads declined marginally. Business and consumer loan demand both were little changed on balance.
- Prices and Costs: Cost pressures were subdued. Energy prices remained low, as did prices of steel and other primary metals. Most retail prices changed little and wages pressures remained modest.
- Agriculture: Widespread rains damaged crops and restricted fieldwork. Corn, soybean, and wheat prices rose as yield expectations declined. Both higher feed costs and lower prices for hogs, milk, and cattle hurt livestock producers’ margins. Egg prices remained elevated, as bird flu continued to hurt production.
Led by a slight decrease in service sector growth, the Midwest Economy Index (MEI) moved down to +0.17 in May from +0.28 in April. The relative MEI fell to +0.55 in May from +0.86 in April. May’s value for the relative MEI indicates that Midwest economic growth was somewhat higher than would typically be suggested by the growth rate of the national economy.