Seventh District Update, June 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 remained moderate in April and early May, and contacts expected growth to continue at a similar pace over the next six to twelve months.
- Consumer spending: Growth in consumer spending was moderate. Non-auto retail sales were steady, while auto sales continued their strong pace.
- 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 picked up some.
- Construction and Real Estate: Demand for residential construction ticked up. Home prices and residential rents were up slightly. Nonresidential construction activity was somewhat higher, while commercial real estate activity grew at a strong pace.
- Manufacturing: Growth was again moderate. The auto and aerospace industries remained a source of strength and capacity utilization in the steel industry increased some. Sales of heavy machinery and heavy trucks again grew slowly.
- Banking and finance: Credit conditions continued to improve. Financial market volatility remained low and credit spreads declined slightly. Business loan demand ticked up, but consumer loan demand flattened with the exception of mortgage originations.
- Prices and Costs: Cost pressures were little changed overall. Energy and metals prices were up slightly, but remained low. Retail prices were little changed and wage pressures increased slightly.
- Agriculture: Corn and soybean planting proceeded rapidly, exceeding the pace of last spring. Higher output pushed down milk prices further, hog prices increased some, and cattle prices remained high. Poultry flocks were hit hard by bird flu, raising egg prices.
The Midwest Economy Index (MEI) ticked down to +0.29 in April from +0.33 in March. The relative MEI edged up to +0.95 in April from +0.90 in March. April’s value for the relative MEI indicates that Midwest economic growth was moderately higher than would typically be suggested by the growth rate of the national economy.