Seventh District Update, October 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 slowed to a more modest pace in late August and September, but most contacts expected growth to pick up somewhat over the next 6 to 12 months.
- Consumer spending: Growth in consumer spending slowed to a more modest pace over the reporting period, though new and used vehicle sales continued to be strong.
- Business Spending: Most retailers reported comfortable inventory levels, while many manufacturers indicated an undesirable increase in inventories. The pace of hiring and capital spending remained moderate, but many contacts reduced plans for future hiring and capital expenditures.
- Construction and Real Estate: The pace of residential construction was unchanged. Residential rents, home prices, and home sales were also little changed, though residential rents increased modestly. Commercial real estate activity again increased moderately.
- Manufacturing: Growth in production slowed to a more modest pace in spite of strong growth in the auto and aerospace industries. Capacity utilization in the steel industry remained low and sales of heavy machinery remained weak.
- Banking and finance: Credit conditions were little changed. Financial market volatility declined, but remains high. Business and consumer loan demand increased slightly.
- Prices and Costs: Cost pressures remained subdued. Energy and steel prices declined, while the prices of other primary metals remained low. Most retail prices changed little and wage pressures remained mild.
- Agriculture: Corn and soybean crop conditions improved some as the harvest began, while the profitability of crop operations ranged from substantial losses to break-even. Wheat and milk prices moved up, while hog, cattle, and egg prices moved down.
The Midwest Economy Index (MEI) ticked down to −0.12 in August from −0.11 in July. The relative MEI declined to −0.23 in August from −0.06 in July. August’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.