Seventh District Update, September 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 July and early August, and most contacts expect activity to rise at a similar pace over the next 6 to 12 months.
- Consumer spending: Growth in consumer spending continued at a moderate pace. New and used vehicle sales continued to be strong.
- Business Spending: Growth in business spending remained moderate. Overall, inventory levels were comfortable, though steel service center inventories were slightly elevated. The pace of hiring and capital spending remained moderate.
- Construction and Real Estate: Residential construction ticked up, while residential rents, home prices, and home sales all increased slightly. Demand for nonresidential construction edged up and commercial real estate activity again increased moderately.
- Manufacturing: Growth was again moderate, as the auto and aerospace industries continued their strong advance. Capacity utilization in the steel industry 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 higher, while credit spreads were largely unchanged. Business loan demand weakened some, while consumer loan demand was up slightly.
- 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 mild.
- Agriculture: The condition of the corn and soybean crops was uneven across the District, with record yields possible in some areas and low yields likely in others. Corn, soybean, and wheat prices declined. Hog prices were flat, dairy moved up, and cattle prices moved down. The recovery from the bird influenza has been slow, pushing egg prices up again.
Led by declines in the construction and mining sector, the Midwest Economy Index (MEI) decreased to −0.12 in July from a neutral reading in June. The relative MEI declined to −0.08 in July from +0.12 in June. July’s value for the relative MEI indicates that Midwest economic growth was slightly less than what would typically be suggested by the growth rate of the national economy.