Seventh District Update, September 2016
First, a (repeat) repeat special announcement: As a Midwest Economy blog reader, you may also want to sign up to follow our new Chicago Fed Survey of Business Conditions (CFSBC), which is a survey of business contacts conducted to support the Seventh Federal Reserve District’s contribution to the Beige Book. The Chicago Fed produces diffusion indexes based on the quantitative questions in the survey. Click here to sign up for email alerts and click here to view the latest release.
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And now, 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 picked up to a moderate pace in July and early August, and contacts expect growth to remain moderate over the next six to twelve months.
- Consumer spending: Growth in consumer spending slowed notably with most segments reporting little change in sales. Auto sales slowed some, but remained strong.
- Business Spending: Growth in business spending picked up to a moderate pace. Retail inventories were somewhat higher than desired because of softer sales. Current capital expenditures picked up to a moderate pace, while hiring continued at a modest rate.
- Construction and Real Estate: Activity increased slightly overall. Residential construction and home sales increased slightly. Demand for nonresidential construction picked up some, and commercial real estate activity increased slightly.
- Manufacturing: Growth in manufacturing production picked up to a moderate pace. Activity continued to be strong in autos and aerospace, and increased in most other industries.
- Banking and finance: Conditions improved modestly. Equity prices were higher, volatility was low, and loan demand from small and middle market businesses grew modestly. Consumer loan demand increased slightly.
- Prices and Costs: Cost pressures were unchanged and remained mild. Most energy and metals prices were flat and remained low. Retail prices changed little and labor cost pressures were steady.
- Agriculture: Already low expectations for farm incomes deteriorated over the reporting period as the potential for a record national harvest pushed prices down further.
The Midwest Economy Index (MEI) decreased to −0.14 in July from −0.04 in June. The relative MEI moved down to +0.03 in July from +0.38 in June. July’s value for the relative MEI indicates that Midwest economic growth was quite close to what would typically be suggested by the growth rate of the national economy.
The Chicago Fed Survey of Business Conditions (CFSBC) Activity Index increased to −18 from −23, suggesting that growth in economic activity remained at a modest pace in July and early August. The CFSBC Manufacturing Activity Index increased to a neutral value from −31, while the CFSBC Nonmanufacturing Activity Index declined to −27 from −18.