Seventh District Update, January 2017
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 continued at a modest pace in late November and December, though contacts expected it to move up to a moderate pace over the next six to twelve months.
- Employment and Wages: Employment growth slowed to a modest rate, though contacts continued to indicate that the labor market is tight. Wage growth picked up to a moderate pace.
- Prices: Prices again rose modestly. Retail prices increased only slightly, but contacts reported rallies in energy and metals prices.
- Consumer spending: Growth in consumer spending picked up to a modest pace. Sales of new light vehicles strengthened further and many dealers reported record sales for 2016.
- Business Spending: Growth in business spending remained at a moderate pace overall. Retail and manufacturing inventories were generally at desired levels. Current capital expenditures grew at a moderate pace.
- Construction and Real Estate: Construction and real estate activity edged up. Demand for residential construction, residential real estate, nonresidential construction, and commercial real estate all increased slightly.
- Manufacturing: Growth in manufacturing production picked up to a robust pace. Growth continued to be strong in autos and aerospace (though it slowed a bit in autos) and was moderate overall among other industries.
- Banking and finance: Conditions improved on balance. Financial market participants reported broad-based growth in equity prices and low volatility. Loan demand from middle-market businesses increased slightly and consumer loan demand was little changed.
- Agriculture: Farm incomes were little changed. Corn sales picked up some, but inventories remained high. Soybean sales were up moderately, and exports remained strong.
The Chicago Fed Survey of Business Conditions (CFSBC) Activity Index increased to –8 from –19, suggesting that growth in economic activity remained at a modest pace in late November and December. The CFSBC Manufacturing Activity Index rose to +20 from a neutral reading, and the CFSBC Nonmanufacturing Activity Index moved up to –23 from –30.
The Midwest Economy Index (MEI) decreased slightly to –0.01 in November from a neutral reading in October. The relative MEI decreased to +0.20 in November from +0.22 in October. November’s value for the relative MEI indicates that Midwest economic growth was somewhat higher than what would typically be suggested by the growth rate of the national economy.