Sept. 9 (Bloomberg) -- The following is the summary
text of the Federal Reserve Boards Summary of Commentary.
Reports from the 12 Federal Reserve Districts indicate that
economic activity continued to stabilize in July and August.
Relative to the last report, Dallas indicated that economic
activity had firmed, while Boston, Cleveland, Philadelphia,
Richmond, and San Francisco mentioned signs of improvement.
Atlanta, Chicago, Kansas City, Minneapolis, and New York
generally described economic activity as stable or showing
signs of stabilization; St. Louis remarked that the pace of
decline appeared to be moderating. Most Districts noted that
the outlook for economic activity among their business
contacts remained cautiously positive.
The majority of Districts reported flat retail sales.
Richmond, Philadelphia, Chicago, Atlanta, and Boston remarked
that retailers continued to carefully manage inventories,
keeping them in line with low sales levels. A majority of
Districts confirmed that the cash-for-clunkers program
boosted traffic and sales. Richmond, Atlanta, Chicago, and
Minneapolis also noted increases or planned increases in
automobile-related production. Most regions reported some
improvement in residential real estate markets. Downward
pressure on home prices continued in most Districts, although
Dallas and New York noted that local prices were firming.
Reports on commercial real estate suggest that the demand for
space remained weak and that nonresidential construction-
related activity continued to decline. San Francisco,
Philadelphia, and St. Louis noted that the demand for
nonfinancial services remained soft, although the pace of the
decline was described as slowing in the latter two Districts.
Loan demand was described as weak and many Districts reported
that credit standards remained tight. Most Districts reported
improvements in manufacturing production. For instance,
Philadelphia, Richmond, Atlanta, Cleveland, and Chicago
reported moderate increases in new orders. Labor market
conditions remained weak across all Districts. However,
staffing firms in Atlanta, Dallas, Richmond, Cleveland,
Philadelphia, Boston, New York, and Chicago did report a
slight pickup in the demand for temporary workers.
Wage pressures remained minimal across all Districts.
Consumer prices were described as being steady in most
Districts, although Kansas City and San Francisco noted some
downward pressure on retail prices.
Consumer Spending and Tourism
Consumer spending remained soft in most Districts. The
majority of Districts reported that retail activity was flat.
Boston, Philadelphia, and Kansas City noted improvement in
sales, but attributed the increase primarily to back-to-school
purchases. Philadelphia, Chicago, Cleveland, and San
Francisco observed that shoppers remained focused on
essentials and continued to refrain from purchasing
discretionary and big-ticket items. Kansas City and San
Francisco noted weak restaurant sales. Richmond, Philadelphia,
Chicago, Atlanta, and Boston remarked that retailer
inventories were being closely monitored and were keeping them
in line with low sales levels.
The majority of Districts reported that the cash-for-clunkers
program helped boost traffic and sales, although Cleveland and
Kansas City also remarked that used car sales were adversely
affected by the program. The sustainability of the higher
recent pace of new vehicle sales was questioned by industry
contacts in the Richmond, Atlanta, Minneapolis, and San
Tourism activity varied. Kansas City, Minneapolis, and
Richmond observed solid visitor numbers at local vacation
destinations, whereas Atlanta and New York noted sluggish
activity and aggressive hotel discounting. San Francisco
reported that activity in California and Nevada was weak, but
visitors to Hawaii had increased.
Real Estate and Construction
Residential real estate markets remained weak, but signs of
improvement continued to be noted. Chicago, Richmond, Boston,
and San Francisco observed an uptick in sales over the last
six weeks, while sales in the Philadelphia District were
described as steady. St. Louis commented that residential home
sales had not improved. Most Districts reported that sales
remained below the levels of a year earlier. However, Atlanta,
New York, Cleveland, and Minneapolis documented some year-
over-year gains in select markets. Most Districts noted that
demand remained stronger at the low-end of the housing market.
Boston, Cleveland, Dallas, Kansas City, Richmond, and New York
indicated that the first-time home buyer tax incentive was
spurring sales. However, Philadelphia did note an upturn in
sales at the high-end of the market. Reports on house prices
generally indicated ongoing downward pressures, although
Dallas and New York noted some increases. Construction
remained at low levels overall, although Chicago and Dallas
reported a small increase in activity.
Reports on commercial real estate markets indicated that
demand for space remained weak and that construction continued
to decline in all Districts. Atlanta, Philadelphia, Richmond,
and San Francisco reported that vacancy rates increased, while
rates held steady in the Boston and Kansas City Districts and
were mixed in New York. Boston, Dallas, Kansas City,
Philadelphia, and Richmond commented that the demand for space
remained weak. Commercial rents declined according to Boston,
Chicago, New York, Philadelphia, and Richmond. Rent
concessions were reported in the Richmond and San Francisco
markets, and Richmond noted that some landlords had postponed
property improvements in an effort to conserve cash.
Construction remained at very low levels, with modest
improvements noted in public construction in the Chicago,
Cleveland, and Minneapolis Districts.
Reports on the demand for nonfinancial services were mixed.
San Francisco, Philadelphia, and St. Louis noted that the
demand for service sector business remained soft, although the
pace of decline was described as having slowed in the latter
two Districts. The demand for legal services remained
relatively flat at low levels according to Dallas and
Minneapolis. Kansas City and Richmond cited increasing demand
for technology-related services. Healthcare services in
Minneapolis also experienced an uptick in demand. Demand for
transportation services were mixed, with some Districts noting
stabilization at weak levels. Reports indicated that freight
volume declines were moderating in Cleveland, while Dallas and
Atlanta reported a modest pickup in rail shipments.
Banking and Financial Services
Most Districts reported that loan demand was weak and that
credit standards remained tight. New York, Philadelphia,
Cleveland, Richmond, Kansas City, St. Louis, and San Francisco
observed further weakening in loan demand across most
categories. Dallas noted scattered reports of improvements in
loan demand. Contacts in Cleveland, Chicago, and Dallas noted
an increase in demand for auto loans. Credit standards ranged
from unchanged to tighter in most Districts. However, Chicago
reported that credit conditions and availability had improved.
Mortgage activity declined modestly according to the
Philadelphia, Cleveland, and Kansas City Districts, while
Richmond reported increases attributed to improved demand for
starter homes. Dallas noted an uptick in refinancing activity.
Commercial and industrial lending declined in the Philadelphia
and Kansas City regions, and was steady according to Richmond.
The lack of available credit was cited as an issue for both
residential and commercial contractors in Cleveland, and for
commercial real estate borrowers in Atlanta. San Francisco
reported an increase in venture capital investment.
Further deterioration in credit quality was noted by
Philadelphia, Richmond, Dallas, and San Francisco, whereas
Cleveland observed some improvement in credit quality. Chicago
also cited improvements in credit quality, apart from home
equity and commercial real estate. Dallas and Chicago noted
increases in consumer bankruptcies, while rising delinquency
rates were reported by New York and Cleveland.
Most Districts reported modest improvements in the
manufacturing sector. Philadelphia, Richmond, Atlanta,
Cleveland, and Chicago all reported slight-to-moderate
increases in new orders. San Francisco indicated that new
orders increased for manufacturers of semiconductors and other
IT products, while orders declined for metal fabricators and
petroleum refineries. Dallas noted that orders held steady,
while St. Louis reported that manufacturing output continued
to decline, but at a slower pace. Richmond, Atlanta, Chicago,
and Minneapolis reported increases or planned increases in
automobile and automobile-related production. Several
Districts also noted increased production in the
The near-term outlook among manufacturers varied, but the
majority of reports indicated that manufacturers were
cautiously optimistic. Boston, New York, and Philadelphia
reported that their contacts expect modest growth later this
year or early 2010. Boston noted that while its contacts
generally expect modest growth, several cost control measures
would remain in place. Dallas reported increased uncertainty
among construction-related manufacturers, while Cleveland
noted that half of their manufacturing contacts expected weak
demand into 2010.
Employment, Wages, and Prices
Labor market conditions remained weak across all Districts,
but several also noted an uptick in temporary hiring and a
decline in the pace of layoffs. Richmond reported that most
service-providing firms continued to cut employees, while
Minneapolis and New York noted additional layoffs in the
manufacturing sector. Cleveland reported modest job declines
in the banking, commercial construction, and coal mining
sectors. Further job cuts are expected in auto manufacturing
according to St. Louis, and Dallas indicated further staff
reductions are anticipated in the airline, energy, and
residential construction sectors. Staffing firms in a majority
of Districts reported a modest increase in the demand for
temporary workers, although industry contacts in Boston also
questioned whether these gains will persist. New York cited a
modest pickup in temporary hiring for the legal and financial
industries. Chicago noted an uptick in demand for workers in
the healthcare and information technology industries. St.
Louis and Minneapolis reported that federal stimulus funds
have had a positive impact on construction and local
Wage pressures remained low across all Districts. Several
Districts noted businesses and local governments imposing wage
freezes or even reducing employee compensation in some
instances. Boston noted that several manufacturers who have
cut wage rates do not expect to restore pay levels until next
year. Kansas City, Philadelphia, Chicago, Minneapolis, San
Francisco, Dallas, and Richmond noted an increase in the cost
of some raw materials, including fuel, metals, and steel.
Chicago and Dallas mentioned that excess supply was putting
substantial downward pressure on natural gas prices. Retail
prices were described as generally steady in most Districts,
although Kansas City and San Francisco noted continued
discounting and downward pressure on consumer prices.
Agriculture and Natural Resources
Reports on agricultural activity were mixed. Weather
conditions were described as being favorable in St. Louis,
Kansas City, and Atlanta. However, cold weather, crop
diseases, and drought were limiting production of corn, cotton,
and soybeans in the Chicago, Minneapolis, and Dallas Districts.
Drought and weak market conditions were significantly
affecting livestock industries according to Kansas City and
Dallas. Dallas reported that some ranchers had liquidated
portions of their cattle herds, while hog producers in the
Kansas City District were said to be struggling as a result of
lower pork prices.
Atlanta, Dallas, Kansas City, and San Francisco noted
increased oil and gas inventories as a result of reduced
consumption. Contacts in the natural gas industry noted that
subdued demand continued to suppress prices and has lead to
cutbacks in extraction activity. Cleveland indicated that
weak demand for electricity prompted coal producers to scale
back production and capital investment. Kansas City noted
that although coal production in Wyoming had risen, it
remained below year-ago levels. Dallas and Atlanta remarked
that oil and gas drilling activity continued to decline in the
Gulf of Mexico, whereas Kansas City and Dallas reported that
the number of rigs operating on land had increased.
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