Highlights from the Federal Reserve’s survey of economic conditions nationwide. The survey, released Wednesday and known as the Beige Book, is based on information collected from the Fed’s 12 regional bank districts.
SAN FRANCISCO
(This region covers California, Washington, Oregon, Idaho, Nevada, Utah, Arizona, Hawaii and Alaska.)
Discounts on retail goods and services helped pare recent oil-driven price increases. Many employers reported freezing or cutting wages and benefit costs. High unemployment did improve the “quantity and quality of job applicants.”
“Anemic demand” and “dismal sales” hurt department stores and other retailers. Grocers reported more consumers seeking better value. Container traffic at ports fell 20 percent from last year, and tourism dropped in Hawaii, California and Nevada. But new orders and sales of high-tech products firmed up. Aerospace and food manufacturers also were strong.
Housing and commercial real estate markets remained weak, with foreclosures pushing prices lower and construction down. But a few areas saw “a significant pickup” in home sales thanks to low prices and mortgage rates. Bank lending remained tight.
BOSTON
(This region covers Maine, Vermont, Massachusetts, New Hampshire, Rhode Island and part of Connecticut.)
Non-auto retailers were the bright spot. Even those with lower sales said results were “better than expected.” Tight credit and reduced demand forced auto sales down 10 to 50 percent.
Many manufacturers faced double-digit declines in sales and orders. Three-fourths planned to cut local employment and freeze or reduce compensation. Service industries also saw demand fall as client companies cut back or merged.
Commercial and residential real estate “remain in the doldrums,” with commercial deals worth more than $10 million “largely dormant.” Home sales plunged in Massachusetts, Rhode Island, Maine and Connecticut, but rose 1 percent in New Hampshire. Improved attendance at open houses and lower housing prices inspired some hope of a turnaround.
NEW YORK
(This region covers New York and parts of Connecticut and New Jersey.)
As contraction continued “at a more subdued pace,” some optimism took hold. Retail sales seemed to bottom, but tourism, commercial real estate and housing fell further.
Consumer confidence across the region hit an all-time low. Tourism in New York City plunged: Manhattan hotel revenues dropped more than 30 percent and Broadway theaters saw 15 percent less revenue. The city also lost high-end office tenants, but office markets in the suburbs and upstate cities “showed resilience.” On the residential side, apartment rentals in New York City cost much less, and suburban single-family home prices also dropped.
“Optimism about the near-term business outlook” is much more widespread than in September, but employment is expected to keep declining. An “inexhaustible” supply of available workers has created an “exceptionally weak” job market, with 2008 college graduates still looking as the class of 2009 prepares to join them.
PHILADELPHIA
(This region covers Delaware and parts of Pennsylvania and New Jersey.)
Declines in commercial real estate and construction, and reduced demand for manufactured goods hindered an economy that was depressed but steady. About half of manufacturers reported declines in both shipments and new orders. Producers of primary metals, machinery and electrical equipment said car- and housing-related product demand “ranged from ‘weak’ to ‘horrible.”‘ Makers of food products, furniture and some fabricated metals fared better.
Retail sales were weak but steady, except for a much slower auto market. Home mortgages, commercial and industrial lending fell. Builders and real estate agents said the market was “bouncing along the bottom” as home prices leveled off. Commercial construction, leasing and purchasing fell, along with rents, but some builders looked to federal stimulus funds to increase infrastructure projects.
The service sector’s outlook is weak for the rest of the year, as companies with clients in construction, real estate and finance face falling demand. Prices rose for food and metal products. “Firms in a wide range of industries” froze salaries or reduced benefits.
CLEVELAND
(This region covers Ohio and parts of Pennsylvania, West Virginia and Kentucky.)
Reduced factory and steel output led to “very depressed” residential construction and employment declines. Energy production, commercial building and vehicle sales appeared stronger.
Agriculture equipment and defense-related firms were “the only end markets cited as showing some stability.” A plant that produced SUVs was closed permanently, and most companies said their budgets had been frozen or cut back. “Almost all” of the Fed’s contacts were laying off employees or reducing production schedules.
Despite less pessimism among homebuilders, a turnaround was not expected “until consumer confidence improves significantly and excess inventory is pared down.” Housing prices dropped less than in other areas, and contractors said “they are now operating with skeleton crews.” Education, health care and public works projects helped buoy the commercial real estate sector.
In financials, some community bankers reported siphoning business from regional competitors. Energy production was expected to remain stable for coal and increase modestly for oil and gas. Energy prices were expected to fall.
RICHMOND
(This region covers Virginia, Maryland, North Carolina, South Carolina and parts of West Virginia, North Carolina and South Carolina.)
A Maryland payroll services firm said the business was in “survival mode” as service-sector revenues fell. Financing caused problems for a central North Carolina architecture and engineering firm, while a commercial interiors company on the South Carolina coast said “no one is seeking proposals.” Employment and average wages dropped, and even hospitals were cutting payroll expenses.
Car dealers pared inventories as consumers had trouble getting financing. One South Carolina car parts maker reported “catastrophic reductions in orders,” and a builder of residential doors said a “total lack of orders” had led to “unreasonably low pricing.” Lumber companies, too, were in “survival mode,” and import-export volumes at area ports were off 20 percent for the year.
Residential lending was slightly higher, as lenders worked to meet demand for refinancing. Home sales were up but “subdued.” Commercial real estate was softer.
ATLANTA
(This region covers Georgia, Alabama, Florida, and parts of Louisiana, Mississippi and Tennessee.)
Lending decreased, with bankers blaming reduced demand and tighter credit standards. Businesses and consumers “appeared to be reluctant to take on more debt.”
Everything from cruise vacations to retail goods to wholesale products were discounted, which led to some stronger sales in certain housing markets and tourism areas. But retail and auto sales declined overall. The commercial real estate market softened as retail vacancies rose and more vacant space was expected as construction slows.
Manufacturing remained weak, but improved from the previous period. Reduced shipments of both retail and wholesale products made for “intense pricing pressure” for some truckers. Weak demand spelled “trouble” for agriculture, and for oil and natural gas producers.
CHICAGO
(This region covers Iowa, Wisconsin, Michigan and parts of Illinois and Indiana.)
Modest gains in consumer spending and increased prices for some crops helped slow the pace of economic contraction. Retail promotions helped sales of “necessities,” electronics and fast food. Retailers trimmed orders to “keep inventories lean.” Easier access to credit helped foot traffic at car dealerships.
Health care and pharmaceutical firms kept hiring. One contact said the mortgage refinancing “boom” also led to some jobs in financial services. But tight credit led to real estate delays, housing inventories were high and retail rents dropped as more space became available.
Manufacturing fell along with demand for steel, aircraft, trucks and other products. Exporters suffered but were “optimistic” about a late-March “surge” from stimulus programs. A Fed contact called the situation in the dairy industry “ugly,” and livestock prices suffered, but corn prices edged up.
ST. LOUIS
(This region covers Missouri, Arkansas and Kentucky, and parts of Illinois, Indiana, Tennessee and Mississippi.)
Economic conditions weakened. Most manufacturers announced layoffs, and “a major firm in animal processing and slaughtering” ended operations, as did “a large national retailer.” Layoffs also hit services industries, though financial services was a bright spot.
Home sales dropped by double digits in St. Louis, Little Rock, Louisville and Memphis. Commercial real estate sales and development also were soft.
Auto retailers said customers were having trouble getting financing, and commercial and industrial loans fell.
MINNEAPOLIS
(This region covers Montana, North Dakota, South Dakota, Minnesota and parts of Wisconsin and Michigan.)
Agriculture was the sole bright spot, thanks to decreased costs of diesel, fertilizer and some chemicals. Sales fell at retailers, car dealerships and restaurant chains. Professional service firms faced customers “delaying payment and asking for price reductions.”
There was some activity in information technology, education and medical companies, as well as a refinance boom benefiting appraisers and mortgage companies. But commercial construction slowed and commercial real estate was “stagnant.” Home sales were lower, though up slightly from last year in Minneapolis-St. Paul.
“Very weak orders” in manufacturing led to production cuts, and mining and energy companies mostly scaled back. Unemployment reached 25-year highs in Minnesota and Wisconsin.
KANSAS CITY, Mo.
(This region covers Wyoming, Nebraska, Colorado, Kansas, Oklahoma and parts of Missouri and New Mexico.)
“Tentative signs of stabilization” and optimism took hold in residential real estate and agriculture. But the commercial real estate, energy and banking sectors declined.
Retail sales were level, excluding a sharp decline in auto sales, but tourism and travel looked bleak as businesses cut back. Manufacturing began to stabilize as plants cut production in response to sluggish demand. Businesses put spending decisions “on hold.”
Home sales, new and refinanced mortgages rose. But residential and commercial construction both remained weak and rents fell.
DALLAS
(This region covers Texas and parts of New Mexico and Louisiana.)
Some industries — including manufacturing, retail, residential construction and financial services — “were seeing signs of stabilizing at low levels,” but energy extraction and transportation “noted sharp declines.” Prices dropped for retail goods and services, like accounting and legal work.
In the energy sector, companies “felt that fundamentals remained negative” due to weak industrial demand and strong production. Energy, real estate, construction and manufacturing saw further layoffs. High-tech manufacturers saw demand “bounce across the bottom.” Retail sales also leveled off, despite lower demand for discretionary and luxury goods — and auto sales plunged 40 percent since last year.
“It’s going to be ugly” in the legal field if consumers don’t start spending more on litigation and bankruptcy, one firm reported. Airlines said they were dropping prices to make up for decreased business travel. Homebuilders face a “painful decrease in home production,” but expectations for the spring selling season improved.