Manufacturing turned"generally weaker" while the broader economy continued to expand at a moderate pace, according to the Federal Reserve's latest Beige Book.The Beige Book isa compilation of anecdotes about the economy from the Fed's 12 regions.It showed that from mid-August to early October, wage growth was mostly flat, although some regions reported wage pressures. Consumer spending grew moderately,It is usually published two weeks before the Fed's policy announcement, and informs the discussions at the two-day Federal Open Market Committee meeting.Here's the full text:Reports from the twelve Federal Reserve Districts point to continued modest expansion in economic activity during the reporting period from mid-August through early October. The pace of growth was characterized as modest in the New York, Philadelphia, Cleveland, Atlanta, Chicago, and St. Louis Districts, while the Minneapolis, Dallas, and San Francisco Districts described growth as moderate. Boston and Richmond reported that activity increased. Kansas City, on the other hand, noted a slight decline in economic activity. Compared with the previous report, the pace of growth is said to have slowed in the Richmond and Chicago Districts. A number of Districts cite the strong dollar as restraining manufacturing activity as well as tourism spending. Business contacts across the nation were generally optimistic about the near-term outlook.Consumer spending grew moderately in the latest reporting period. Most Districts reported that non-auto sales grew at a modest or moderate rate, while vehicle sales generally grew more strongly; tourism across the nation was mixed. Nonfinancial services activity generally strengthened since the previous report, although freight transport activity weakened.Manufacturing turned in a mixed but generally weaker performance during the latest reporting period, with a number of Districts noting adverse effects from the energy sector. Some strength was reported in the motor vehicles, aerospace, and transportation equipment industries, while metals industries were generally weaker--in part, due to the strong dollar.Both the housing and commercial real estate markets improved since the last report. Home prices and sales volume increased in almost all regions, and a number of Districts noted relative strength in the market for lower or moderately priced homes. Both residential rental markets and commercial real estate markets were mostly stronger. Commercial and residential multi-family construction showed further strength; single-family construction activity was more mixed but did increase modestly.Reports on the banking and finance sector were generally positive--lending activity increased, loan quality was steady to improved, and lending standards were little changed or somewhat easier.Agricultural conditions were mixed. Growing conditions and farm output were solid in some Districts, but there were adverse effects from droughts in the south, as well as excessive rainfall in the Richmond and St. Louis Districts. Lower crop and livestock prices raised concerns that farm income may weaken. Activity in the energy industry weakened since the last report.Labor markets tightened in most Districts, with some reports of labor shortages--particularly for skilled workers. Wage growth was mostly subdued, though there were scattered reports of increased wage pressures. Prices remained fairly stable across the nation, as most Districts reported that prices of both inputs and finished goods were little changed or up only slightly, though some Districts report declines for energy, as well as other inputs.Consumer Spending and TourismConsumer spending grew at a moderate pace over the latest reporting period. Most Districts indicated that non-auto retail sales expanded at a modest or moderate rate. New York and Atlanta characterized sales as mixed, while Richmond and Chicago noted that growth slowed; Kansas City, however, indicated that sales weakened slightly. Contacts were described as generally optimistic about the sales outlook in the Boston, Philadelphia, Atlanta, Kansas City, and Dallas Districts.Vehicle sales generally increased in the latest reporting period. Richmond, Atlanta, Chicago, and Dallas characterized auto sales as strengthening; New York said they were steady to stronger; and St. Louis and Minneapolis described them as mixed. Modest growth in vehicle sales was reported in the Philadelphia, Cleveland, and Kansas City Districts.Tourism was mixed across the nation. Minneapolis and San Francisco indicated increased activity, and Philadelphia, Atlanta, and Chicago reported that tourism was at high or strong levels. In contrast, tourism was seen to have weakened in the New York, Kansas City, and Dallas Districts. The strong dollar was mentioned as a restraining factor by New York, Minneapolis, and Dallas.Nonfinancial ServicesNonfinancial services activity generally strengthened since the previous report. The New York, Philadelphia, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco Districts reported that service-sector activity expanded, on balance, while such activity was reported to be mixed in the Richmond District. Revenues increased for advertising and business services firms in the Boston District, while Dallas reported particularly strong demand for logistics and accounting services and little evidence of negative effects on professional services from lower energy prices. Activity in the technology services sector expanded in the San Francisco District, particularly for cloud-based remote services.On balance, goods transportation services softened since the previous report. Some declines in shipments and cargo volumes were noted in the Cleveland, Atlanta, St. Louis, Kansas City, and Dallas Districts, particularly metals and energy-related shipments. Partially offsetting these declines, motor vehicle shipments were said to have increased in the Cleveland and Dallas Districts. In addition, port contacts in the Richmond District noted that exports softened and imports strengthened due to the strong dollar, while port contacts in the Atlanta District reported strong demand across all cargo types. Sturdy demand for trucking services was noted in the Atlanta and Dallas Districts.ManufacturingOn the whole, manufacturing conditions were generally sluggish. Reports were mixed across Districts, and among those that saw some increase in activity, such improvement was mild. Chicago and St. Louis reported modest growth in manufacturing activity, and Dallas reported that most manufacturers saw an increase in demand since the last report. On the other hand, Cleveland, Richmond, Boston, Minneapolis, and San Francisco all reported that manufacturing activity was flat or mixed, while the remaining four Districts--New York, Philadelphia, Atlanta, and Kansas City--noted that manufacturing activity had declined. Several Districts reported fairly strong growth in activity related to motor vehicles, aerospace, and transportation equipment. Cleveland, Chicago, and San Francisco all reported that the demand for steel remained weak, with the strong dollar and competition from China cited as factors driving this trend. Falling demand from the energy sector was also cited as a source of weakness by a number of Districts. Activity related to primary and fabricated metals was mixed, with Chicago and Kansas City seeing weakness in these sectors, while Philadelphia, St. Louis and Dallas saw some expansion in metals related industries. Demand for high tech manufacturing picked up slightly in the Dallas District, while semiconductor sales slowed in the San Francisco District.Real Estate and ConstructionResidential real estate activity has generally improved since the last report, with almost all Districts reporting rising prices and sales volume. One exception was the Chicago District, where prices and sales volume were generally steady. A number of Districts noted that the market for lower or moderately priced homes has outperformed the high end of the market. The inventory of available homes was reported to be low in the Boston, New York, Richmond, and St. Louis Districts; and San Francisco reported a shortage of available land in some areas. On the other hand, Philadelphia reported adequate inventories, and Dallas noted a fair amount of supply in the pipeline. Boston, New York, and Chicago indicated rising residential rents, while Minneapolis reported sharp declines in rents in energy-producing areas of North Dakota. Residential construction has been mixed but generally stronger in the latest reporting period, with multi-family outpacing single-family construction. Strong multi-family construction was highlighted in the New York, Cleveland, Richmond, and San Francisco Districts, while Atlanta reported strong residential construction generally. However, Minneapolis and Kansas City reported declines in new home construction. Philadelphia mentioned a lack of new construction, while Dallas reported that new construction has been restrained by labor shortages; Chicago indicated little change.Commercial real estate markets have shown signs of strengthening in all twelve Districts. Most Districts noted improvement across all major segments, though New York and St. Louis noted some increased slack in the market for retail space. Commercial construction was also stronger in most Districts. Boston and St. Louis noted brisk construction in the health sector, including senior care facilities, and Cleveland also indicated strong demand for senior living structures. New York, on the other hand, noted some pullback in new commercial construction, though activity remained fairly brisk.Banking and Financial ServicesReports from the banking sector were generally positive. Loan demand or volume was reported to be growing in the Philadelphia, Cleveland, Richmond, Chicago, St. Louis, Dallas, and San Francisco Districts. Other Districts indicated mixed loan demand: New York reported rising demand for commercial loans but declining demand for refinancing, and Kansas City indicated weaker demand for agricultural loans but steady demand in other categories.Credit conditions were mixed but mostly improved. Improved loan quality or declining delinquency rates were noted in New York, while Cleveland, Richmond, and Kansas City reported little change. Richmond and Chicago indicated some easing in lending standards, while New York, Kansas City, and Dallas reported no change. San Francisco reported tight lending conditions in the residential real estate segment.Agriculture and Natural ResourcesAgriculture conditions were mixed. Growing conditions and farm output were solid in some Districts, while either drought or excessive moisture hampered production in other Districts. Several Districts reported lower prices for crops and livestock, raising concerns that farm income may weaken as a result. Drought conditions were seen in parts of the Atlanta and Dallas Districts, and excessive rainfall was reported in the Richmond and St. Louis Districts. Corn and soybean crops were reported as being in excellent shape by Chicago, Minneapolis and Kansas City, and the San Francisco District reported that grain yield has been excellent.Activity in the energy industry declined further since the last report, particularly in the Minneapolis, Kansas City and Dallas Districts, where the number of active drilling rigs fell. Dallas said that the demand for oilfield services remained depressed, and exploration and production companies reduced business activities in the Atlanta District. Coal production fell in the St. Louis District and in parts of the Richmond District, and natural gas production was flat in the Richmond District.Employment, Wages and PricesLabor markets generally tightened since the previous report. The New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, and Dallas Districts indicated that employment was up modestly to moderately. Boston reported that most advertising and consulting firms planned to increase hiring, while manufacturers were cutting staff. Many Districts continued to report that employers were having difficulty finding skilled workers, and, in some cases, unskilled workers. Scattered labor shortages were reported in construction (Cleveland, Chicago, San Francisco), trucking (New York, St. Louis, Kansas City), and information technology (New York, Kansas City, San Francisco). However, contacts in the Philadelphia District noted relatively more growth of part time and temporary positions compared to full-time positions, and Dallas reported that layoffs in the energy industry were still underway.Wage growth remained subdued in most Districts since the previous report. The Boston, Philadelphia, Richmond, Atlanta, Chicago, St. Louis, Kansas City, and Dallas Districts noted only slight to modest wage increases. To the extent that more significant wage increases were observed, they were largely concentrated among highly skilled workers in information technology, health care, professional services, and some of the skilled trades. However, New York noted increased wage pressure for both skilled and less skilled workers, and San Francisco noted that the impact of higher minimum wages implemented over the past year began to filter through to the retail sector and resulted in increased wages for some lower-skilled workers.Price pressures were said to be contained, as most Districts reported that both input and finished goods prices were little changed or up only slightly since the previous report. Contacts in the Kansas City District noted that prices grew more slowly than in recent months, and eased in some sectors. Moreover, low or declining prices for energy products, technology goods, some agricultural commodities, and metals were cited by some Districts.Return to topReturn to topFirst District--BostonBusiness activity levels continue to increase in the First District, according to contacts. Most responding manufacturers, retailers, and advertising and consulting firms report higher revenues than a year ago with only one respondent in each of the three sectors citing flat or down results. Reports on commercial and residential real estate markets are similar to six weeks ago, with the strength of commercial leasing demand varying across markets and continued year-over-year gains in home sales and median prices in most of the New England states. Most consulting and advertising respondents plan to increase employment, but several manufacturers are cutting staff. Contacts cite very limited, if any, upward pressure on prices and say they plan to raise wages only modestly.Retail and TourismRetailers consulted for this round report year-over-year changes in comparable-store sales ranging from flat to up by 7 percent. Most of these figures reflect performance recorded through the third quarter of 2015. A few contacts report that their third-quarter sales were good or better than expected, but one contact continues to report slightly softer sales growth across all regions of the United States since mid-June. Apparel, furniture, and items related to home improvement are selling well. Inventories are up slightly, due to continuing expected improvement in sales, adding merchandise for the holiday season, and stocking up on winter-related items. Expectations are that total 2015 sales will show gains between 3 percent and 8 percent compared with 2014.Contacts continue to report that vendor prices remain steady or that they are seeing very modest increases of about 1 percent. Some contacts expect that the U.S. economy will continue to improve and that consumers are now more apt to spend. However, another feels that the U.S. economy has slipped back into a "sideways" momentum, perhaps in response to macro-political situations both domestically--the threatened government shutdown--and internationally, specifically involving Russia and Syria.Manufacturing and Related Services Of 10 firms contacted this cycle, only one, a manufacturer and retailer of furniture, reports falling sales. The furniture company says they are experiencing longer term decreases, but in addition they saw particularly weak sales accompanying the stock market declines in recent weeks. Another firm, a manufacturer of parts for the aerospace and automotive markets, reports higher sales than a year ago, but growth substantially lower than expected. Only one firm, a manufacturer of storage devices for computers, specifically mentions the slowdown in China as affecting results. Five contacts, including a manufacturer of lab equipment and a drug company, note the strong dollar as a headwind for their business.Most firms report no news on the inventory front. The firm with slowing sales growth says they reduced inventory as a result of the lowered outlook.No contacts report significant pricing pressure either in their end markets or from suppliers. Three contacts note the benefits of lower energy prices.Four contacts report that they expect employment to decline. A manufacturer of postal equipment attributes cutbacks to fundamental changes in the nature of the company. A media company indicates the staff reduction is part of a long term trend in their industry. The manufacturer of aerospace and auto parts says declining sales growth led to layoffs and a substantial reduction in its temporary workforce.Most responding manufacturers report capital spending consistent with earlier plans. The manufacturer of aerospace and auto parts, by contrast, has cut capital spending plans in recent months by 10 percent to 15 percent, expecting demand to slow further in coming months. Other manufacturing contacts say the outlook is stable.Selected Business Services Revenues are mostly up from a year earlier at responding consulting and advertising firms in the First District. A large advertising materials firm and a large pharmaceuticals consultant experienced mid-single digit growth over last year. Two smaller firms, a research and strategy consultant and a healthcare consultant, were up 20 percent from last year; both cited increases in demand, as businesses are making more drastic strategic changes and consolidation continues in the healthcare industry. A large economic consultant was flat over last year, as work related to mortgage-backed securities (MBS) litigation continued to decline; the replacements for the MBS work are diverse and include antitrust work with the Department of Justice and healthcare.Consulting contacts increased or plan to increase compensation by 1 percent to 3 percent. The small research and strategy consultant increased headcount by 10 percent and hopes to add another 5 percent this year; they are finding it very difficult to find quality people to fill these positions. Both healthcare consultants are hiring in the mid-single digits; one says hiring has been easier than expected. The advertising materials firm increased employment 2 percent and the large economic analyst was flat on net, though they had to do more hiring to cover increased attrition. Contacts cite increased competition from tech jobs and difficulty in filling programming, IT, and e-commerce related positions.Respondents are bullish regarding the fourth quarter, with most expecting revenue growth rates to be similar to recent experience. Specifically, contacts from larger firms forecast mid-single digit growth through next year and the small research and strategy consultant expects to end the year up 25 percent.Commercial Real EstateConditions in the First District's commercial real estate markets are mostly unchanged since the last report. The strength of office leasing demand continues to vary across cities within the district. According to contacts, demand for office space remains robust in Boston and Portland, while leasing volume is gaining momentum in Providence and remains quite slow in Hartford. Portland's industrial leasing market is described as very strong, with a single-digit vacancy rate. Investment sales volume remains high in Boston and Portland and moderately strong in Hartford. In Providence, construction activity is concentrated in the higher education sector, but a multifamily project should break ground in the spring of 2016. In Maine, significant current and planned construction is coming from health-related institutions, including some large senior living facilities, and multifamily construction remains active in Portland. Construction activity is limited in Connecticut but a few retail developments are being discussed. A regional lender to commercial real estate achieved an uptick in new loan volume but growth in outstanding loans continues to be hampered by high payoff rates among existing loans.The outlook in Hartford was downgraded in response to fresh reports of fiscal stress in Connecticut and threats by a large employer to move its headquarters out of state. A contact says the near-term outlook for Portland is strong, but points to longer-term challenges to the state's economy related to its aging workforce. A Providence contact believes that office rent growth is possible by late 2016 if current absorption rates persist. The outlook for greater Boston remains optimistic, but one contact is concerned that the flow of investment capital from sovereign wealth funds into Boston's commercial real estate market could slow in response to the impact of lower oil prices on the funds from oil-rich countries such as Norway and Russia.Residential Real EstateClosed sales of both single-family homes and condos increased on a year-over-year basis in each of the six First District states. In Boston, the volume of closed sales in August was the highest on record. In Rhode Island, single-family home sales saw the ninth consecutive month of increase from the prior year, the longest running growth period since 2012. One contact notes that the market seemed to be stronger than usual for late summer, possibly due to delays on the inventory side that resulted from the harsh winter weather. Another says the season is wrapping up with "solid momentum." Median sales price also increased from last year in most states, but not for single-family homes in Connecticut and Vermont nor condos in Maine and Vermont, which saw moderate price decreases. Massachusetts contacts note that prices increased more markedly in the condo market than in the single-family home market. Continuing recent trends, inventory decreased year-over-year in every state in the First District. This marks the 42nd consecutive month of inventory decline in Massachusetts. Contacts cited low inventory as a persistent issue for buyers as it has created a strong "seller's market" in which sellers are increasingly willing to move on to other buyers. Similarly, the months of available supply and average days on market decreased from August of 2014 for both single-family homes and condos in all the New England states. A Maine contact notes that inventory continues to move quickly and competition among buyers is robust.Overall, contacts express an optimistic outlook. Most contacts are anticipating a stronger fall than last year, as increases in August pending sales for both single-family homes and condos suggest that closing activity will continue to increase in the coming months. Massachusetts, in particular, saw huge year-over-year increases, with pending sales of single-family homes rising by over 40 percent. Several contacts note ongoing concerns regarding low inventories and one contact cites mild concern about the impact of potentially rising interest rates on home affordability.Return to topReturn to topSecond District--New YorkEconomic growth in the Second District has continued at a modest pace since the last report. Selling prices remain generally stable, while service-sector firms continue to note upward pressure on input prices and wages. Labor markets have shown further signs of tightening since the last report. Consumer spending has been mixed but up moderately, on balance, while tourism has remained weak. Manufacturers report further softening in activity. Housing markets continued to improve, while commercial real estate markets were mostly stronger. Multi-family residential construction has been increasingly robust, whereas commercial construction has slowed. Finally, banks report that loan demand has leveled off, while delinquency rates have continued to improve.Consumer SpendingRetailers report mixed results for August and September. One major retail chain indicates that sales in the region came in below plan in both months, slipping below comparable 2014 levels, whereas another chain notes that sales picked up in late August and remained above plan through September. Retailers in upstate New York report that sales were sturdy in August but slowed a bit in September. A number of contacts note that the strong dollar has adversely affected sales, particularly in areas frequented by foreign shoppers. Still, retail inventories are generally said to be at satisfactory levels, and selling prices are reported to be generally steady.Auto dealers in upstate New York indicate that new vehicle sales have been steady to stronger since the last report. Buffalo-area dealers indicate that sales were little changed in August but picked up noticeably in September, while Rochester-area dealers describe volume as steady in both months. Used vehicle sales are reported to have strengthened somewhat. Wholesale and retail credit conditions continue to be described as in good shape.Tourism activity has shown further signs of weakening--particularly in New York City, where revenues at both hotels and Broadway theatres are reported to have slipped below comparable 2014 levels. Retail contacts also note particular weakness in tourism-related sales. Separately, the Conference Board's September survey shows consumer confidence in the region (NY, NJ, Pa), as well as in New York State, surging to a multi-year high.Construction and Real EstateThe District's housing markets have continued to strengthen modestly since the last report, while multi-family residential construction remains brisk. The home resale market in western New York State has been particularly strong across the board, with a combination of limited supply and strong demand driving up prices and making bidding wars commonplace. New York City's co-op and condo market has also been fairly robust, with sales volume fairly strong, despite low inventories; the average time properties are on the market is reported to be at record low, and many transactions have been above the initial listing price. Compared with a year ago, apartment sales prices are up substantially in Brooklyn and Queens, while they are up moderately in Manhattan. Across other parts of the District--Long Island, northern New Jersey, and the Lower Hudson Valley--home prices are generally stable or rising modestly.Residential rental markets generally remain on an upward trend. Rents are reported to be running moderately ahead of a year ago in Manhattan and Queens, and are up modestly across northern New Jersey and most of upstate New York. Residential rents are up more substantially across prime areas of Brooklyn.Commercial real estate markets across the District were mostly stronger. Office availability rates edged down throughout the District in the third quarter, while asking rents for office space rose substantially in New York City, Long Island, and across parts of upstate New York and more modestly in northern New Jersey and Westchester and Fairfield counties. The market for industrial space also continued to tighten. In contrast, vacancy rates for retail space climbed to multi-year highs across New York City, Long Island and northern New Jersey.Commercial construction activity has retreated somewhat but remains at a high level; however, considerably fewer new projects have been started in recent months. On the residential side, while single-family residential construction activity remains subdued, multi-family construction has been increasingly robust--particularly in New York City. One construction industry contact in New Jersey reports that new residential development has been particularly robust in areas adjacent to New York City.Other Business ActivityThe labor market has shown further signs of strengthening in recent weeks. Business contacts in most industries report they are adding workers, on net, and plan on doing so in the months ahead. One noteworthy exception is manufacturing, where more contacts say they have reduced than added to their workforce. Two major New York City employment agencies report that hiring activity has been particularly brisk for this time of year, while a major agency in upstate New York notes that hiring activity remains steady at a moderate pace. A growing number of job candidates are reported to be getting multiple offers, and this is putting more upward pressure on starting salaries--and not only for more skilled workers. Employment agencies note particularly strong demand for HR workers, especially for recruiters and benefits administrators. IT workers and truck drivers are reported to be in exceptionally short supply.Manufacturers report that selling prices are flat to declining modestly, while input prices remain generally stable. Service firms report stable selling prices but continued upward pressure on input prices as well as wages. Insofar as general business conditions go, service-sector firms continue to report modestly expanding activity, and most remain generally optimistic about the near-term outlook. In contrast, manufacturers report that business activity has weakened noticeably; contacts remain somewhat optimistic about the near-term outlook but less so than earlier in the year.Financial DevelopmentsSmall to medium sized banks in the District report increased demand for commercial mortgages but little change in demand for other types of loans. Demand for refinancing is reported to have weakened for the first time this year. Bankers report that credit standards were unchanged across all loan categories. Respondents report a decrease in spreads of loan rates over cost of funds across all loan categories, with the exception of consumer loans, for which bankers reported no change. The decrease in spreads was most prevalent for commercial mortgages. Finally, banks report an ongoing decrease in delinquency rates across all loan categories, except for consumer loans, where delinquency rates were reported to have leveled off.Return to topReturn to topThird District--PhiladelphiaAggregate business activity in the Third District continued to grow at a modest pace during the current Beige Book period. In addition, most contacts continued to report modest growth in hiring, although staffing firms reported stronger results. On balance, only slight increases were reported in wages and prices, including home prices. Moderate growth of economic activity is anticipated over the next six months. Across sectors, activity at staffing firms accelerated from a modest pace of growth during the prior period to strong growth during the current period. Lenders also reported moderate growth of loan volumes in contrast to more modest growth during the prior period. Nonauto retailers continued to report a moderate pace of sales growth. Sales at general services firms continued at a modest pace but appeared to have strengthened a bit and were nearing the more moderate growth that the broad sector typically reports. Commercial contractors, commercial leasing agents, and residential brokers continued to report modest growth. Auto dealers and tourism contacts also reported modest growth compared with very high levels of activity last year. Manufacturing continued to grow slightly. Homebuilders reported slight growth overall; flat for most, but stronger than before for a few.Manufacturing During the latest Beige Book period, more contacts indicated that general activity had declined; however, contacts reported little change in the slight growth of new orders and in shipments. Moreover, employment picked up a bit among manufacturers. Gains in activity appeared to be stronger among the makers of lumber and wood products, paper products, fabricated metal products, and instruments; activity appeared weaker among the makers of chemicals, primary metals, and electronics. Firms continued to cite concerns about the strong dollar; however, a contact at one firm noted that the firm was building inventories of commodity inputs while prices were low.Despite the weakness in general activity suggested by contacts, their expectations of growth during the next six months have remained the same since the last Beige Book report, if not slightly better. Firms also indicated higher expectations for future capital expenditures; however, plans for future hiring sagged a bit. Still, nearly three times more firms anticipate hiring workers than firms that expect to decrease employment.Retail Retail sales continued at a moderate pace. An improving economy and continued good weather were cited as factors. Convenience store owners reported continued strong results for August and the first-half of September. Area malls reported moderate growth overall, although apparel sales were somewhat flat. Contacts continued to express optimism for growth through 2016.Auto dealers continued to report modest sales growth into the fall but from high levels. New Jersey dealers reported record-high levels with moderate sales growth over the prior year. Pennsylvania dealers reported slight sales growth; they had reported record highs last period. Early reports for September suggested that sales may be reaching a plateau; dealers expressed some concern that inventory levels have thinned (in part due to recalls), which may limit sales growth through year-end. Overall, auto dealers remained optimistic for continued growth through 2016.FinanceThird District financial firms have reported moderate overall increases in total loan volumes since the previous Beige Book--an increase from the prior more modest rate. Commercial real estate activity, commercial and industrial lending, auto loans, and other consumer lending (excluding credit cards) were the segments with the strongest growth in volumes. Residential real estate lending volumes remained essentially flat for mortgages and refinancing loans. Banking contacts in most parts of the District described a steadily growing economy with little sign of inflation. Contacts remained optimistic for continued growth over the next six months.Real Estate and ConstructionOverall, Third District homebuilders have reported a slight improvement since the last Beige Book. A central Pennsylvania builder reported a pickup in traffic, a strong level of contract signings, and firm prices in August and September; sales were mixed between spec homes and contracts for delivery in 2016. Other builders in New Jersey and Pennsylvania noted ongoing softness. Builders did not cite any recent cost increases for materials; however, most continue to struggle with labor costs and securing timely delivery of subcontract work. Brokers in the major Third District housing markets continued to report modest growth of existing home sales. The relative lack of new home construction continues to buoy existing home sales. Year-over-year comparisons have begun to diminish, as 2014's sales began to strengthen near year-end. Inventory levels remain relatively unchanged at sufficiently high levels such that price increases are constrained and limited to select local markets.Nonresidential real estate contacts reported little change to the modest pace of growth in construction and leasing activity seen earlier. Activity remains focused on urban, upscale mixed-use developments and on industrial warehouse space. One contact noted that large firms with good credit are emerging early (as much as two years in advance of lease expirations) to discuss their future office space needs--a tactic not seen yet during the current economic expansion, and an indicator of concerns that supply will become constrained and rents will rise. Contacts remained optimistic for ongoing growth of both new construction and leasing activity throughout the District into 2016.Services Third District service-sector firms reported that overall activity continued to pick up after a summer swoon--still at a modest pace, but nearing the more moderate pace of growth that generally characterizes the broad service sector. Expectations for future growth remained strong, with more than four-fifths of the firms expecting growth. On balance, firms continued to add to payrolls; over the past period, firms reported more growth of part time, temporary, and contract positions than of full-time hires.Staffing firms throughout the Third District reported significantly stronger growth for temporary positions and permanent placements and across all sectors. Several firms reported their strongest levels of activity since the past recession began, with growth driven by firm expansions as well as replacement hires.Tourism activity continued at high levels for modest growth over the prior year. "Spectacular" weather, a later Labor Day weekend, and a papal visit contributed to increased visitors and spending in most of the Third District tourist destinations. The brief papal visit to Philadelphia shifted significant spending from Center City stores and restaurants to mountain and shore destinations, as the region's population made way for tourists from around the nation and around the world.Prices and WagesGeneral price levels have continued to rise slightly since the previous Beige Book period; however, reported increases appeared weaker than before. Roughly two-thirds of the contacts reported no significant change in the prices they pay for inputs and the prices received for their goods and services. Compared with last period, fewer nonmanufacturing contacts reported increases of prices paid, while relatively more reported decreases of prices received. In manufacturing, more contacts reported price decreases in both categories. On balance, manufacturers reported no change in prices paid and a decrease in prices received. Retail contacts reported little pressure to raise prices.Generally, contacts continued to report little change in wage pressures. However, several staffing contacts indicated difficulties recruiting for low-skill positions. Low wages and compensation were cited as one factor. Another factor is the undesirability of the fluctuating schedule associated with fulfillment centers where employees are only needed for a few days at a time. In other sectors, contacts continued to report some difficulties filling highly technical positions.Return to topReturn to topFourth District--ClevelandOn balance, the economy in the Fourth District expanded at a modest pace during the past six weeks. Factory output was stable. The housing market improved, with higher unit sales and prices. Nonresidential building contractors reported continued robust activity. Retailers and new-car dealerships saw higher sales on a year-over-year basis. The demand for business and consumer credit moved slowly higher. Exploration in the Marcellus and Utica Shales declined, whereas production remains at historic highs. Freight volume trended lower. Net gains in employment were seen in the construction sector, banking, and freight hauling. Staffing firms reported a pickup in the number of job openings and placements, mainly in manufacturing and financial services. Wage pressure was little mentioned other than in construction. Overall, input and finished-goods prices were steady.Manufacturing Demand for manufactured products was little changed over the period. Key factors tempering output include a strong dollar, the slowdown in the energy and agriculture sectors, softness in developing markets, and growing uncertainty about the domestic economy. That said, suppliers to the motor vehicle, aerospace, and construction industries continue to see strong demand. On balance, capacity utilization rates have contracted slightly. The steel industry continues to struggle against an array of headwinds such as the strength of the dollar, weak international demand for steel, and low demand from the domestic energy sector. Year-to-date auto production at District assembly plants through August increased about 1 percent compared to the prior years level. Despite the downside risks, a majority of our contacts are cautiously optimistic in their outlook for the remainder of 2015.Capital budgets were stable over the period. Spending was largely allocated for maintenance projects, new equipment, and to a lesser extent product development. Steel makers cut budgets to control costs and preserve cash. Automakers reported using overtime and adding shifts to meet demand increases instead of expanding plant capacity. Typically, raw material prices were flat or lower, while finished goods prices were stable. Steel prices continue to fall despite occasional signs that the downward trend might be slowing. A food producer commented that his industrys prices remained stable, notwithstanding declines in agricultural commodities. Payrolls held steady on net. New hires were primarily production workers and engineers.Real Estate and ConstructionYear-to-date sales through August of new and existing single-family homes rose 9.5 percent compared to those of the same time period in 2014. The average sales price increased by more than 4 percent. Homebuilders cited two downside risks, which they believe could threaten a relatively healthy housing market in the near term: a rise in interest rates and a shortage of skilled labor. Despite these risks, our contacts remain cautiously optimistic and expect new-home sales to continue along recent seasonal trends. New-home contracts remain concentrated in the move-up price point categories. Builders reported that new- home prices increased 5 percent on average over the year, citing larger building footprints and lower existing-home inventory as factors influencing the increase.Nonresidential contractors reported continued robust activity, with revenues rising above year-ago levels. A majority of our contacts saw an increase in the number of inquiries and backlogs over the period. Demand has been strong across multiple segments, particularly in commercial building, government-sponsored projects, and multifamily housing (including senior living and affordable). General contractors remain optimistic about potential growth in the near term. Several reported that they were able to increase their margins with little pushback. Others believe that a small interest rate increase would have little, if any, impact on the construction industry. Banks are more proactive in working with developers, but they are reluctant to finance spec projects.Capital spending by general contractors was mainly for capacity expansion and new equipment. Materials prices were stable during the past six weeks. For the remainder of 2015, builders anticipate that price increases will be limited to glass products. Construction payrolls expanded at a moderate pace over the period for field and office jobs. That said, the construction industry remains challenged by a labor shortage, including laborers, skilled craftsmen, and construction professionals. The end result is upward pressure on construction costs, including labor, and a reduction in the overall number of bids.Consumer SpendingRetailers reported that revenues from late July through early September were higher compared to those of the same time period a year ago. Revenue increases were driven in part by back-to-school sales and lower energy prices, including for gasoline. A majority of our contacts saw rising profit margins during the past couple of months. Active wear, products related to outdoor activities, household durables, and electronics were in highest demand. Revenues during the fourth quarter are expected to be on par or increase in the low to mid-single digits compared to those of the same time period a year ago. Vendor and shelf prices were stable, other than increases for poultry products and some moderation in beef prices. Capital spending was primarily for brick-and-mortar projects. Hiring is limited to new-store openings.Year-to-date sales of new motor vehicles through August showed a modest increase compared to those of a year ago. A strong consumer preference for SUVs and light trucks continued. One dealer association executive remarked that much of the driving force behind truck and SUV sales has been low fuel prices and affordable financing. Looking forward, dealers expect unit volumes will be on par with that of 2014. Year-to-date pre-owned vehicle sales are moderately higher compared to those of last year. Payrolls were fairly stable over the period, but dealers indicated that labor markets are tight, putting upward pressure on wages.BankingBankers reported a modest increase in demand for business credit, particularly for CRE loans. Several commented that some customers are proceeding more cautiously when using commercial credit products because of concerns about the strong dollar and weakening international demand. Consumer lending expanded modestly over the period, with activity concentrated in auto lending and home equity products. Back-to-school transactions were smaller than expected. Interest rates for business and consumer credit held steady. Contacts reported a moderate expansion in their residential mortgage business, an expansion which was biased toward new-home purchases. Little change was reported in delinquencies (already at low levels) and loan-application standards. Core deposit balances remain strong. Capital investment by banks was primarily for technology enhancements, including security, and acquisitions. Payrolls increased on net. A decline in the number of retail banking jobs at branches was offset by new hires in higher-skilled positions such as IT, risk management, and regulatory compliance.Energy The number of drilling rigs operating in the Marcellus and Utica Shales trended lower over the period and is currently almost 50 percent below its peak level in the fourth quarter of last year. Natural gas production remains at elevated levels. Wellhead prices for oil and natural gas continue to decline. Downward adjustments to capital budgets reflecting reductions in exploration and production programs have been completed. An industry executive reported that while midstream investment activities are continuing, weaker companies are increasingly cautious given the recent volatility of energy prices. Hiring within the oil and gas industry remains modest and tightly controlled; most is for replacement.Freight TransportationReports indicated that on net, freight volume contracted over the period. Declines were prevalent in metals and energy-related shipments. One contact said that investments made by railroads to accommodate the fracking industry might now lead to defaults. Another carrier noted that factory volumes remain lackluster. In contrast, volumes grew in the motor vehicle and construction industries. A pick-up in retail and agricultural products was also reported. The former is related to back-to-school sales and the upcoming holiday shopping season. A majority of our contacts see little change in volume along seasonal trends during the next few months. Prices for fuel and maintenance items were stable. Capital spending is mainly for replacing older equipment and maintenance projects. Some reports indicated that future capital expenditures may be curtailed because of the slowdown in the energy sector (coal as well as oil and gas). Payrolls increased slightly over the period. That said, two carriers reported that they are re-evaluating hiring plans because of the slowdown in demand.Return to topReturn to topFifth District--RichmondInformation gathered since the last Beige Book indicates that Fifth District economic growth moderated in recent weeks. Manufacturing activity was tepid, with mild growth in shipments and the volume of new orders. Retail sales growth slowed and activity at non-retail services firms varied. Consumer loan demand leveled off, while demand for commercial loans rose modestly. Real estate activity, both residential and commercial, grew at a moderate pace. Agribusiness revenue growth was modest and recent severe flooding damaged some crops. The demand for labor increased moderately. According to our most recent surveys, manufacturing employment rose slightly. In contrast, hiring slowed at non-retail service firms and declined at retail establishments. Average wage growth softened in the service sector, while manufacturing wages rose moderately and the average workweek shortened. Price increases slowed.ManufacturingManufacturing reports were mixed since the last report. On balance, producers noted mild growth in shipments and the volume of new orders. Furniture manufacturers reported increased sales. A door manufacturer in North Carolina reported that demand was steady, but not strong. A manufacturer in North Carolina reported differing conditions across business segments. He stated that the textile business was very weak, except in non-wovens and crafts. Another textile manufacturer and a chemical producer said their firms' exports had weakened significantly in recent weeks. A Virginia food manufacturer reported steady, but overall unchanged business conditions. According to our most recent survey, prices of raw materials and prices of finished goods rose, although at a slower pace than during the previous report.PortsExports softened year-over-year in recent weeks and imports strengthened, which port authorities attributed to the strong dollar. Inbound loaded container traffic grew rapidly since our last report, and departing vessels filled unused export space by removing stored empty containers from the ports. Apparel and footwear, appliances, furniture, and resins were among the strongest containerized imports. European demand for exports of farm and construction equipment declined. Additionally, Chinese restrictions reduced some grain and soybean exports. Exports of forest products, chemicals, and used cars slowed since our last report, while exports and imports of new vehicles rose.RetailRetail sales grew at a slower pace since the previous Beige Book. Department store managers reported stronger sales while grocery sales flattened. Sales growth improved according to several car and truck dealerships, but slowed unexpectedly at a large dealership near Washington, D.C. Sellers of construction materials reported sales growth. Retail prices rose modestly since the last report, and one retailer noted that prices had fallen on some items in his spring order.Services Activity at non-retail services firms was mixed in recent weeks. An executive at a national trucking firm headquartered in the District reported that demand was a little softer because their customers' inventory levels were high, but he expects a seasonal pick-up to begin in the next few weeks. Architects, construction site preparation specialists, and other construction-related firms reported better revenue growth. Demand for healthcare services was unchanged, remaining at high levels according to hospital administrators. Healthcare organizations reported higher supplier prices for pharmacy items. Prices received by services providers rose more slowly since the previous report.Tourism strengthened moderately in recent weeks. Hotels and restaurants in Virginia, West Virginia, and the Carolinas reported an increase in bookings since our last report. An executive on the outer banks of North Carolina reported that bookings were stronger year-over-year at hotels and rental properties, and that the outlook is for a busy Thanksgiving weekend. However, at a hotel located near a military base, an executive reported flat to slightly slower bookings as a result of fewer government stays. Room rates and rental rates were reported to be unchanged, except in Charleston and Greenville, South Carolina, where hotel rates rose.Finance Loan demand improved slightly, on balance, since our previous Beige Book. According to a lender in Virginia, residential mortgage demand slowed slightly over the last few weeks, but was on par with the same time period last year. A South Carolina banker characterized mortgage demand as slow but steady. However, commercial loan demand rose modestly. A lender in South Carolina reported an increase in demand for commercial and industrial real estate loans, particularly in the Charleston area. A North Carolina lender echoed that overall commercial real estate demand had risen, but added that increased competition from other banks made loan growth difficult to achieve. Several bankers in other areas also said that competition remained high, putting downward pressure on margins. Credit standards loosened slightly, according to contacts in Maryland, Virginia, and South Carolina. A Maryland lender added that the loosening also applied to land developers. Credit quality was reported as unchanged at strong levels in Virginia, North Carolina, and South Carolina. The Virginia banker noted that delinquency rates improved in the last few weeks. There were no reports of changes to interest rates since our last report.Real EstateResidential real estate activity grew at a moderate pace since the previous report. Average sale prices increased slowly, and new construction prices were reportedly rising faster than resale prices. Days on the market varied. Home inventories remained low. A source indicated that the residential real estate market in the Frederick County region of Maryland was generally strong, with steady buyer traffic and an increase since the previous report in transactions on homes below $400,000. A Richmond real estate agent said that buyer traffic was very good, although inventory remains low for the market overall. A broker in northern Virginia reported increased demand in higher-end homes, along with higher closing prices. Single-family construction increased modestly since the previous report, with multiple reports of a slight uptick in speculative building. A contact in the Hendersonville, North Carolina area stated that custom home building is booming, particularly for high-end homes. Multifamily leasing and construction activity remained strong.Commercial real estate activity increased moderately since the previous report. Rental rates rose slightly, while vacancy rates varied by submarket and region. A Realtor in Richmond, Virginia reported strong demand across all segments. A broker in Raleigh, North Carolina stated that office space is doing very well, with new businesses coming into the area. Office space tightened in Charlotte and speculative office construction rose. Short-term leasing of warehouse space spiked in the area of Columbia, South Carolina following record flooding there, with much of the space going to emergency assistance organizations that were bringing in supplies. A Realtor in Columbia, South Carolina described strong commercial development, particularly apartment construction. Another South Carolina agent reported solid retail, industrial, and office markets. He said rental rates increased in the office sector and flattened in the industrial sector. A real estate contact in Washington, D.C. reported "an explosion" of new restaurants and grocery stores. In contrast, Baltimore activity was reported to be flat. Commercial construction increased in Richmond, Charlotte, and Columbia, South Carolina, and was unchanged in other locations, according to sources.Agriculture and Natural Resources Agribusiness reported modest revenue growth in recent weeks. Corn harvesting was completed. However, farmers reported that dry conditions earlier in the season had result in low, and in some cases zero, corn crop yields. Cotton and peanut harvesting is underway. In early October, extended rainfall in South Carolina resulted in severe flooding in some areas. One peanut farmer said he expects much of his crop to be affected by mold as result of the flooding, and a sod farmer reported that he will have to replant a recently sown crop. Cotton prices were reported as decreasing since the last report. Farmers' input prices were unchanged.Natural gas production was flat overall since our previous report. Appalachian coal production remained stable in in the north, but continued to decline in the south. Coal prices were unchanged.LaborSince the last Beige Book, the demand for labor has increased moderately, especially for customer service workers, skilled tradespeople, technicians, healthcare practitioners, government employees, engineers, IT professionals, truck drivers, and manufacturing workers. However a couple of executives at healthcare systems said they were only filling vacated positions and were managing for productivity improvement with existing staffing. A few staffing services agents noted more direct hiring. A contact in South Carolina said that temp to perm hiring picked up, and employees were being converted at a quicker pace. Difficulties finding qualified workers remained a challenge districtwide, and some employers were willing to hire workers who lacked the requisite skills, but had a strong work ethic and were capable of learning. A Virginia staffing agent described conditions as a candidate's market' for qualified job-seekers. Reports on wages were varied. Wage pressures increased for workers in high demand, such as drivers, housekeepers, food servers, manufacturers, and construction workers. According to our most recent surveys, employment increased mildly in manufacturing, slowed at non-retail service firms, and declined at retail establishments. Wage increases slowed in the service sector, while manufacturing wages rose moderately and the average workweek shortened.Return to top Return to topSixth District--AtlantaSixth District business contacts described economic conditions as improving at a modest pace from mid-August through September. The outlook among firms remains largely optimistic with the majority of contacts expecting growth to be sustained at or slightly above current levels for the remainder of the year.Some retailers cited an improvement in sales growth, while others reported slower or no growth compared with a year ago. Automobile dealers continued to note strong sales. Hospitality contacts reported strong activity. Residential real estate contacts indicated that existing and new home sales and prices were slightly ahead of last year's levels. Commercial real estate contacts continued to note improving demand and construction activity was up from a year ago. Manufacturers indicated that overall activity slowed with new orders and production decreasing since the previous report. Banking contacts noted lending activity was mixed. Payrolls expanded slowly, and businesses continued to report challenges filling positions. Contacts indicated wages continued to grow at a slow, steady pace and input cost pressures were almost nonexistent.Consumer Spending and TourismDistrict retailers reported mixed activity from mid-August through September. Most contacts reported healthier sales growth compared with a year ago while others reported slow or no growth. Industry contacts expect activity to improve from current levels for the upcoming holiday season. Auto sales continued to experience robust sales activity.Reports on leisure and business travel remained positive. Tourism contacts in Georgia, Florida, and Louisiana reported a solid summer season with occupancy numbers and attendance at major conventions up from a year ago. Year-to-date Mississippi casino gaming revenues increased compared with the same period last year. Industry contacts expect business and leisure travel to exceed forecasts for the remainder of 2015 and many already report strong advanced bookings in the hotel and conference segments for the first quarter of 2016.Real Estate and ConstructionDistrict contacts indicated that residential real estate and construction activity continued to improve since the last report. The majority of homebuilders indicated that construction activity was up from the year-ago level and had met or exceeded their plan for the period. Most builders and brokers reported home sales were flat to up slightly and buyer traffic increased relative to one-year earlier. Three-fourths of builders noted that inventory levels were on par with last year; broker reports on inventory levels were mixed. Most real estate contacts indicated that they were experiencing modest home price appreciation in their markets. Business contacts' expectations for home sales and construction activity over the next three months remain positive, with the majority indicating that they expect activity to pick up slightly.Commercial real estate brokers indicated improvements in demand that resulted in increased absorption and rent growth across property types, but they continued to caution that the rate of improvement varied by metropolitan area, submarket, and property type. Most commercial contractors indicated that nonresidential construction activity was up from one year ago, with many also reporting a backlog greater than the previous year. Reports on apartment construction suggested that activity remained robust. The outlook among District commercial real estate contacts remains positive, with most expecting the pace of construction activity to increase slightly over the next quarter.Manufacturing and TransportationDistrict manufacturers indicated that business activity declined since the previous report. Contacts noted a decrease in new orders and production, while employment levels at District manufacturing firms were relatively unchanged. Finished inventory levels were reported to be slightly lower than the previous report. However, reports indicated that commodity input costs continued to decline. Optimism for future production fell, with less than one-quarter of businesses expecting higher production over the next three to six months.Transportation contacts cited mixed levels of activity from mid-August through September. Trucking companies reported healthy demand, which was mostly attributed to growth in e-commerce; meanwhile, flatbed volume, primarily steel shipments, showed some slowing in growth. District rail contacts indicated that total carload volume declined slightly due to year-over-year, double-digit decreases in shipments of coal, iron and steel scrap, and metals. District port contacts reported strong demand across all types of cargo.Banking and FinanceReports indicated that credit remained readily available for qualified borrowers. Competition for new commercial loan customers remained tight and some financial institutions were reported to be extending term amounts and maturities to attract customers. Small businesses indicated continued difficulty in obtaining financing and noted funding some expansion with cash. As mortgage refinancing activity slowed, purchase transactions made up a greater share of mortgage loans. Consumer lending activity was strong and bad debt on the consumer side was significantly reduced.Employment and PricesMany District companies continued to report adding to headcounts, albeit modestly. Hiring challenges persisted and intensified in some areas. Contacts also reported that labor market tightness was prompting some firms to implement training programs and referral or signing bonuses to address labor shortages. Contacts indicated that hiring and retention challenges were most prevalent among higher skilled occupations though firms also noted greater competition for lower skilled labor.Businesses continued to report negligible non-labor input cost pressures, although lower commodity prices and lower costs for imported goods aided in improving margins, and firms were generally able to hold prices steady. Wage growth remained in the 2 to 3 percent range for most job categories, with the exception of specialized positions in high demand, which continued to receive outsized increases. According to the Atlanta Fed's survey of business inflation expectations, year-over-year unit costs were up 1.3 percent in August, the lowest reading in two years. Survey respondents also indicated that they expect unit costs to rise 1.7 percent over the next 12 months.Natural Resources and AgricultureContinued weak global demand and an oversupply of oil drove exploration and production companies to further reduce capital investment and business activities that do not improve cash-flow. That said, contacts reported that liquid natural gas projects already in progress will continue on schedule. Refineries have been running near capacity with feedstock readily available at low costs. Deepwater drilling activity showed signs of slowing with a drop in rig counts. Utility contacts reported increased energy usage in both the residential and commercial sectors.Areas affected by drought conditions expanded in the District since the last report.
Click here to read full news..
