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October 18, 2017

The Beige Book
Summary of Commentary on Current Economic Conditions
By Federal Reserve District

October 2017

Federal Reserve Districts




New York


San Francisco
Kansas City

St. Louis



Alaska and Hawaii
are part of the
San Francisco District.

The System serves commonwealths and territories as follows: the New York Bank serves the Commonwealth of Puerto Rico and the U.S. Virgin
Islands; the San Francisco Bank serves American Samoa, Guam, and the Commonwealth of the Northern Mariana Islands.

National Summary


First District

New York


Second District



Third District



Fourth District



Fifth District



Sixth District



Seventh District

St. Louis


Eighth District


What is The Beige Book?
The Beige Book is a Federal Reserve System publication about current
economic conditions across the 12 Federal Reserve Districts. It characterizes regional economic conditions and prospects based on a variety
of mostly qualitative information, gathered directly from District
The qualitative nature of the Beige Book creates an opportunity to
characterize dynamics and identify emerging trends in the economy
that may not be readily apparent in the available economic data. Because this information is collected from a wide range of business and
community contacts through a variety of formal and informal methods,
the Beige Book can complement other forms of regional information

How is the information collected?
Each Federal Reserve Bank gathers anecdotal information on current
economic conditions in its District through reports from Bank and
Branch directors, plus phone and in-person interviews with and online
questionnaires completed by businesses, community contacts, economists, market experts, and other sources.

How is the information used?
The anecdotal information collected in the Beige Book supplements the
data and analysis used by Federal Reserve economists and staff to
assess economic conditions in the Federal Reserve Districts. This
information enables comparison of economic conditions in different
parts of the country, which can be helpful for assessing the outlook for
the national economy. The Beige Book also serves as a regular summary of the Federal Reserve System’s efforts to listen to businesses
and community organizations.


Ninth District

Kansas City


Tenth District



Eleventh District

San Francisco
Twelfth District


This report was prepared at the Federal Reserve Bank of Minneapolis
based on information collected on or before October 6, 2017. This
document summarizes comments received from contacts outside the
Federal Reserve System and is not a commentary on the views of
Federal Reserve officials.

National Summary
The Beige Book ■ October 2017

Overall Economic Activity
Reports from all 12 Federal Reserve Districts indicated that economic activity increased in September through early
October, with the pace of growth split between modest and moderate. The Richmond, Atlanta, and Dallas Districts
reported major disruptions from Hurricanes Harvey and Irma in some areas and sectors, including transportation, energy, and agriculture. Manufacturing activity and nonfinancial services expanded modestly to moderately in most Districts. Retail spending rose slowly, while vehicle sales and tourism increased in most Districts. Residential construction
continued to increase, and growth in commercial construction was up slightly on balance. Low home inventory levels
continued to constrain residential sales in many areas, while nonresidential real estate activity increased slightly overall. Loan demand was generally stable to modestly higher. Growth in the energy sector eased slightly. Agricultural
conditions were mixed; while some regions were reporting better-than-expected harvests, low commodity prices continued to weigh down farm incomes.

Employment and Wages
Employment growth was modest on balance, with most Districts reporting flat to moderate increases. Labor markets
were widely described as tight. Many Districts noted that employers were having difficulty finding qualified workers,
particularly in construction, transportation, skilled manufacturing, and some health care and service positions. These
shortages were also restraining business growth. Firms in several Districts reported that scarcity of labor, particularly
related to construction, would be exacerbated by hurricane recovery efforts. Despite widespread labor tightness, the
majority of Districts reported only modest to moderate wage pressures. However, some Districts reported stronger
wage pressures in certain sectors, including transportation and construction. Growing use of sign-on bonuses, overtime, and other nonwage efforts to attract and retain workers were also reported.

Price pressures remained modest since the previous report. Several Districts noted increased manufacturing input
costs, but in most cases these weren’t passed through to selling prices. Retail prices generally increased slightly.
Transportation, energy, and construction materials prices increased more rapidly, with some Districts citing effects from

Highlights by Federal Reserve District

New York

Economic activity expanded at a modest to moderate
pace since August, according to contacts. Respondents
in manufacturing, retailing, and software and IT services
said revenues continued to increase year over year.
Commercial and residential real estate market conditions
were mostly unchanged. Looking forward, business
contacts remained upbeat about the outlook.

The District’s economy has continued to expand at a
moderate pace since the last report, while labor markets
have been tight. Input prices continued to rise moderately, while selling prices rose more modestly. Housing
markets have strengthened somewhat, on balance, but
commercial real estate markets have been flat.


National Summary

St. Louis

Overall, economic activity continued at a modest pace of
growth. Most sectors, including manufacturing and nonfinancial services, continued to grow modestly. Non-auto
retail sales showed slight improvement, and auto sales
grew modestly after declining in the previous period. On
balance, employment changed little, while wages and
prices continued to grow modestly.

Economic conditions have continued to improve at a
modest pace since our previous report. The District
continues to see relatively stronger growth in both manufacturing and banking sectors, although growth in both
sectors has decelerated somewhat since the beginning
of the year.


Economic activity grew modestly. Despite employer
demand, job growth suffered from a lack of available
workers. Tourism saw growth, but consumer spending
overall showed some signs of weakness. Home construction rose, while home sales fell due to tight inventories. Commercial construction continued to lag. Manufacturing and mining activity picked up.


Business activity increased from that of the previous
reporting period, but the overall pace of growth was
moderate. After slowing during the summer months,
hiring picked up across industries. Input price pressures
outpaced selling price pressures. Retail store spending
was flat; auto sales rose. Nonresidential construction
remains healthy, but there are signs the industry may be

Kansas City
Economic activity in the Tenth District continued to expand modestly, and expectations for future growth were
positive in most sectors. Retail sales increased modestly, the manufacturing sector expanded moderately, and
transportation and wholesale trade firms noted strong
sales. However, growth in the energy sector eased, and
the agricultural sector continued to soften.

The economy expanded moderately. Manufacturing and
port activity picked up, retail sales rose, and tourism
remained strong. Commercial real estate leasing and
lending activity increased modestly. Labor markets
strengthened and wage pressures broadened. Prices
rose moderately, partially due to supply chain disruptions
from the hurricanes.

Economic activity grew moderately. The impact from
Hurricane Harvey varied by location and industry, and
most contacts do not expect significant long-term disruption. The manufacturing sector exhibited notable strength
with stronger output, increased hiring, and a pickup in
price inflation. Auto sales surged in response to the loss
of storm-damaged vehicles, and labor market shortages
persisted and may become more acute as hurricane
recovery continues.

Economic conditions improved modestly since the last
report. Tightness in the labor market continued with few
reports of wage pressures. Input cost pressures were
subdued. Non-auto retailers cited steady sales growth.
Tourism, energy, and agriculture were impacted by
Hurricane Irma. Home sales and prices increased. New
orders and production rose. Credit was available to most

San Francisco


Economic activity continued to expand at a moderate
pace. Overall price inflation was flat and remained low,
while upward wage pressures strengthened somewhat
and conditions in the labor market tightened further.
Sales of retail goods picked up, and growth in the consumer and business services sectors remained strong.
Conditions in the manufacturing sector improved. Activity
in the residential real estate market was strong.

Growth continued at a modest rate. Employment, business spending, and manufacturing increased modestly,
while consumer spending increased slightly. Construction and real estate activity was little changed, as were
financial sector conditions. Wages and prices rose modestly. Contacts expected the District’s corn and soybean
harvests to be close to trend.


Federal Reserve Bank of


The Beige Book ■ October 2017

Summary of Economic Activity
Most business contacts in the First District reported modest to moderate year-over-year revenue increases in recent
weeks. Both retailers and manufacturers cited sales and revenue improvements and most software and information
technology services firms reported strong results. Commercial real estate conditions in the region were reported to be
unchanged from the last report, with office leasing activity steady, albeit at different paces in individual markets. Residential real estate contacts also cited little change, with low inventories and rising home and condo prices. Most firms
said they were doing only modest net hiring, although some raised wages. Manufacturing firms mentioned price increases somewhat more often than in the recent past. Firms in the District retained a positive outlook.

Employment and Wages

Retail and Tourism

Most First District business contacts reported little
change in regional labor markets. Some retailers reported that they have raised their wage offers somewhat in
order to attract new hires. All manufacturing contacts
said that employment grew in line with expectations; in
most cases, that meant that employment did not grow by
much. A tech contact selling online backup solutions was
aggressively hiring. Other software and IT services
contacts were hiring in the low single-digit percentages;
all noted the labor market for technical positions remained tight globally, and particularly in New England.

All responding retailers reported that sales improved
over the last six weeks. Whereas previous reports sometimes cited flat or negative year-over-year results, contacts this round reported year-over-year comparablestore gains in the 2 percent to 4 percent range. Consumers reportedly spent on clothing, furniture, and home
improvement items. Contacts were generally optimistic
that the recent positive sales trend would continue
through the end of the year.
The most recent year-over-year results for the tourist
industry run through August: compared to 2016, international air travel to Boston increased 11 percent; in total,
domestic and international air travel to Boston rose 6.2
percent. Hotel occupancy rates for August were 1 percent higher in the Boston area than a year earlier, while
the average monthly room rate was up almost 3 percent
year-over-year. This strong performance alleviated some
previous concern that a slower trend in tourism during
the first half of the year would continue into the high
summer-fall travel season. A tourism contact noted that
hotels are facing increasing competition from alternative
lodging sources, which may partly account for a slight
drop in 2017 year-to-date occupancy rates. However,
this contact hypothesized that the options offered by non
-traditional lodging services may appeal to leisure

Contacts reported some price increases this round.
Retailers indicated that prices for goods remained
steady, though one contact in the hardware industry said
that paint prices had recently gone up 5 percent. Several
manufacturing contacts reported price increases. A
packaging firm recently raised prices 10 percent; they
also reported an 8 percent to 10 percent increase in
material costs over the year, although they said that
materials prices remained well below levels from a few
years ago. A chemical manufacturer said customers
accepted a price increase more easily than expected. A
manufacturer of frozen fish said it had reduced discounts.


Federal Reserve Bank of Boston
travelers who are more sensitive to price, and that a
traditionally expensive destination like Boston could see
an overall increase in tourism as a result.

momentum in Maine. Demand for industrial space remained strong throughout the District, resulting in increases in sales prices and rental rates compared with
last year and a modest amount of new construction
activity. Investment sales activity in Greater Boston
softened a bit amid a modest decline in foreign capital
flows, but prices for premier commercial properties in the
area reportedly held steady. Also in Greater Boston,
apartment construction slowed amid a perceived oversupply of luxury units. Modest increases in loan defaults
were reported for retail centers in Maine and for obsolete
office buildings in Connecticut.

Manufacturing and Related Services
Based on an unusually low number of respondents this
round, 60 percent of manufacturing firms reported higher
sales in line with expectations. One contact reported a
decline driven mostly by disruptions in its chemical business due to the hurricanes; specifically, a plant delivering a key input was destroyed by Hurricane Harvey and
the firm temporarily shifted its sourcing to costlier South
American sources. A toy manufacturer also reported
some hurricane-related problems related to plastic supply. Neither firm expected any long-term effects from the
Hurricane. A company that produces packaging used by
Internet retailers reported strong sales growth although
lower than in comparable periods in recent years. None
of our contacts reported any revisions to their capital
expenditure plans.

Contacts expected that commercial real estate activity
would at least hold steady moving forward. Some noted
downside risks related to potential further increases in
interest rates and to proposed federal tax changes.

Residential Real Estate
Heading into the fall, residential real estate markets in
the First District faced continuous upward pressure on
prices. (All six states and the Greater Boston area reported changes from August 2016 to August 2017.) For
single family homes, five out of the seven reporting
areas reported increases in closed sales, while Massachusetts and Boston experienced moderate decreases.
For condos, closed sales were up in New Hampshire
and Rhode Island; other reporting areas experienced no
change or decreases. Rising median sales prices were
reported throughout the First District. According to a
contact in Rhode Island, “Prices have been consistently
on the rise, hitting levels that we haven’t seen since

All responding firms reported a positive outlook with only
small revisions from previous rounds. A toy manufacturing contact said they were less optimistic than when they
last spoke to us, but still optimistic.

Software and Information Technology Services
Software and IT services respondents serving the
healthcare and health devices industries continued to
thrive in New England. A healthcare IT firm converted
strong demand for new browser-based offerings into 17
percent revenue growth year-over-year. Firms providing
IT for manufacturing and online backup experienced lowto mid-teen revenue growth year-over-year. Demand
from manufacturing and business customers continued
to firm in this quarter. An enterprise software contact
continued to struggle, with revenues down 5 percent
year-over-year; however, the contact maintained that
their market was healthy and demand was steady – their
struggles were largely internal.

Most areas are still struggling with inventory shortages.
Except for Connecticut, all areas reported decreases in
inventory for both single family homes and condos.
Contacts expressed different outlooks on inventory, with
those in Massachusetts concerned that shortages were
likely to continue.
Looking forward, contacts maintained a positive outlook
for substantial demand and stable economic indicators.
Respondents said they expected especially strong demand for fully renovated houses and for homes on the
lower end of the price spectrum.■

All contacts were optimistic about the future. The only
potentially negative factor was uncertainty surrounding
the health care landscape in Washington.

Commercial Real Estate
Commercial real estate contacts in the First District
reported that conditions were mostly unchanged since
late August. Office leasing activity was steady across the
District, but still at a very slow pace in Hartford and Portland and at a decent pace in Providence and Boston.
Medical office leasing and related construction gained

For more information about District economic conditions visit:


Federal Reserve Bank of

New York
The Beige Book ■ October 2017

Summary of Economic Activity
Economic activity in the Second District continued to expand at a moderate pace in the latest reporting period, and labor
markets have remained steady and tight. Input prices continued to increase moderately, while selling prices were up
only modestly. Manufacturers reported continued brisk growth in activity, and businesses engaged in wholesale trade
and information noted a pickup in activity since the last report. However, contacts in professional & business services
and health & education services generally characterized business activity as flat. Consumer spending was generally
steady since the last report, while consumer confidence edged up. Housing markets have been mixed but, on balance,
a bit stronger, though the high end of the market has been soft. Commercial real estate markets were mostly steady.
New residential construction activity has slowed further, while commercial construction has been steady to weaker.
Finally, banks reported a pickup in demand for home mortgage loans and lower delinquency rates across all loan categories.

Employment and Wages

latest reporting period. One noteworthy example has
been ticket prices at Broadway theaters, which have
been running about 12 percent ahead of comparable
2016 levels. On the other hand, prices of used vehicles
have softened, and some general merchandise retailers
have recently become more aggressive with price discounting and promotional activity. Education & health
firms reported moderate increases in prices received,
while contacts in other industries generally reported that
selling prices were steady.

The labor market has remained tight. One major employment agency in New York City and another in upstate
New York both described the job market as tight but
steady, with only modest upward pressure on wages in
most industries. Businesses continued to report difficulty
finding qualified workers.
Business contacts in manufacturing and in most servicesector industries reported that they have added jobs on
net, though to a modest degree. Similarly, hiring plans
for the months ahead are subdued but positive, on net.

Consumer Spending
Retail contacts reported that sales have been mixed but,
on balance, flat in recent weeks. Retailers in upstate
New York indicated that both traffic and sales activity
have been steady and little changed from a year earlier.
A general merchandise chain indicates that sales in the
District have picked up and were ahead of plan but still
down slightly from a year earlier. Retail inventories were
generally reported to be steady and at satisfactory levels.

Overall, wages have continued to rise at a modest pace,
though contacts in education & health, leisure & hospitality, and real estate report somewhat more widespread
wage hikes.

Businesses generally indicated that input prices continued to rise moderately, though contacts in retail, real
estate, and education & health noted more widespread

Auto sales, on the other hand, have remained solid.
Dealers in upstate New York reported that demand for
new vehicles was fairly robust in September and that
sales were up from a year earlier, led by strong leasing

Selling prices overall continued to rise modestly, though
contacts in the retail and leisure & hospitality industries
noted increasingly widespread price increases in the


Federal Reserve Bank of New York
activity. New auto sales across upstate have been near
record highs. Used vehicle sales have been steady to
modestly stronger. Vehicle inventories were said to be at
satisfactory levels. Retail and wholesale credit conditions
have remained favorable, according to dealers.

Rental markets have also been mixed. Rents in and
around New York City have been rising moderately for
smaller apartments but declining for larger and pricier
units. Landlord concessions have leveled off but remain
fairly widespread.

Consumer confidence in the Middle Atlantic states (NY,
NJ, PA), which was already at a fairly high level, edged
up further in September.

Commercial real estate markets have mostly remained
steady. The market for office space has softened further
in upstate New York, Long Island and Brooklyn but has
been steady to slightly stronger in Manhattan and northern New Jersey. Vacancy rates for industrial space,
which had been declining steadily in recent years, have
leveled off in and around New York City, though they
have continued to decline in upstate New York. Industrial
rents have continued to rise at a brisk pace throughout
the District.

Manufacturing and Distribution
Manufacturers reported continued brisk growth in business activity in recent weeks. Contacts in the wholesale
trade sector noted a pickup in growth, while those in the
transportation industry continued to report modest
growth. Looking ahead, manufacturers and wholesalers
remained broadly optimistic about the near-term outlook,
while transportation firms have grown considerably less

Single-family home construction has been sluggish—
particularly for low and mid-priced homes—and appears
to have tapered off somewhat since the last report. New
multi-family construction starts have picked up further in
northern New Jersey but have remained lackluster
across the rest of the District. Still, there continues to be
a good amount of ongoing multi-family construction in
progress throughout the District. Similarly, new commercial development—of both office and industrial space—
has strengthened further in northern New Jersey but has
been increasingly sluggish across the rest of the District.

Service-sector firms generally reported sluggish growth.
Contacts in both professional & business services and
education & health services noted that activity was flat,
on balance, while firms in the information and leisure &
hospitality industries noted a pickup in growth. Service
sector businesses remained mildly optimistic about the
near-term outlook, except in the professional & business
services industry, where contacts were considerably less
upbeat than in recent months.

Banking and Finance
Small to medium-sized banks in the District reported
higher demand for residential mortgages but no change
in demand for consumer loans, commercial mortgages,
or commercial & industrial loans. Bankers also reported
that refinancing activity decreased, on net. Contacts
reported tighter credit standards for commercial mortgages, and unchanged credit standards across all other
loan categories. Banks reported higher loan spreads
overall, largely reflecting higher spreads on commercial
mortgages. Respondents also reported an increase in
the average deposit rate. Bankers reported lower delinquency rates across all loan categories. ■

Broadway theaters reported that attendance and revenues were fairly strong through the first half of September but have tapered off in recent weeks, with attendance falling below comparable 2016 levels.

Real Estate and Construction
Housing markets across the District have been mixed
but, on balance, moderately stronger. Real estate contacts in upstate New York report that sales volume has
been hampered by a lack of inventory, while prices have
continued to climb, with homes often selling for above
the asking price. In the suburbs around New York City,
home sales volume has been strong and prices have
accelerated somewhat, though the high end of the market continues to lag, reflecting excess supply. New York
City’s condo and co-op market has strengthened modestly; home prices have continued to rise moderately in
Brooklyn and Queens but have risen only slightly in
Manhattan. Across the city, the high end has continued
to lag; sellers have become more negotiable and this
has boosted activity somewhat.

For more information about District economic conditions visit:


Federal Reserve Bank of

The Beige Book ■ October 2017

Summary of Economic Activity
Aggregate business activity in the Third District continued at a modest pace of growth during the current Beige Book
period. Manufacturing, nonfinancial services, new home sales, and tourism grew modestly; nonresidential construction
and leasing appeared to grow slightly; and nonauto retail sales and new home construction activity exhibited little
change. Auto sales, which had declined modestly in the prior period, showed modest growth in the current period. On
balance, wages and prices continued to grow at a modest pace, but employment flattened out. Overall, firms appear to
anticipate continued modest growth over the next six months, with a larger percentage of firms expecting growth.

Employment and Wages

increases in lumber costs. Overall, existing home prices
continued to edge up.

Employment changed little during the Beige Book period,
slowing from a modest pace of growth in the prior period.
Reports of net additions to staff were subdued for both
manufacturing and nonmanufacturing firms, and most
contacts reported no change in staff levels. Average
hours worked decreased over the period for manufacturing firms but held steady among nonmanufacturers.

On balance, manufacturing activity continued at a modest pace of growth and showed signs of improvement.
Higher percentages of firms reported increases in new
orders and shipments compared with the prior period.
Firms in most sectors continued to note gains in both
new orders and shipments, including makers of paper
products, chemicals, fabricated metal products, industrial
machinery, and electronic products.

On balance, wage growth held steady at a modest pace.
Staffing firms and other contacts generally reported
steady wage growth and tight labor markets in certain
areas and for certain occupations. One staffing firm
noted strong order activity and a need to act quickly to fill

Generally, manufacturing contacts continued to expect
growth over the next six months. The percentage of firms
expecting future increases for general activity rose, while
it held mostly steady for future increases in capital expenditures and employment.

On balance, prices continued to rise modestly. Among
manufacturing contacts, more firms reported increases,
particularly in input costs, during the current period than
the prior period; slightly fewer service-sector contacts
reported input cost increases. A majority of contacts
indicated no change in prices paid and received.

Consumer Spending
Nonauto retail contacts reported little change in sales, on
balance, similar to the prior Beige Book period. An outlets operator reported modest, but slowing, sales growth
in August and September, with strength in shoes and
jeans as well as housewares and furniture. Convenience
store contacts indicated a slight pickup in traffic and

Retailers and banking contacts generally noted no signs
of inflation, while homebuilders reported further


Federal Reserve Bank of Philadelphia
spending in September, which they attributed more to
favorable weather than to a shift in the sales trend.

Real Estate and Construction
Homebuilders generally reported little change during the
current period, similar to the previous period. The current
period covered weeks that are typically slow for traffic
and contract signings; some builders reported no real
pickup at the end of September following the expected
slow period.

Auto dealers throughout the region reported modest
increases in year-over-year sales this period, an improvement from the modest declines during the prior
period. New Jersey dealers indicated that the pickup in
sales was driven by incentives and wondered how manufacturers would alter incentives around a spike in demand following the recent hurricanes. Although sales
remained generally in line with the high levels seen in
2016, dealers continued to face difficulty sustaining

Brokers in most major Third District housing markets
continued to report modest growth of existing home
sales, but no increase of inventories. One broker noted
general slowing in pending sales and does not expect
the supply of homes to significantly increase for some

Tourism contacts generally indicated a continuation of
modest growth. Strong gains were reported from the
Poconos and shore locations in Delaware and New
Jersey. A New Jersey banking contact indicated that
activity remained strong through the end of September,
and the shore market had its best year in quite some
time. Atlantic City’s casino revenues were flat in August
relative to the previous year, propped up by Internet
gaming. A Philadelphia analyst noted stronger-thanexpected hotel demand but year-over-year decreases in
room rates because of fewer citywide conventions this
year compared with last year.

Nonresidential real estate contacts continued to report
slight growth in construction and leasing activity. Contractors reported that despite a slight softening over the
summer, overall, labor hours have picked up in September, suggesting more new construction activity. This year
has been the second most active year in the past five
years (behind 2016), and contacts expect activity to keep
up in 2018. ■

Nonfinancial Services
Service-sector firms continued to report modest growth
in general activity since the prior Beige Book period, and
new orders and sales strengthened further, on balance.
One large service-sector firm noted continued improvement in the payment performance of its customers.
Expectations about future growth remained elevated,
with nearly 60 percent of the firms anticipating increased

Financial Services
Financial firms reported modest growth of overall loan
volumes (excluding credit cards) — similar to the prior
Beige Book period. Loan volumes grew modestly in most
categories, including auto loans and other consumer
loans, while commercial real estate loans grew slightly.
Commercial and industrial loan volumes improved over
the period, posting modest growth following declines
over the prior Beige Book period. Credit card volumes —
which are highly seasonal — continued to grow at a
modest rate over the Beige Book period but outpaced
growth in the comparable year-ago period. In general,
banking contacts tended to describe economic growth as
slow and steady.

For more information about District economic conditions visit:


Federal Reserve Bank of

The Beige Book ■ October 2017

Summary of Economic Activity
Economic activity in the Fourth District expanded at a moderate pace since our last report. Labor markets expanded
broadly, with employers looking for low- and high-skilled workers. Wage pressures were felt primarily in the construction
and nonfinancial services industries. Upward pressure on prices paid increased across industry sectors; however, producers and service providers found it challenging to raise selling prices. Consumer spending at retail establishments
was little changed, while new motor vehicle sales strengthened. Manufacturing output grew at a modest pace overall,
but production at District motor vehicle assembly plants trended lower. Nonfinancial services and freight transport firms
saw moderate gains in activity. Year-to-date residential real estate sales stayed above year-ago levels. Base prices for
new homes rose. Activity in the commercial real estate market remained elevated.

Employment and Wages


The past two months saw a boost in hiring across all
reporting industries, with the strongest activity seen in
construction, banking, and nonfinancial services. Many
of our contacts reported creating new jobs during the
current cycle, and a majority said that they have replaced departed workers. Greatest demand was for highskilled workers, such as engineers and those in the
building trades, and for low-skilled workers. Demand for
the latter group was attributed to difficulties in retaining
employees. A building contractor reported that his firm
recently hired 15 newly graduated engineers and has
openings for 10 additional entry-level engineers, but the
firm has difficulty attracting qualified candidates. A chamber of commerce executive said that in order to avoid
employee turnover, firms are incentivizing workers with
bonuses and higher wages. This strategy has resulted in
narrowing the wage gap between low- and middle-wage
workers, drawing criticism from middle-wage workers.
Competitive market conditions were cited as the primary
factor for increasing wages, particularly in the construction and nonfinancial services sectors.

Upward pressure on prices paid increased moderately
across industry sectors since our last report. The share
of contacts who cited rising input prices is at its highest
level since early in the second quarter and was most
widespread in the manufacturing and construction sectors. Several manufacturers reported rising prices for
ferrous metals, increases which they attributed in part to
domestic trade policies. For the most part, these higher
input prices were passed through to the end user. Prices
for natural and synthetic fabrics used in apparel manufacturing remain at a relatively low level. Selling prices
rose slightly overall during the current cycle, and the
share of companies increasing prices for their products
or services was lower than in the first half of 2017. Several manufacturers and service providers reported that
close scrutiny by customers’ procurement officers combined with global competition is making it difficult for
them to raise their selling prices.

Consumer Spending
Retailers reported little change in consumer spending
during the period. Department store chains are seemingly performing better than their specialty counterparts.


Federal Reserve Bank of Cleveland
One department store chain cited increased demand,
which was qualified by citing an increase in traffic. A fast
food chain reported much better results because of the
introduction of new products and technology. An apparel
retailer believes the removal of the border-adjustment
tax proposal from the federal tax reform debate has
eliminated an element of uncertainty and risk to the retail
industry. Year-to-date unit sales through August of new
motor vehicles rose almost 3 percent compared to those
of a year ago. Auto dealers were concerned about above
-normal new-vehicle inventory, which they attributed to
an imbalance in supply and demand.

logs were relatively stable, although three contacts described their backlogs as very strong and higher than
projected. That said, contacts reported a downturn in
inquires beginning in the third quarter. One general
contractor observed that companies that do site work are
seeking jobs. As site preparation is the first phase of a
project, this situation is a leading indicator of a potential
slowdown in construction activity. Another builder said
that in his industry things just sometimes calm down
unexpectedly for no particular reason. Office vacancy
rates remain stable, and asking rents are slowly rising. A
strong increase was reported in selling prices for office
properties during the first half of 2017 compared to those
of a year ago, while selling prices of industrial properties
were stable. Apartment rental increases were moderate.

Activity in the manufacturing sector picked up from that
of the previous reporting period; however, the overall
pace of growth was modest. Several of our contacts
cited confidence in the economy on the part of customers as the primary contributor to a rise in new orders.
Other factors cited as contributing to the expansion in
output include a strong housing market and strengthening in the oil and gas and primary materials industries. A
few contacts reported an increase in orders for capital
goods. Demand for consumer packaged products remained below projections. Year-to-date production
through August at District auto assembly plants declined
about 18 percent when compared to that of the same
period a year earlier. Much of the decline can be attributed to retooling for three next-generation vehicles. The
pickup in spending for structures and product development that began in the second quarter has weakened.
However, contacts reported increased spending on IT
equipment and services. Many manufacturers remain
bullish in their outlook for the economy.

On balance, business lending grew slightly over the
period. Community bankers were more upbeat in their
assessment of credit markets than were their counterparts at large banks. A few large bankers reported that
loan demand is softening because of political uncertainty,
with customers taking a wait-and-see approach. Consumer lending was largely stable. Fixed-rate purchase
mortgages were in high demand, while credit card lending has softened, a situation one banker attributed to
seasonal factors. Bankers reported improving loan quality. Loan application standards were little changed other
than some easing in auto lending.

Nonfinancial Services
Freight volume generally increased beyond what can be
accounted for by seasonal factors. Two carriers described intermodal as very strong. Other contacts reported increased volume because of a surge in e-commerce
and an expansion in the oil and gas industry. There is
concern about the industry’s facing capacity constraints
by year’s end because of electronic logging device requirements and rebuilding from recent hurricanes.

Real Estate and Construction
Year-to-date unit sales through August of new and existing single-family homes increased almost 2 percent
compared to those of a year earlier. The average sales
price rose 5 percent. Demand for new homes is stable
across price points. Upward pressure on base prices is
increasing because of rising development costs and
rising prices for labor and materials. Builders are concerned that rising base prices may force some first-time
buyers out of the market. Year-to-date estimates of
single-family construction starts thru August are about 10
percent higher compared to those of a year earlier.

Professional and business services firms reported moderate gains in activity during the period. Strongest demand was seen by management consulting and IT services firms. A majority of our contacts reported that their
customers are bullish on the economy and as a result
are willing to invest more in technology. ■

Nonresidential construction activity remains at elevated
levels. Property development was broad based except
for retail, for which demand continued to be weak. Back-


Federal Reserve Bank of

The Beige Book ■ October 2017

Summary of Economic Activity
The Fifth District economy grew at a moderate pace since our previous report, with some respondents attributing increased activity to the recent hurricanes. Manufacturing firms continued to report moderate growth in new orders and
shipments. Ports and trucking companies saw robust growth in cargo movements, which was partially due to ships
being rerouted to district ports from areas affected by hurricanes. Retail sales picked up slightly, overall, including those
for building materials to support hurricane relief efforts. Tourism and travel activity remained strong. Commercial leasing
rose modestly, on balance. Loan demand picked up moderately in recent weeks, driven by commercial activity. Services
firms generally indicated moderate revenue growth. Labor demand strengthened moderately and wage pressures
broadened. Prices rose at a moderate pace. Supply chain disruptions drove some input prices higher.

commodity prices increased modestly for poultry, eggs,
wheat, and sugar in recent weeks and were expected to
rise further as a result of the recent hurricanes. A food
manufacturer also expressed concerns about future
price increases for plastic wrap. Prices continued to rise
for transportation services, construction materials, and
health insurance premiums. Coal and natural gas prices
rose moderately.

Employment and Wages
Labor demand continued to strengthen moderately in
recent weeks and labor markets remained tight. Although employment agencies reported a slight increase
in new job openings, that increase was lower than
expected going in to the fall recruiting season. They
continue to anticipate an increase in openings in coming months. Wage increases remained modest, but
more contacts noted increased wage pressures. Executives reported difficulty finding qualified machinists
and machine operators, engineers, construction workers and contractors, executive assistants, mechanics,
and nurses. Trucking companies continued to struggle
finding drivers, despite an increase in drivers’ wages
across the industry.

On balance, manufacturing firms reported moderate
growth in new orders and shipments in recent weeks.
Medical equipment producers and furniture manufacturers noted a recent pickup in new orders, while metal
manufacturers continued to see improved business
conditions. Additionally, a packaging manufacturer reported increased shipments with the opening of its new
fulfillment center. Contacts generally experienced slightly
longer vendor lead times. Expectations remained optimistic for the next six months, as producers anticipated
increases in new orders and shipments.

On balance, prices grew at a moderate pace since our
previous report. According to our most recent surveys,
manufacturing input prices increased moderately and
continued to grow at a faster pace than final goods
prices. Manufacturers said that supply chain disruptions from the recent hurricanes drove some raw materials prices higher, particularly for resins, lumber, and
petroleum-based products. Services firms indicated
that price growth decelerated slightly in recent weeks
but remained at a modest level, overall. Agriculture

Ports and Transportation
District ports continued to see robust growth in shipment
volumes in recent months and expected the strength to
persist in coming months. In August, one District port
reported its largest volume ever and another reported its


Federal Reserve Bank of Richmond
second-largest on record. Ports continued to see stronger growth in imports than in exports. District ports reported seeing increased traffic as incoming ships were rerouted from hurricane affected areas. Trucking companies also reported strong business conditions, easily
loading trucks to capacity. Firms noted that a portion of
the recent uptick was a result of the recent hurricanes,
as trucks brought relief shipments to affected areas.

mixed. Office and warehouse construction increased in
Raleigh and Charlotte, North Carolina and Charleston,
South Carolina, while in Washington, D.C., retail development slowed somewhat. Multifamily construction
continued at a steady pace in large urban markets but
was limited elsewhere.

Banking and Finance
Overall, loan demand rose moderately in recent weeks.
Reports on residential mortgage demand varied by location but was generally described as stable to increasing
modestly. On the commercial side, real estate loan demand strengthened moderately, with a notable uptick
reported in the greater Raleigh, North Carolina area.
Business lending improved slightly, on balance. Deposits
grew moderately as bankers reported growth in both
CDs and checking accounts. Short term interest rates
were reported as unchanged to up slightly. Competition
among banks remained aggressive with some reports of
extended term durations and non-recourse loans being
offered, which led to concerns about softening credit
standards. Credit quality remained stable at strong levels. Late payments and delinquency rates trended lower.

Retail, Travel, and Tourism
Retail sales rose slightly, overall, since our previous
report. Hardware and construction material providers
saw an increase in demand resulting from the hurricane,
which led to higher prices of hardware and lumber. An
auto dealer in North Carolina reported a slight increase
in sales and customer traffic but noted uncertainties
about how the hurricanes would affect the used vehicle
market. Meanwhile, a sporting goods company in West
Virginia said that sales continued to slow as some manufacturers opted to sell directly to customers.
The Fifth District saw strong tourism in recent months. A
West Virginia resort experienced bookings 12 percent to
15 percent above expectation. A Virginia outdoor adventure center credited strong business to early fall weather
and visiting school groups. Coastal North Carolina witnessed tourism above the seasonal norm, and some
businesses claimed it was the best season they have
ever had. Some hotels reported an influx of people due
to Hurricane Irma evacuations, but believed tourism
might be depressed in the near future as hurricane victims might be less likely to travel later this year.

Non-Financial Services
Services firms indicated moderate revenue growth,
according to our most recent surveys, and remained
optimistic for demand to improve further over the next six
months. The strongest reports came from construction
related services, including civil engineering, home repair,
maintenance, and contractor services. Telecommunication services, amusement facilities, and performing arts
studios also indicated a pickup in business in recent
weeks. A marketing firm in Virginia reported an extension to an existing contract but a lot of competition for
new business. Health care service providers were less
upbeat and one hospital system administrator expressed
concerns over rising insurance costs.

Real Estate and Construction
Residential real estate reports were more mixed compared to the previous report. Agents in Charlotte,
Durham, and Washington D.C. reported modest sales
growth, but elsewhere most brokers noted a modest
decline in home sales as inventory remained low, particularly in the $200,000 to $400,000 price range. Home
prices continued to rise modestly. Average days on the
market were unchanged since the previous report, most
contacts stated that homes were on the market for about
60 days. New home sales improved modestly in recent
weeks. A broker said that new home communities in
more desirable locations continued to have steady sales,
while most builders were keeping standing inventory low.

Agriculture and Natural Resources
Coal production was little changed in recent weeks while
natural gas production rose slightly. On the whole, agriculture conditions were unchanged as the growing season progressed; however, some farms in South Carolina
were flooded by Hurricane Irma. A hardwood producer
reported a moderate rise in export demand in the flooring
market while cabinetry demand softened somewhat. ■

Commercial real estate leasing rose modestly in recent
weeks, as brokers reported more demand in urban locations. Vacancy rates were unchanged from the previous
report, with most contacts noting steady, low rates
across markets. Rental rates were stable to increasing
modestly. Commercial construction accounts were

For more information about District economic conditions visit:


Federal Reserve Bank of

The Beige Book ■ October 2017

Summary of Economic Activity
Aside from hurricane effects, Sixth District business contacts described economic conditions as improving at a modest
pace from mid-August through September. The outlook among firms remained optimistic with the majority of contacts
expecting growth to be slightly above current levels for the remainder of the year. Most firms continued to cite labor
market tightness, but with few reports of wage pressures. Overall input cost pressures were muted. Most merchants
cited steady sales growth since the previous reporting period; however, automobile dealers continued to note softening
sales. Hospitality, energy, and agriculture contacts reported that activity was greatly affected by Hurricane Irma. Residential real estate contacts suggested that home sales and prices were slightly ahead of last year's levels. Manufacturers indicated that new orders and production increased. Bankers noted that credit continued to be available.

Employment and Wages


District business contacts reported that job growth was
steady since the previous report, though challenges
filling construction, information technology, finance,
transportation, and nursing positions persisted. Energy
sector contacts experienced ongoing difficulties filling
skilled craft positions. Firms continued to develop and
utilize internal and external training programs to help
produce qualified workers. Commercial and residential
construction industry contacts further indicated that labor
shortages were restraining growth. Businesses continued to engage in partnerships with the educational and
workforce development community to fill specific industry
or individual firms’ skill gaps. Broadly, businesses continued to use non-wage mechanisms to attract and retain
workers. While it is early to gauge the impact of Hurricanes Harvey and Irma on southeastern labor markets,
some contacts expect the hospitality, retail, and construction industries to be the most impacted, particularly
in Florida and Louisiana.

Firms reported that overall input costs were mostly flat.
Although there were reports of limited pricing power,
most businesses have been able to pass along commodity input cost increases. The Atlanta Fed’s Business
Inflation Expectations survey showed year-over-year unit
costs were up 1.7 percent in September. Survey respondents also remarked that they expect unit costs to
rise 1.9 percent over the next twelve months. Early reports from Florida construction contacts indicated that
costs, which were already rising, were expected to increase significantly due to hurricane rebuilding efforts.

Consumer Spending and Tourism
Overall, retail sales growth was unchanged since the last
report, although contacts in Florida reported an increase
in retail sales of building materials in preparation for and
following Hurricane Irma. Auto dealers continued to
report a slow-down in momentum of auto sales compared to a year ago, though some expect sales to increase from replacement activity due to the hurricanes.

Wage growth remained steady, with the exception of
continued wage pressures for some high-skilled positions and increased reports of rising wages in the construction industry. Business plans for future compensation, on balance, continued to be reported as modest for
the coming year.

Tourism in Florida was heavily impacted by Hurricane
Irma, although it is too soon to gauge the full extent of
the impact. Hotels and restaurants remained closed due
to power outages and downed trees for up to three
weeks on the west coast of Florida while the remainder
of the state was functional within a week. Reports from


Federal Reserve Bank of Atlanta
the Florida Keys indicated that some major hotels and
resorts may take up to six months to rebuild. Georgia
and Louisiana experienced an uptick in visitors displaced
from Florida. In spite of hurricane related set backs,
contacts from the tourism and hospitality sector remain
optimistic for the remainder of the year.

with the same period last year as shipments of grain,
farm products, petroleum and petroleum products, and
non-metallic minerals saw double-digit declines. Intermodal traffic, however, was up moderately. Trucking
contacts cited considerable increases in freight volume
month-over-month. While Hurricane Irma caused temporary disruptions for Florida transportation contacts, most
reported a return to normalcy within a week after the

Construction and Real Estate
Reports from residential real estate contacts in August
signaled modest growth prior to Hurricane Irma’s landfall. Builders said construction activity was slightly up
from the year-ago level. Many brokers and builders
indicated home sales were up slightly relative to the year
-ago level. The majority of contacts noted that buyer
traffic was flat to slightly down and inventory levels were
down from the year-ago level. Both builders and brokers
continued to report gains in home prices. Many builders
expect home sales to be flat over the next three months
relative to the same period last year, while the majority of
brokers anticipate slightly higher sales. Most builders
expect that construction activity will match or marginally
surpass the current pace over the next three months.

Banking and Finance
Credit remained readily available for most qualified borrowers, although some small and minority-owned businesses experienced difficulty obtaining credit. Liquidity
was plentiful, but competition restrained lending at some
banks. Auto dealer contacts described a slowdown in
auto lending due to slowing sales and rising interest
rates. Credit remained widely available to businesses
seeking operating and expansion capital.

Contacts indicated that inventories decreased as a result
of Hurricanes Harvey and Irma. Retail demand continued
to put pressure on supply to affected areas, particularly
those without pipeline access. Refineries resumed production a few days after the hurricane hit. Utility companies restored power within two weeks to areas affected
with the exception of significantly wind damaged locations in the Keys. Overall, contacts reported that utilities
continued to experience a decline in residential and
industrial sales and commercial sales remained flat.

Many commercial real estate contacts reported improvements in demand that resulted in rent growth, but cautioned that the rate of improvement varied by metropolitan area, submarket, and property type. The majority of
commercial contractors indicated that the pace of nonresidential construction activity had increased from one
year ago; most reported healthy backlogs. Several reports noted that the pace of multifamily construction
matched or exceeded the year-ago level. Commercial
construction contacts’ expectations for the pace of nonresidential construction were mixed, while their outlook
for the pace of multifamily construction leveled off. Florida contacts suggested that construction activity will
increase significantly due to hurricane rebuilding efforts.

Agriculture conditions across the District were mixed. Although damage assessments are still being made,
Irma’s heavy rains and high winds resulted in significant
damage to Florida’s agriculture industry as well as crop
damage in parts of Georgia and Alabama. Tennessee’s
corn harvest closely tracked the five-year average. The
District’s cotton harvest and the soybean harvests in
Mississippi and Tennessee were mostly on par with five
year averages. Both the Louisiana and Mississippi rice
harvests were ahead of their five-year averages. On a
year-over-year basis, prices paid to farmers in August
were up for corn, broilers, and eggs but were down for
cotton, rice, soybeans, and beef. ■

Manufacturing contacts indicated that the pace of overall
activity increased since the last report. Purchasing managers noted a rise in new orders and production levels,
as well as an increase in the pace of hiring. Supplier
delivery times were reported as getting longer and finished inventory levels increased somewhat. The overall
outlook was relatively unchanged from the previous
report, with close to half of firms surveyed expecting
higher production over the next six months.

Transportation firms reported varying levels of activity
since the previous report. Ports experienced continued
growth in container trade and roll-on/roll-off cargo. Railroads reported that total rail traffic was down compared

For more information about District economic conditions visit:


Federal Reserve Bank of

The Beige Book ■ October 2017

Summary of Economic Activity
Growth in economic activity in the Seventh District continued at a modest rate in late August and September, and contacts expected growth to continue at that pace over the next 6 to 12 months. Employment, business spending, and
manufacturing increased modestly, while consumer spending increased slightly. Construction and real estate activity
was little changed, as were financial sector conditions. Wages and prices rose modestly. Contacts expected the District’s corn and soybean harvests to be close to trend, but smaller than last year’s record.

Employment and Wages

reported increases in costs for raw materials and employee benefits. Transportation costs were also higher,
and one contact attributed some of the increase to elevated demand related to hurricanes Harvey and Irma.

Employment growth continued at a modest rate over the
reporting period, and contacts expected it to continue at
that pace over the next 6 to 12 months. Contacts continued to indicate that the labor market was tight and reported difficulty filling positions at all skill levels. A contact in the construction industry indicated that increased
demand in the southern US related to hurricanes Harvey
and Irma had forced them to rework their production
schedule due to a lack of workers. Across all industries,
hiring was primarily focused on professional and technical, sales, and production workers, with a notable
increase in the number of contacts looking to hire production workers. That said, a staffing firm that primarily
supplies manufacturers with production workers reported
little change in billable hours. Wage growth remained
modest overall. Contacts most often cited wage increases for professional and technical, sales, and production
workers, but there were also reports that growing demand for transportation services was pushing up wages
for truckers.

Consumer Spending
Consumer spending increased slightly over the reporting
period. Non-auto retail sales were mixed, with growth in
the personal services, food and beverage, and discount
segments balanced by declines at mainstream brick and
mortar stores. Retailers indicated that they expected
sales during the upcoming holiday season to be slightly
higher than last year. Light vehicle sales strengthened
somewhat, and the vehicle mix continued to shift from
cars to light trucks. The pace of used vehicle sales
slowed a bit.

Business Spending
Growth in business spending remained at modest pace
in late August and September. In general, retail inventories were at desired levels, though stocks remained high
for cars and low for light trucks, particularly crossovers.
Manufacturing inventories were at comfortable levels
overall, though steel service center inventories were
lower than historical norms. Growth in capital spending
remained at a modest rate, and contacts expected
growth to continue at that pace for the next 6 to 12

Prices again rose modestly overall in late August and
September. Retail prices were little changed for most
categories, though there continued to be reports of rising
prices for older used cars. A number of contacts again


Federal Reserve Bank of Chicago
months. Outlays were primarily for replacing industrial
and IT equipment and for renovating structures, though
there was an increase in the number of contacts reporting spending for expansion. Demand for residential,
commercial, and industrial electricity was flat.

Consumer loan demand increased slightly. Demand for
both home and auto loans picked up and quality remained good. That said, an auto dealer indicated that
credit continued to tighten for buyers of new cars with
low credit scores.

Construction and Real Estate


Construction and real estate activity was little changed
over the reporting period. Residential construction increased slightly, as greater demand for starter homes
led more builders to enter the market. There were reports that in some areas newly built starter homes were
receiving multiple offers and closing well above the
original asking price because of limited availability. Overall, home sales edged lower as tight inventories constrained sales in the low-end segment and weak demand
hurt sales in the high-end segment. Home prices were
up slightly overall, but growth varied by price level: prices
increased noticeably for homes under $250,000, modestly for homes between $250,000 and $500,000, and
were down slightly for homes over $500,000. Nonresidential construction edged lower across most market
segments. Commercial real estate activity remained
strong, and edged up further. Commercial rents increased slightly, vacancy rates moved lower, and the
availability of sublease space changed little.

Contacts expected both the corn and soybean harvests
to be close to trend but smaller than last year’s record.
On balance, crop conditions worsened in late August
and September as drought conditions spread in the
District. In addition, suboptimal weather conditions earlier in the year meant crops were less mature than normal
and that the harvest started later than usual. Corn prices
moved down (but were still higher than a year ago),
while soybean prices were little changed (and slightly
lower than a year ago). With the exception of eggs,
livestock and dairy prices were down as supplies stayed
plentiful. New hog processing plants in Iowa and Michigan were ramping up more slowly than planned because
labor was in short supply. Prospects for agriculture incomes declined overall during the reporting period. ■

Growth in manufacturing production generally continued
at a modest pace in late August and September. Growth
did pick up for some industries: Improved international
conditions led to solid gains for heavy machinery producers; hurricanes Harvey and Irma boosted sales of construction materials and RVs (FEMA trailers are modified
RVs); and heavy truck manufacturers and producers of
packing materials reported strong increases in demand.
Contacts in most other industries reported little change in
conditions. Activity in the auto sector was flat. Demand
for steel continued to grow slowly, though producers
expected that improved international demand and tight
inventories at service centers would soon lead to more
orders. Specialty metals manufacturers reported modest
increases overall, and highlighted improved demand
from the aerospace and defense sectors.

Banking and Finance
Financial conditions were little changed on balance over
the reporting period. Market participants noted that equity prices remained high and volatility remained low.
Business loan demand increased slightly, with growth
coming primarily from higher capital equipment and real
estate spending by the manufacturing and construction
sectors. Contacts again indicated that robust competition
was creating pressure to lower rates and loosen terms.

For more information about District economic conditions visit:


Federal Reserve Bank of

St. Louis
The Beige Book ■ October 2017

Summary of Economic Activity
Reports from contacts suggest economic conditions have continued to improve at a modest pace since our previous
report. Labor markets remain tight, with positions remaining unfilled; employment was little changed. Contacts report
moderate growth in wages, while broader price pressures remain modest. Reports on consumer spending improved
since our previous report, although reports from auto dealers remain mixed. The District continues to see relatively
stronger growth in both the manufacturing and banking sectors, although growth in both sectors has decelerated somewhat since the beginning of the year.

Employment and Wages

slightly, and a contact in Little Rock reported that wood
product prices continued to decrease modestly. Due to
low water levels, barge rates along the Mississippi and
Illinois rivers increased significantly.

Anecdotal evidence suggests little change in employment since the previous report. Contacts continued to
report difficulties finding experienced or qualified employees. A construction contact in Little Rock noted that high
levels of real estate activity have created a shortage of
skilled workers, and a transportation contact reported
that the shortage of truck drivers worsened. Several
contacts reported that potential employees’ lack of transportation to and from work has posed a challenge to

Energy prices increased moderately since the previous
report. In Illinois and Kentucky, coal prices rose modestly. In Arkansas, Mississippi, and Tennessee, Hurricane
Harvey caused relatively strong increases in gasoline
prices compared with national prices. Cotton, rice, soybean, and wheat prices increased moderately, while
sorghum prices were flat and corn prices decreased

Contacts have reported moderate growth in wages since
the previous report. A contact in Little Rock reported
increasing compensation as part of an effort to retain
staff, while another contact reported moderate increases
for both hourly and salaried employees throughout the

Consumer Spending
Reports from general retailers, auto dealers, and hoteliers indicate consumer spending has grown modestly
since our previous report. Although August’s real sales
tax collections decreased in Arkansas and Kentucky
relative to a year ago, they increased in Missouri and
Tennessee. Consumer confidence increased substantially in West Tennessee, as households indicated their
willingness to spend more in the next few months relative to a year ago. Reports from auto dealers were
mixed; although some dealers in the Memphis area
indicated strong sales, dealers in Little Rock noted slower foot traffic and are less optimistic that 2017 sales will

Price pressures have increased modestly since the
previous report. Residential real estate prices continued
to rise moderately throughout most of the District. Nonresidential real estate price pressures were mixed: A
contact in Little Rock reported a decrease in industrial
rents, while a contact in Memphis reported an increase.
Construction costs declined slightly. Steel prices fell


Federal Reserve Bank of St. Louis
exceed last year’s. Hospitality contacts in Missouri and
Tennessee indicated that business activity has increased
and exceeded expectations since our previous report.

Commercial real estate activity was unchanged from the
previous report. Contacts largely indicated that demand
remained steady for most property types. A central Arkansas banker reported strong demand for commercial
real estate loans.

Manufacturing activity has increased moderately since
our previous report. Manufacturing production, inventories, and employment growth were all stronger than one
month earlier in both Arkansas and Missouri. However,
new manufacturing orders grew at a slower rate in both

Commercial construction activity was mixed. August
nonresidential construction starts dropped slightly within
the District relative to the previous month, and multifamily permits were below levels from a year ago. However,
local contacts generally reported a robust level of new
multifamily construction underway or being planned, and
several Memphis contractors continued to report optimism regarding future projects.

Contacts in several industries across the District reported increased sales, including industrial pipe manufacturing and plastic manufacturing. However, a contact in the
plastic product manufacturing industry noted a drop in
requests for quotes from new customers. A contact in
the wood product manufacturing industry reported that
production has outpaced demand.

Banking and Finance
Lending activity in the Eighth District improved moderately. According to a survey of 84 small and mid-sized
District banks, outstanding loan volumes grew by 8
percent relative to year-ago levels. Loan growth in the
District has been gradually slowing since the start of
2017, but it continues to exceed the national rate. Commercial and industrial loan growth has stabilized at 9
percent after decelerating through the first half of 2017.
Meanwhile, consumer and commercial real estate lending grew the fastest among all loan categories, rising by
11 and 10 percent, respectively.

Nonfinancial Services
The nonfinancial services sector has expanded at a
modest pace since the previous report. Firms that provide transportation and logistics services are reporting
plans to increase employment and renovate existing
structures. Demand for commercial trucking from firms
headquartered in the District is up from Hurricane Harvey relief efforts and expected to remain elevated during
rebuilding efforts. Several firms that provide professional
business and information services are reporting plans to
expand and increase employment. Reports from
healthcare firms remain mixed. Employers continue to
streamline operations in an uncertain environment, with
one major employer shifting jobs from low-profit to highprofit areas.

Agriculture and Natural Resources
District agriculture conditions improved modestly from
the previous reporting period. Reports from farmers
indicated that they have been impressed by their harvest
numbers so far. Production and yield forecasts improved
from August to September for corn, cotton, and soybeans. For rice expected yields ticked up from August to
September, while expected production ticked down after
downward revisions to rice acreage estimates. Relative
to 2016, District cotton and soybean production levels
were projected to be higher, while those for corn and rice
were projected to be lower.

Real Estate and Construction
There was little change in residential real estate activity
since the previous report. Seasonally adjusted home
sales for August ticked up slightly relative to the previous
month across the District’s four major MSAs, and year-to
-date sales remained in line with those from a year ago.
Local real estate contacts continued to report that significant shortages in inventory have hindered sales, particularly for median-priced housing.

Natural resource extraction declined slightly from July to
August, with seasonally adjusted coal production declining 3 percent. However, August production was 10 percent above the level from one year ago. ■

Residential construction activity improved slightly. August permit activity within District MSAs increased modestly relative to the previous month. Local contacts reported that lot scarcity and a shortage of labor continue
to limit new construction.

For more information about District economic conditions, visit:


Federal Reserve Bank of

The Beige Book ■ October 2017

Summary of Economic Activity
The Ninth District economy grew modestly since the last report. Employment fell since the last report, but hiring demand
remained strong, held back by tight labor markets. Wage pressures were moderate, while price pressures were modest
overall. The District economy showed growth in services, manufacturing, commercial real estate, residential construction, and energy. Consumer spending saw only slight growth, and commercial construction was flat; agriculture improved, but remained weak overall, and residential real estate slowed.

Employment and Wages

Wages rose moderately since the last report, with some
mixed signals, but overall showing signs of
strengthening. A staffing contact said one client has
raised starting wages three times since June. A South
Dakota construction contact estimated wage increases
of 3 percent to 5 percent over last year and expected
similar increases in the coming year. A Minnesota labor
union source in the services industry reported increases
of 3 percent “in most of our units.” In a survey by the
Minneapolis Fed, 40 percent of South Dakota retailers
reported wages rising between 1 percent and 3 percent
over the past year, but with equal percentages above
and below those levels. Said a Minnesota workforce
contact, “I get very mixed signals. I hear that wages are
going up, but when I press, I still see a lot of wage
increases in the 2 percent to 3 percent range.”

Employment fell since the last report, but hiring demand
remained strong, held back by tight labor markets.
Seasonally adjusted August employment levels fell
across the District, continuing an up-and-down pattern in
recent months. However, a staffing contact in
southeastern Minnesota said hiring “is still robust. I have
no issue getting clients. If I had 100 people, I could put
them all to work.” A Minnesota labor contact said worker
demand in hospitality was “stronger than usual going into
the winter season” for both union and nonunion
businesses. A large Minnesota entertainment and
hospitality firm said it had 150 job openings on a steady
basis at two locations. A Montana source said booth
registrations at recent career fairs were up 7 percent,
“indicating more employers are looking to hire.” Two
September business conditions indexes showed strong
hiring sentiment in Minnesota and North Dakota, but
some softness in South Dakota. In Montana, the number
of job seekers visiting state workforce centers in
September fell compared with August figures, while the
number of open job positions grew. A September survey
of South Dakota retailers by the Minneapolis Fed found
that more than half were hiring, but most often to fill
turnover. Contacts in hospitality and construction also
noted an increase in overtime for workers.

Price pressures remained modest since the last report.
After spiking in late August, retail fuel prices in District
states decreased over the following month, but remained
slightly higher than the previous reporting period. A
survey of Minneapolis-St. Paul home builders indicated
increased price expectations for building materials and
land. Prices received by farmers for corn, wheat, hay,
milk, hogs, and eggs increased in August compared with
a year earlier; prices for soybeans, cattle, chickens, and
turkeys decreased.


Federal Reserve Bank of Minneapolis
Consumer Spending

Limited September data on residential construction
showed activity was higher in Minneapolis-St. Paul and
Billings compared with a year ago, but slightly lower in
Sioux Falls. August permitting was generally flat to lower
across the District compared with a year ago, with the
notable exception of Minneapolis-St. Paul.

Consumer spending rose slightly overall since the last
report. Automotive sales were reportedly solid, and a
Minnesota dealer announced a major expansion of
dealerships in Minneapolis-St. Paul and nearby
Wisconsin markets. Despite recent closures, especially
among legacy retailers, new retail stores continued to
open. Tourism also saw growth. Among the 14 national
parks in District states with significant summer
attendance, total August visitors were up 8 percent over
a year earlier, to more than 3 million—the third
consecutive month of a visitor increase of at least 5
percent. August hotel demand in Minnesota increased by
1 percent from a year earlier, with Rochester and
Minneapolis-St. Paul growing by 4 percent and 2
percent, respectively.

Commercial real estate grew modestly since the last
report. In Minneapolis-St. Paul, office vacancies have
risen slightly, while retail vacancies fell slightly after
rising in previous quarters. Most metros continue to see
multifamily development in light of low vacancy rates.
Minneapolis-St. Paul maintained one of the tightest
vacancy rates in the nation despite 5,000 units coming
online in the past 12 months. Residential real estate
slowed, with closed sales lower across the District.
Thanks to low inventories, median prices were
universally higher, including a 14 percent year-over-year
increase in Bozeman, Mont. A contact there said real
estate agents “are not seeing any slowdown in buying.
They feel it’s only a matter of time before the markets
slow, simply because of the lack of available inventory.

However, there were some signs of softness. A
September survey of North Dakota and South Dakota
retailers by the Minneapolis Fed showed generally softer
sales over the previous two months compared with the
same period a year earlier. Gross sales were softer this
summer in Wisconsin and South Dakota compared with
last year, and the total August handle at South Dakota
casinos fell by about 3 percent.

District manufacturing activity increased moderately
since the last report. An index of manufacturing
conditions produced by Creighton University indicated
increased activity in September compared with a month
earlier in Minnesota and North Dakota; the index for
South Dakota indicated a slight decrease in activity.
Several firms noted an increase in demand for
equipment related to oil and gas extraction. A lubrication
equipment producer reported an increase in orders from
the military. A producer of hydraulic cylinders said sales
were up over last year and current orders were solid.

Activity in the professional services industry increased
moderately since the last report. A biotech firm broke
ground on a large research facility in Minnesota. A
consultant noted a growing backlog of work related to
merger and acquisition activity in the second half of the
year. Freight rail contacts reported that shipments had
grown slightly but consistently during this year. August
shipments from Great Lakes ports increased from a year
earlier; iron ore shipments increased 10 percent.

Agriculture, Energy, and Natural Resources

Construction and Real Estate

District agricultural conditions improved slightly since the
previous report, but remained weak overall. Though
drought conditions eased, large areas of Montana and
the Dakotas remained exceptionally dry, and much of the
damage to crops had already been done. Early
indications were that the wheat harvest might be better
than expected in these areas, but still well below
average. Areas not affected by drought were generally
expecting good yields, but saw harvests delayed by
rains. Activity in the energy and mining sectors increased
slightly since the last report. District oil and gas
exploration as of late-September was roughly
unchanged from a month earlier. Output at District iron
ore mines was up substantially from a year earlier. ■

Commercial construction was flat since the last report.
An industry database of construction spending showed
no growth over the latter half of summer compared with
a year earlier. Industry tracking of new construction
projects showed lower levels over the most recent sixweek period (end of September) compared with a year
earlier. A South Dakota contact said construction there
was “a little slower” compared with last year, especially
outside of metro areas. Limited figures on commercial
construction permits in September showed activity was
higher in Sioux Falls, S.D., but considerably lower in
Billings, Mont. August permit figures were mixed.
Residential construction was up modestly overall.


Federal Reserve Bank of

Kansas City
The Beige Book ■ October 2017

Summary of Economic Activity
Economic activity in the Tenth District continued to increase at a modest pace in September, and contacts in most sectors expected gains in the coming months. Retail, restaurant, and tourism activity picked up since the last survey, but
auto sales fell modestly. The manufacturing sector continued to increase moderately, and capital spending plans were
positive. Contacts in the transportation and wholesale trade sectors noted a strong increase in sales, while professional
and high-tech firms reported a modest rise in overall activity. Residential real estate activity was mostly flat, with steady
home sales and construction activity. The Tenth District’s commercial real estate sector continued to expand modestly.
Banking respondents reported steady overall loan demand, unchanged loan quality and credit standards, and stable
deposit levels. Growth in energy activity in the Tenth District eased since the last survey period, and abundant supply in
the natural gas sector continued to weigh on prices and profitability. The agricultural sector continued to soften in the
District since the last survey.

Employment and Wages

and expectations were for steady selling prices moving
forward. Transportation input prices were up strongly,
and transportation selling prices edged up. Prices in the
construction sector rose moderately, with continued
moderate increases anticipated in the coming months.
Manufacturers reported modest rises in prices for finished goods, while raw material costs continued to edge
higher. Manufacturers expected moderate growth in both
finished goods and raw material prices in the next few

District employment and employee hours continued to
rise at a slight pace in September, and contacts expected additional improvement in the months ahead.
Respondents in the manufacturing, energy, wholesale
trade, professional services, real estate, health services
and restaurant sectors noted an increase in both employment and employee hours compared to the previous
survey period, while respondents in the retail trade, auto
sales, and tourism and hospitality sectors noted a decrease. Expectations for employment remained positive
in all sectors except the auto sales and tourism sectors.
The majority of respondents noted it was difficult to find
qualified workers, and several contacts noted a shortage
of commercial drivers, salespeople, and services workers.

Consumer Spending
Overall consumer spending activity was mixed as retail
sales, restaurant sales, and tourism activity increased,
while auto sales fell further. Consumer spending was
expected to increase slightly in the months ahead. Retail
sales improved modestly in September and were similar
to year-ago levels. Several retailers noted an increase in
sales for upholstery and furniture items, while luxury
products sold poorly. Contacts in the retail sector anticipated sales to rise moderately in the next few months,
and inventory levels were expected to increase slightly.
Auto sales continued to fall at a moderate pace and were
below year-ago levels. Dealer contacts anticipated a
further modest slowdown in sales moving forward, and
auto inventories were expected to rise slightly. Restaurant sales increased slightly since the last survey, and

Wages rose modestly in most sectors, and moderate
wage growth was anticipated in the coming months.

Input prices rose modestly in most sectors compared to
the previous survey period, while selling prices were
either flat or slightly higher. In the retail sector, both input
and selling prices increased slightly, but at a slower pace
than in the prior survey. Restaurant contacts reported
modest rises in input prices and steady selling prices,


Federal Reserve Bank of Kansas City
were well above year-ago levels. District tourism activity
increased slightly, but remained lower than a year ago.
Tourism contacts expected activity to improve further this

Bankers reported steady overall loan demand since the
previous survey, with a majority of respondents indicating stable demand for commercial and industrial, commercial real estate, residential real estate and consumer
installment loans. Most bankers reported that loan quality was unchanged compared to a year ago, and expected loan quality to remain essentially the same over
the next six months. Credit standards also remained
largely unchanged in all major loan categories. Finally, a
majority of respondents reported stable deposit levels.

Manufacturing and Other Business Activity
Manufacturing activity continued to expand at a moderate pace in September, and the majority of other business contacts reported moderate sales increases. Manufacturers reported sustained moderate growth in production and shipments, particularly for chemicals, plastics,
and machinery products. New orders and order backlogs
grew at a modest pace, and activity was considerably
higher than a year ago. Manufacturers’ capital spending
plans remained favorable, and firms were increasingly
optimistic about future activity.

Growth in Tenth District energy activity eased since the
last survey period, while expectations for future activity
remained solid. The number of active oil and gas drilling
rigs was little changed across the District, and contacts
expected them to stay near current levels in the coming
months. Respondents projected a modest increase in
future oil prices and hence higher profits over the next
six months. The abundant supply of natural gas was
expected to keep weighing on prices and profitability in
that sector. Firms surveyed expected Hurricane Harvey
to have low to medium impacts on the oil and gas industry. Contacts, on average, estimated the effects on offshore production, trade, and refineries to last five, six
and nine weeks, respectively, from the start of Harvey.

Outside of manufacturing, transportation and wholesale
trade firms reported strong sales increases, while professional and high tech firms noted a more modest rise in
activity. All firms expected sales to rise considerably in
the next six months. Professional, high-tech, and wholesale trade firms reported strong capital spending plans,
while transportation firms anticipated a slight decrease in
capital expenditures heading forward.

Real Estate and Construction
District real estate activity continued to rise at a slight
pace as residential real estate conditions were flat and
commercial real estate activity expanded modestly.
Residential home sales were steady since the previous
survey, and were moderately above year-ago levels.
Sales of low- and medium-priced homes continued to
outpace sales of higher-priced homes. Residential home
prices increased modestly, while residential inventories
decreased. Residential construction activity was flat, with
no change in sales of construction supplies, new home
starts, and traffic of potential home buyers. Activity in the
commercial real estate sector continued to expand at a
modest pace, as absorption, completions, construction
underway, sales, and prices rose, while vacancy rates
declined. Commercial real estate activity was expected
to continue to increase at a modest pace in the coming

The District farm economy continued to soften, but
showed some signs of stabilization since the previous
reporting period. Farm income in the District was lower
than a year ago, but some agricultural commodity prices
rebounded slightly. Soybean prices increased modestly
from the previous reporting period, and yield expectations remained strong. Wheat prices remained flat, but
were higher than a year ago. Corn prices declined slightly amid strong production expectations, but District contacts expected strong crop yields to offset some weakness in prices. Cattle and hog prices declined slightly
from the previous reporting period, but also remained
higher than a year ago. Farmland values declined modestly in some regions, but generally remained steady in
areas with strong crop production. ■

For more information about District economic conditions visit:


Federal Reserve Bank of


The Beige Book ■ October 2017

Summary of Economic Activity
The Eleventh District economy continued to expand at a moderate pace over the past six weeks, and most contacts do
not expect significant long-term disruption due to Hurricane Harvey. Manufacturing output strengthened, and activity in
nonfinancial services increased. Retail sales growth continued to accelerate, with a surge in auto sales to replace vehicles damaged by the hurricane. Homes sales weakened during the reporting period and prices were flat. Growth in the
financial services and energy sectors continued but at a slower pace, and crop conditions remained mostly favorable.
Employment, wages and prices increased, particularly in manufacturing. Outlooks remained positive overall.

Employment and Wages

Some builders were offering discounts and/or incentives
to entice buyers, particularly on inventory homes. Gasoline and diesel prices rose over the reporting period, as
did oil prices.

Overall employment rose, and upward wage pressure
persisted. Hiring picked up in manufacturing, continued
at about the same modest pace in services, and abated
slightly in the energy sector. Reports of labor shortages
persisted, spanning most industries. Some manufacturers said the difficulty finding workers was impeding their
growth, and some services firms said it was driving up
overtime costs. More than a quarter of firms expect that
the impact of Hurricane Harvey will make finding and
hiring workers more difficult over the next six months. In
construction, builders were concerned that once posthurricane repair and rebuilding work begins, there likely
will be skilled-worker shortages and increases in labor
costs. Other contacts noted that they also pull from a
labor pool that is likely to be in higher demand in the
aftermath of the storm.

Robust expansion in the manufacturing sector continued,
despite some disruption among Texas Gulf Coast producers in the wake of Hurricane Harvey. Output growth
picked up further for durable goods in September, led by
increases in computer and electronic product manufacturing. Fabricated metals production rebounded, and
output among energy-related firms overall continued to
exhibit strength. Meanwhile, nondurable goods production slowed. A majority of chemical producers noted
production held steady or declined over the reporting
period, with a number of executives saying Hurricane
Harvey had a negative impact on logistics like transportation and availability of raw materials. Refinery capacity
hampered by the storm was ramping back up quickly,
with little damage to infrastructure. While it may take
some time for supply chains to recover, the storm’s
impact on the refining and petrochemical industry are
projected to be transitory. For Texas manufacturing
overall, outlooks were positive and more optimistic than
during the prior reporting period.

Selling prices increased at the same or faster pace over
the past six weeks, and contacts noted upward pressure
on input costs. Prices and costs rose at a faster clip in
the manufacturing and energy sectors, while upward
pressure was largely unchanged on the services side.
New home prices were mostly flat, but there is continued
pushback from buyers on pricing at the higher end.


Federal Reserve Bank of Dallas
Retail Sales

family homes was reported to be much more extensive
compared with other property types. Contacts expect
new home starts and closings in Houston to be behind
schedule for the remainder of the year.

Retail sales growth continued to accelerate despite
Hurricane Harvey, according to firms surveyed three
weeks after the storm. Nearly two-thirds of stores along
the Texas Gulf Coast said they were negatively impacted
by the hurricane, and on average those stores were shut
down for about four days and experienced a reduction in
revenue for about 10 days. Auto sales surged, partly due
to increased demand for replacement vehicles after the
storm. An auto dealer in Houston said sales were incredibly strong, noting that several hundred thousand vehicles had been flooded, and another dealer expects elevated demand to last about six months. For the broader
retail sector in Houston, rebuilding efforts were fueling a
rise in retail sales and demand for warehouses in the
area from building supply companies. Outlooks for business in general were quite positive, an improvement
from the mixed outlooks during the prior reporting period.

Apartment demand was generally disappointing in the
third quarter, following a solid second quarter. Rent
growth slowed and was below average in some large
metros. In Houston, however, apartment leasing activity
picked up, occupancy rose and rent concessions have
diminished following Hurricane Harvey. The office market was generally characterized as solid in DFW and
San Antonio, but still weak in Houston.

Financial Services
Loan demand continued to increase over the past six
weeks, albeit at a more sluggish pace than during the
prior period. Growth was led by commercial real estate
loans, where volumes continued to rise at a moderate
pace. Volume growth abated for commercial and industrial loans as well as for residential real estate loans, and
consumer loan volumes declined slightly. Credit standards and terms tightened. Core deposit volumes grew
again and net interest margins continued to increase.
Outlooks in the financial sector remained optimistic.

Nonfinancial Services
Demand for nonfinancial services continued to expand
moderately over the past six weeks. There were some
reports of Hurricane Harvey disrupting business, with
those contacts noting the impact lasted one to two
weeks on average. About a third of firms expect a net
negative impact on revenues over the next six months
from the storm, while nearly half expect no change on
net and the balance anticipate an increase. Some staffing services contacts have seen a rise in demand for
accounting and data entry positions related to the hurricane damages, as well as for call center employees and
insurance adjusters. Staffing contacts generally think
business activity will return to normal (pre-hurricane) by
year’s end, and an oil and gas staffing firm noted that
“things are close to normal again” in Houston already.

Energy activity continued to expand, but at a slightly
slower clip in the third quarter. Drilling activity in the
Eagle Ford Shale and offshore has resumed normal
operations after the hurricane. Overall growth in oil and
gas production continued, but oilfield services firms
noted weaker demand growth. Drilling activity is expected to decline slightly by the end of 2017, and demand for oilfield services is softening outside of the
Permian Basin. However, six-month outlooks for 2018
were more optimistic relative to the last reporting period,
and uncertainty has moderated.

Strength in the nonfinancial services sector was led by
professional and technical services, with firms generally
noting stronger revenue gains over the past six weeks,
as well as transportation services. The healthcare industry remained rather weak, with contacts saying they were
continuing to struggle with lower demand and rising
costs. Leisure and hospitality also exhibited weakness
over the past six weeks, particularly along the Gulf Coast
and Mexican border.

Crop conditions remained favorable, although Hurricane
Harvey hampered agriculture in the Coastal Plains. The
extent of the impact is not yet known, but some livestock
were lost and a small portion of the Texas cotton crop
was damaged. Some rice and soybeans were also affected, but likely minimally. Overall, grain production was
strong, with particularly robust yields in Northeast Texas.
There is good moisture for planting winter wheat, but
while wheat prices are higher than a year ago they are
still generally below breakeven levels. Agricultural producers remain concerned about low crop prices, NAFTA
negotiations, and the configuration of the next farm bill. ■

Construction and Real Estate
Overall, home sales weakened during the reporting
period. However, contacts in Austin and Dallas–Fort
Worth (DFW) noted continued strength in sales of low- to
mid-priced homes. In Houston, storm damage to single-


Federal Reserve Bank of

San Francisco
The Beige Book ■ October 2017

Summary of Economic Activity
Economic activity in the Twelfth District continued to expand at a moderate pace during the reporting period of midAugust through September. Overall price inflation was flat and remained low, while upward wage pressures strengthened somewhat, and labor market conditions tightened further. Sales of retail goods picked up, and growth in consumer
and business services remained strong. Conditions in the manufacturing sector improved, while activity in the agriculture sector was flat. Contacts reported continued strong activity in residential real estate markets, and conditions in the
commercial real estate sector remained solid. Lending activity grew at a moderate pace.

Employment and Wages

Retail Trade and Services

Conditions in the labor market tightened further. Wage
gains increased in a few sectors. Increased competition
for warehouse employees in the retail industry boosted
wages. One contact at a major logistics and delivery
company noted rising demand for manual labor, with
these jobs increasingly being filled by workers wanting to
supplement their income with additional part-time hours.
Continued elevated demand for skilled IT professionals
in the technology, financial services, and health-care
industries supported strong wage growth. Shortages of
health-care workers in Eastern Washington worsened.
Labor shortages and increased unit labor costs in the
agriculture sector fueled investments in automated technology. In the retail grocery industry, the continued shift
of consumer preferences towards online purchases
further reduced labor demand.

Retail sales picked up over the reporting period. Continued improvement in economic conditions and favorable
weather nudged up sales of beverage products. Sales in
the retail grocery industry were unchanged from their
solid pace in the previous period. Contacts in the industry reported that online sales continued to more than
offset declines at traditional brick-and-mortar outlets.
One lender with a large national presence in the retail
sector noted that same store sales at small merchants
rebounded after slight declines following recent hurricanes. Growth in demand for legacy computing products
slowed slightly to a moderate pace. Contacts expect
these markets to experience a more modest growth
environment in the future.
Activity in consumer and business services generally
grew at a strong pace. Accelerating investments in cloud
computing and data analytics in the technology and
financial services industries boosted sales at large technology companies. Additionally, demand for cybersecurity services is expected to be a major source of growth
for the technology industry over the medium-term. Boosted by e-commerce sales, transport volumes expanded at
a robust pace. Contacts noted that improving economic
conditions fueled demand for high-end shipping services
in particular. Demand for entertainment services was
strong, and one contact reported that technological gains
and favorable tax conditions spurred investment. De-

Overall, price inflation was flat and remained low during
the reporting period. Stronger demand for manufactured
steel products boosted price growth relative to the same
period last year. In the restaurant industry, contacts
reported that rising input costs pushed up final sales
prices. Elevated inventory levels pushed down prices for
some agricultural commodities. Economies of scale
continued to put downward pressure on prices of cloud
computing and data storage services.


Federal Reserve Bank of San Francisco
mand in the hospitality industry slowed slightly from its
strong pace over the summer, and contacts expect hotel
stays to soften a bit more over the remainder of the year.
Restaurant sales declined in the late summer, due in
part to less foot traffic at large retail centers.

Real Estate and Construction
Real estate market activity continued to grow at a strong
pace. Residential construction activity remained robust
throughout the District. However, disruptions from recent
hurricanes exacerbated existing shortages of materials,
somewhat slowing activity. Contacts in the Pacific Northwest reported construction delays of up to two months
due to shortages of available land, labor, and materials.
Strong demand for housing and continued low inventory
levels pushed up prices further. Contacts in some metropolitan areas noted that the lack of affordable housing
slowed growth of existing home sales to a moderate
pace. On balance, commercial construction activity
continued to expand at a moderate pace. In Eastern
Washington, permits for commercial construction were
up over the same period last year. Contacts in Southern
California reported that construction of hotel and retail
spaces were at an all-time high. Contacts noted that
interest rate increases have not substantially slowed
demand for residential or commercial real estate.

On balance, conditions in the manufacturing sector
continued to improve. Production of semiconductors
reached a 10-year high, driven primarily by demand for
memory chips. Electricity usage by manufacturers in
Eastern Washington picked up further. Deliveries of
commercial aircraft dipped slightly, but new orders were
up notably over the same period last year. Contacts
expect strong overall demand for steel over the next few
months as construction efforts in other parts of the country ramp up following recent hurricanes. Demand for
manufactured steel products slowed from its moderate
pace in the first half of the year as orders from automobile manufacturers waned somewhat.

Agriculture and Resource-Related Industries

Financial Institutions

Activity in the agriculture sector was flat. Harvest yields
of grains and potatoes were down slightly due to a wet
spring, but overall quality was up. Demand for pork
products dipped slightly, and profitability in the industry
remained challenging. Reduced input prices boosted
profitability in the feedlot industry. Contacts noted that
foreign demand for some agricultural goods remained
solid, and they did not expect exchange rate movements
to slow exports. In the energy generation sector, capacity increases continued to outpace demand growth, a
trend that contacts expect to persist as more states
adopt renewable energy generation targets.

Lending activity continued to expand at a moderate pace
over the reporting period. Overall loan demand remained
moderate. One contact noted that demand from smalland medium-sized businesses slowed to a modest pace.
Deposit growth inched up slightly. One contact in the
Mountain West observed a slight uptick in deposit rates,
indicating an increased demand for liquidity from lenders. Overall credit quality remained strong. However, one
contact noted a decline in credit quality in the agriculture
industry, as continuing price declines hampered profitability.■