According to the Federal Reserve Board (FRB) Summary of Commentary on Current Economic Conditions (“Beige Book”*) released today, economic activity in the Chicago-based 7th District continued to expand at a slow pace through October and early November 2012; the full report is available on the FRB website.
Chicago District Beige Book Highlights (October/November):
- Growth in consumer spending increased slightly, and, overall, retail sales were higher than expected. However, some retailers noted a slower sales pace toward the beginning of November, and lowered their expectations for the first half of next year. For more information click here.
- Business spending slowed as contacts reported uncertainly about the near-term economic outlook, causing them to avoid capital expenditures. Hurricane Sandy did not affect transportation of retail goods, and inventories remained within typical seasonal ranges. The labor market improved slightly, buoyed largely by business services employment; many contacts continued to report difficulty in finding skilled workers, while some established internal training programs to address this. For more information click here.
- Construction activity grew at a steady pace, especially for multi-family housing. Contacts noted that many of their non-residential customers were forgoing capital spending projects until clear resolutions were presented for the European debt crisis, and the potential “fiscal cliff,” which could bring steep federal spending cuts and revenue increases. For more information, click here.
- Manufacturing production slowed and expectations were subdued for the coming year due to an uncertain federal fiscal situation and weakened global demand. Despite decreases in many manufacturing sectors, there was strength in the power generation, heavy equipment, and auto industries. Also, improved housing demand benefited manufacturers of construction materials. For more information, click here.
- Credit conditions eased, in part due to slower growth in debt restructuring deals and lower utilization of credit lines. Contacts attributed much of this decreased use of credit to the uncertainty about tax rates on capital spending. For more information, click here.
- Cost pressures were steady, though contacts noted recent increases in steel and scrap prices, possibly the result of Hurricane Sandy. The construction industry also saw increases in the price of raw materials, while retail food prices were mixed, reflecting higher costs for meat, but lower costs for produce, dairy, and other grocery items. For more information, click here.
- Agriculture – corn and soybean harvests progressed faster than last year; despite the summer’s drought, recent rains and irrigation contributed to higher yields than expected. Consequently, corn and soybean prices – and the resulting livestock feeding costs – fell from earlier this year, but remain higher than last year. Milk, hog, and cattle prices increased from the prior reporting period, and farmland values continued to rise, despite the drought. For more information, click here.
*The Beige Book summarizes comments received from business and other contacts outside the Federal Reserve and is not a commentary on the views of Federal Reserve officials. Source: prepared by the Federal Reserve Bank of Chicago based on information collected on or before November 14, 2012.