Reports from the twelve Federal Reserve Districts indicate that the economy continued to improve, on balance, during the reporting period from early/mid-October to mid-November. Economic activity in the Boston, Cleveland, Atlanta, Dallas and San Francisco Districts increased at a slight to modest pace, while a somewhat stronger pace of economic activity was seen in New York, Richmond, Chicago, Minneapolis and Kansas City. Philadelphia and St. Louis reported business conditions as mixed.
Manufacturing activity continued to expand in almost all Districts, with relatively strong growth seen in metal fabrication and the automotive industries. Reports also showed steady to increasing activity for professional and nonfinancial services. Two Districts noted a decline in demand from government agencies due to budgetary shortfalls. Reports on consumer spending tended to be positive. Nonetheless, several Districts noted that households remain price sensitive and focused on buying necessities. Expectations for the holiday shopping season were generally positive, with several Districts expecting higher sales when compared to year-ago levels. Sales of new cars and light trucks were largely higher than in our last report. Tourism improved in all reporting Districts.
Housing markets remain depressed, with several Districts reporting further weakening during the past six weeks. Conditions in commercial real estate were mixed, and activity stayed at low levels. Agricultural conditions were generally favorable, with several Districts reporting yields nearing historic highs. Agricultural sales to off-shore buyers increased. Overall activity in the energy sector continued to expand.
Lending activity remained stable across most Districts. Credit quality has been steady to improving for most of the Districts that commented on it. Prices for final goods and services were fairly stable, despite rising input costs, especially for agricultural commodities, metals and fuel. Hiring activity showed some improvement across most Districts. Wage pressures were contained.\
Manufacturing activity continued to expand in most Districts. New York was the only District where manufacturing activity was reported to have weakened, while Dallas reported that manufacturing was mixed. Metal fabrication increased in Chicago, Kansas City, Dallas and San Francisco. Contacts in automotive industries reported gains in Boston, Cleveland, Richmond, Atlanta and Chicago. The Boston, Kansas City and San Francisco Districts reported increased sales for high-technology manufacturers, though Dallas noted that growth in orders and production in high-technology industries had slowed from earlier in the year. Steel producers and service centers in the Cleveland District reported that volume was either flat or improving, while Chicago noted some temporary softening in steel demand. Refiners in the Dallas and San Francisco Districts noted reduced production levels. The Philadelphia and Dallas Districts indicated little improvement in demand for manufacturers with ties to residential housing and construction. The Philadelphia, Cleveland and Kansas City Districts reported that capital spending or spending plans had increased. On net, manufacturers in the St. Louis District reported they planned to expand operations. Contacts in Boston, New York and Richmond commented on increasing input costs. Several Districts noted an optimistic outlook from manufacturers. Boston and Richmond described manufacturers as upbeat; New York and Chicago reported contacts as more optimistic; and Philadelphia and Minneapolis manufacturers expect increases in activity in the near term. However, several contacts in Dallas expressed concern about a decline in demand from government agencies, as budget shortfalls continue.