This is the last day of the Beige Book reports. During the past four days, the retail, manufacturing, transportation, energy, and construction sectors have been covered. Today, the banking sector report of the Cleveland Federal Reserve Bank folows.
In general, bankers reported that commercial loan demand was stable or showed modest growth since our last survey. A few bankers commented that although loan originations are up, outstanding balances have declined. We also heard reports from some large banks that lending to small businesses is increasing. On the consumer side, conventional loan demand remains soft, although several of our contacts told us that they are beginning to see early signs of growth. Direct and indirect auto lending continues to show strength, while some weakening was observed in the use of home equity lines of credit. Interest rates for business and consumer credit were stable. Many of our contacts said that demand for residential mortgage refinancing has slowed due to the rise in interest rates. New-purchase mortgage originations remain weak. Core deposits continue to grow, with most of the growth occurring in non-maturing products. Credit quality was characterized as either stable or showing a slight improvement, especially for business applicants. Delinquency rates are stable or trending down. Staffing levels have shown little change during the past few weeks; however, several bankers reported that they are considering hiring during 2011.
During the past three days, four sectors–retail, manufacturing, transportation, and energy–of the Federal Reserve Beige Book Report have been posted. The Beige Book report covers economic conditions of each banking district. In this post, the construction industry is covered as it was reported by the Cleveland Federal Reserve Bank.
New home construction was generally flat at a low level during the past six weeks and on a year-over-year basis, with most sales occurring in the move-up buyer categories. Contractors expect construction to remain sluggish through the winter months. List prices of new homes and discounting have shown little change, while some upward pressure on the cost of building materials was reported. Land purchases and construction of spec homes are constrained by the availability of credit. Subcontractor pricing remains very competitive. General contractors continue to work with lean crews, and no hiring is expected in the near term.
Discussions with nonresidential builders drew mixed responses, with a small majority of our contacts reporting stronger activity than a year ago. There is growing concern over the continuing slowdown in inquiries and tightening margins. However, most builders said they had a sufficient backlog to keep them busy in the upcoming months. New projects generally fall into the health-care category, with some industrial and infrastructure work. Our contacts are uncertain about business conditions through 2011. A few builders mentioned that their customers have the ability to fund projects, but they are hesitant to commit. Builders expect construction material suppliers to begin raising prices early in 2011, but they are uncertain as to the amount or whether the increases will stick. General contractors reported no change in employment levels and wages. Subcontractors continue to cope with very difficult industry conditions.
The Federal Reserve published its recent Beige Book Report covering economic conditions of each banking district. Yesterday, the retail sector report of the Cleveland Federal Reserve was posted. Today, the following post covers economic conditions of Ohio manufacturing.
Reports from District factories indicate that demand was stable or rising during the past six weeks. Compared to year-ago levels, production was higher, with many contacts experiencing low double-digit increases. Several manufacturers noted that while their production levels declined recently–following seasonal trends–orders were above expectations. In general, manufacturers are fairly optimistic and expect at least modest growth during 2011. A few noted that lead times for the delivery of raw materials were getting longer, which they attributed to rising demand across industry sectors. Steel producers and service centers all reported that shipping volume had increased since our last survey, with shipments being driven by energy-related, transportation, and heavy equipment industries. Steel executives we spoke with have heightened expectations for business growth during 2011. District auto production showed a slight decline during November on a month-over-month basis. Compared to a year ago, domestic auto makers showed a substantial rise in production, while foreign nameplates posted a modest decline.
Capacity utilization continues to trend higher, approaching what many of our respondents consider to be more normal rates. Inventories are close to targeted levels. Capital spending plans are conservative, with only a few of our contacts expecting to increase capital budgets for 2011. Outlays are aimed primarily at maintenance, equipment upgrades, and increasing production efficiencies. Prices for agricultural and metal commodities, steel, and scrap remain elevated, while the prices of most other raw materials have been stable. Several producers announced selective product price increases to reflect a rise in the cost of steel and agricultural commodities. Most contacts told us that they have expanded their permanent, full-time payrolls slightly since our last survey, and they will continue hiring at the same pace during 2011. Permanent new hires were largely salaried. To meet rising demand, employers are extending production hours or bringing in temporary hourly workers. Wage pressures are contained. Companies are continuing to restore merit increases and payments to 401K plans.
The Federal Reserve published its recent Beige Book Report covering economic conditions of each banking district. Each day this week, one sector of the Cleveland Federal Reserve report will be posted. Today, the following covers economic activity of Ohio’s retail sector.
Reports from retailers on the holiday shopping season were generally positive. General merchandise stores had the strongest results, while activity at small specialty outlets was mixed. Almost all of our contacts said that sales increased in the low to mid-single digits when compared to year-ago levels. Some retailers noted that consumers are becoming more confident, and it is beginning to show in their buying patterns. Nonetheless, we still heard mixed reports on purchases of discretionary items. Looking forward to the first quarter of 2011, retailers generally expect transactions to rise in the low to mid-single digits on a year-over-year basis, and they believe that rising sales will include more discretionary items. Vendor pricing was generally stable. Most retailers plan a modest increase in capital spending during 2011 for remodeling, expansion, and e-business. Hiring was limited to temporary holiday workers and no pickup is expected in the new year.
Auto dealers reported new vehicle sales during November were steady to up slightly on a month-over-month basis. When compared to year-ago levels, sales were generally higher. A few of our contacts also noted an increase in leasing activity. Looking forward, dealers expect sales to follow seasonal trends through the winter months. However, they anticipate that sales will be slightly higher than the prior year’s level. New car inventories are in line with demand. Reports on used vehicle purchases were mixed. Little change was seen in credit availability. Buyers with high credit scores can readily obtain financing. Dealers’ spending on showroom upgrades to comply with factory mandates remains modest. More aggressive capital outlays are dependent on sustainable demand.