Fed: U.S. economy OK, Chicago...not so much
The Federal Reserve released one of their key economic reports on Wednesday, and it was relatively upbeat -- but not so much for Chicago.
The report, known as the Beige Book, is a collection of anecdotal information on current economic conditions collected by each Federal Reserve Bank district.
The report says that economic activity in the country generally expanded, but noted a slowing pace of growth in New York, Philadelphia, Atlanta and Chicago.
The Chicago Federal Reserve Bank serves the Seventh Federal District, which incorporates Illinois, Indiana, Iowa, Michigan and Wisconsin.
Here are the economic snapshots for the Chicago district economy:
- Consumer Spending:
Spending increased at a slower rate. The report attributes higher food and gas prices to fewer shopping trips. Auto sales were actually up in the Chicago region as people switched from gas-guzzlers to smaller, passenger vehicles.
- Business Spending:
Businesses spent at a steady pace, with auto businesses hedging bets on part inventories, due to potential shortages caused by disruptions in the wake of the earthquake and tsunami in Japan earlier this year.
- Construction and Real Estate:
Construction of single-family homes remained low, depressed by the glut of distressed properties in the market. A positive note is that existing-home sales actually picked up.
Manufacturing slowed from the previous reporting period. Steel producers reported a slower quarter, but hinted that next quarter will be more positive. Manufacturers of construction materials and household goods also reported a decline in activity.
- Banking and Finance:
Credit conditions improved for Chicago, but mostly for hedge funds and other investors looking to buy debt. According to the report, banks have begun small business lending, but community banks, which typically service these loans are still impaired. Business loan demand is up, but much of the demand is the refinancing of existing debt.
- Price and Costs:
One of the most interesting parts of the report is the cost of food and other products. The report said food and energy prices ended mostly lower. According to the report, “Retailers reported that they were unable to pass along much of the recent increase in wholesale prices; and in many cases, were trying to compensate for the impact of higher food and energy prices on consumer budgets by increasing promotions and discounts.” In short, your local grocery store was/is taking a hit by steeply discounting food, to keep up the flow of customers who may be hurt by higher gas prices.
The planting of corn and soybean, staples of Midwest agriculture, slowed last spring thanks to excessive rain and cool temperatures this year.
The report also says that the U.S. labor market improved gradually across the country, with only modest wage growth.