Summary of Commentary on Current Economic Conditions by Federal Reserve District
Reports from most of the twelve Federal Reserve Districts indicated that economic conditions continued to expand from January to early February. Eight Districts reported improved levels of activity, but in most cases the increases were characterized as modest to moderate. New York and Philadelphia experienced a slight decline in activity, which was mostly attributed to the unusually severe weather experienced in those regions. Growth slowed in Chicago, and Kansas City reported that conditions remained stable during the reporting period. The outlook among most Districts remained optimistic.
Residential real estate markets continued to improve in several areas, albeit modestly. Boston and New York gave mixed reports on sales, and Philadelphia, Cleveland, Minneapolis, and Kansas City noted a decrease in sales. Many Districts cited low inventories of housing and continued home price appreciation. Commercial real estate leasing expanded, according to most reports, while reports on construction activity were mixed. Demand for commercial real estate loans was solid in Boston, improved slightly in Dallas, and continued to grow steadily in Chicago and Kansas City.
Real Estate and Construction
Reports on residential housing markets were somewhat mixed. Many Districts continued to report improving conditions but noted that growth had slowed. Most of the Districts indicating otherwise attributed the slowing pace of improvement to unusually severe winter weather conditions. Home sales increased in Richmond, Atlanta, Chicago, St. Louis, and Dallas, while sales were down in Philadelphia, Cleveland, Minneapolis, and Kansas City. Boston and New York reported that the trend in sales for their Districts was mixed. New home construction increased in Richmond, Atlanta, Chicago, St. Louis, and Minneapolis, and remained flat in Kansas City, and was down slightly from the previous period in Philadelphia. Most Districts reported low levels of home inventories and indicated that home prices continued to appreciate. The outlook for sales and residential construction was positive in Boston, Philadelphia, Cleveland, Atlanta, and San Francisco.
Strong multifamily construction was cited in New York, Cleveland, Richmond, Atlanta, and Dallas, while Boston indicated that its pipeline of multifamily construction was declining. Dallas experienced rent growth above its historical average, while New York reported mixed trends in rent growth. Cleveland noted that it expects healthy growth in rents this year.
Many Districts, including New York, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, and San Francisco, indicated that commercial real estate activity had increased and that conditions continued to improve since the previous report. Philadelphia noted that there was very little activity to report in construction or leasing due to severe winter weather. The outlook for nonresidential construction was fairly optimistic in Boston, Philadelphia, Cleveland, Atlanta, Minneapolis, Kansas City, Dallas, and San Francisco.
The Eleventh District Economy grew at a moderate pace over the past six weeks. Manufacturing activity increased overall, although there were a few reports of slowing demand. Retail and automobile sales were slightly weaker but contacts’ outlooks were positive. Demand improved in most nonfinancial services industries with the exception of transportation services, which was negatively impacted by severe national weather. Sales of new single-family homes remained on an upward trend, and office and industrial real estate leasing activity remained strong. Loan demand held relatively steady. Energy activity remained solid, while agricultural conditions worsened. Price increases were noted in several industries, although most were modest. Outlooks were optimistic across most industries.
Construction and Real Estate
Single-family home sales remained on an upward trend over the past six weeks, although one contact noted a slight slowdown in the pace of new home sales in recent weeks. Inventories of new and existing homes remained at extremely low levels. One respondent noted the low inventory of developed lots could hamper single-family building activity later in the year. Apartment demand remained solid and construction activity continued at high levels. Rental rate growth was above the historical average in most major metros. One contact was concerned about possible overbuilding in urban areas.
Office and industrial leasing activity was strong. Sales activity remained at high levels and contacts expect it to increase this year, noting a more friendly lending environment. Outlooks were positive and commercial development is expected to continue to rise this year.