The Midwestern economic indicators tracked by the Federal Reserve District in Chicago improved in January and early February, according to the Fed’s Beige Book.
Overall economic activity for the Seventh District, which includes Wisconsin, Illinois, Iowa, Indiana and Michigan, continued to expand at a moderate pace.
Among the indicators:
• Business spending: Business spending increased in January and early February and inventories were indicated to be at comfortable levels. Labor market conditions improved, although hiring remained selective.
• Construction and real estate: Construction activity was up slightly in January and early February as multi-family construction remained an area of strength and nonresidential construction continued to trend up moderately. Commercial real estate conditions improved with vacancy rates edging lower.
• Manufacturing: Production increased further in January and early February. Demand for heavy equipment remained strong and the auto industry also continued to be a source of strength. Manufacturers of specialty metals reported solid order books.
• Banking and finance: Credit conditions were slightly improved from the previous reporting period. Financial market volatility declined and risk premia moved lower across a number of asset classes. Banking contacts indicated that loan growth continued at a moderate pace with demand from larger businesses being stronger than that from small to mid-sized companies.
• Prices and costs: Cost pressures were largely unchanged in January and early February, but the volatility of commodity prices remained a concern for many contacts. Wage pressures continued to be moderate.
• Agriculture: Corn, soybean, wheat, hog, and cattle prices rose during January and early February. Input costs for agriculture continued to increase, led by sharply higher rental rates for cropland.
• Consumer spending: Growth in consumer spending slowed in January and early February. Contacts indicated that activity was boosted by clearance sales and also some isolated improvement in the luxury segment. Auto sales were up in January, but down slightly in early February.
The Midwest Economy Index (MEI) increased to +0.09 in December from –0.13 in November, rising above its historical trend for the first time in five months. Midwest growth also outperformed its historical deviation with respect to national growth, as the relative MEI increased to +0.31 in December from –0.06 in November.
The Chicago Fed Midwest Manufacturing Index (CFMMI) increased 1.7 percent in December, to a seasonally adjusted level of 87.4 (2007 = 100). December’s growth was broad-based; all four major industry sectors of the index indicated growth in production activity.
