The electrical industry’s primary markets, including manufacturing and residential and commercial construction, fell more in the “modest” growth end of a broadly “modest to moderate” range of economic expansion in recent months, according to the Federal Reserve district banks’ periodic anecdotal summary of business conditions in the United States.
The “Beige Book” report released Wed., Oct, 16, reflected cautious optimism among business contacts at the 12 Fed banks. Many of those contacts, however, noted increased uncertainty “due largely to the federal government shutdown and debt ceiling debate,” a situation that has left the Fed’s Beige Book as one of the few sources of new insight on the economy as most government sources of economic data have fallen silent after federal employees went on unpaid furlough during the shutdown.
The report found business spending grew modestly in most of the Fed’s districts and inventory investment continued at a moderate pace. In key electrical markets, Philadelphia reported an increase in demand for equipment among manufacturers and manufacturers in Cleveland and Chicago said current capital investments were going for productivity enhancements.
Regulatory uncertainty and low prices for natural gas were slowing build-out in shale gas processing and transport infrastructure in the Cleveland district, while natural resource infrastructure projects were highlights for Richmond, Minneapolis and Kansas City.
Manufacturing
Overall, manufacturing activity expanded modestly in September but with some notable exceptions among the districts. Cleveland, St. Louis and Minneapolis experienced faster growth, while New York, Richmond and Chicago saw growth weaken. The automotive and aerospace industries continued to be a source of strength in a number of districts. Demand for fabricated metals was mixed in the Chicago and Richmond districts, but stronger in the Dallas district. Cleveland, Chicago, St. Louis and San Francisco reported steady increases in the demand for steel, while in Cleveland, Chicago and Atlanta sources indicated that much of the higher demand was being met by imports. Demand for construction materials remained strong for Philadelphia, increased for Cleveland and San Francisco, was flat for Dallas, and was slightly lower for the Chicago district. Cleveland and Dallas reported strong demand for manufactured inputs to energy production, and demand for heavy equipment improved slightly in the Richmond and Chicago districts.
Construction and Real Estate
Construction and real estate continued to improve in September. Residential construction increased moderately on balance, growing at a stronger pace in the Minneapolis and Dallas districts but only slightly in Richmond and Philadelphia. Multi-family construction remained stronger than single-family construction in a number of districts.
Nonresidential construction activity remained modest, but varied by market and district. Growth was strong in the Minneapolis district, but up only slightly in Richmond, Atlanta, and Philadelphia. The Cleveland, Chicago, and St. Louis districts reported increased activity for industrial building, Cleveland noted strong demand from the healthcare sector, and redevelopment of vacant retail space picked up in Boston. Leasing activity continued to improve modestly in most districts, but was particularly strong in the Dallas district. A number of districts reported that vacancy rates continued to fall, rents rose, and the outlook for commercial real estate was generally positive.
Business spending
Business spending grew modestly in most districts and inventory investment was moderate. Philadelphia reported an increase in manufacturers’ demand for equipment, while manufacturers in Cleveland and Chicago indicated that current capital outlays were primarily for productivity enhancing investments. Cleveland noted that low natural gas prices and regulatory uncertainty were slowing the build-out of shale-gas transport and processing infrastructure. In contrast, additional infrastructure projects to support natural resource extraction were mentioned in the Richmond, Minneapolis and Kansas City. Several Districts noted an improvement in capital spending plans. Manufacturers in Philadelphia and St. Louis, high-tech service firms in Kansas City and retailers in the Cleveland and St. Louis districts expected to increase capital spending in the months ahead.