U.S. Federal Reserve Beige Guide: Chicago District

SEVENTH DISTRICT--CHICAGO
Summary
Financial exercise while in the Seventh District continued to increase at a moderate pace in late February and March. Progress in buyer spending selected up, and business investing continued to raise. The speed of expansion in production production was small changed and design exercise elevated. Credit rating ailments enhanced a little bit. Electrical power rates higher, but with minimal pass-through to downstream rates, and wage boosts remained average. Soybean and cattle charges rose, when corn, wheat, milk, and hog prices lowered.
Client paying
Shopper shelling out elevated appreciably in late February and March. Shops reported unseasonably heat temperatures boosted retail revenue. Since in the earlier-than-normal begin to the spring shopping time, inventories of some garden & garden, home improvement, and leisure items ended the reporting period on the lean side. Several contacts thought that the recent gains in buyer paying might dissipate over the medium-term, pointing into the temporary nature on the boost from warmer weather and concerns about the impact of higher gasoline costs on client budgets. Auto revenue greater, with contacts noting improved availability of financing for prospective buyers with below- prime credit ratings. Dealerships continued to report some difficulty in stocking popular models due to the fact of supply-chain constraints.
Home business spending
Home business investing ongoing to improve in late February and March. Contacts documented that inventories were generally at comfortable levels, with the exceptions in auto and shopper goods noted above. Capital spending higher steadily. Purchases of heavy equipment picked up, led by robust exercise while in the strength sector. An exception was the coal mining industry which a contact noted was being negatively impacted by mild weather and the cheaper extraction costs for natural gas. Several manufacturers documented paying for technological upgrades as well as moving ahead with planned will increase in capacity. Contacts also noted a pick-up in building renovation and higher shelling out on marketing and for labor force training. Labor market disorders continued to improve. Hiring higher, although it remained selective in many industries. Manufacturing contacts continued to report difficulty in attracting job applicants with ideal skill sets, and in some cases have reduced experience requirements or higher salaries to fill open positions. A staffing firm noted an boost in demand for light industrial, office and clerical, and IT and engineering positions. However, gains in these areas were being offset by declines in others, so that on net temporary employment was little altered.
Construction/real estate
Construction exercise increased in late February and March. Demand continued to be strong for multi-family construction, particularly apartments. That said, a few contacts questioned whether current apartment building plans would lead to overbuilding in this segment. Overall, residential real estate circumstances enhanced marginally. Single-family design was up some from its depressed levels, as large homebuilders have seen a solid raise in sales within the last three months. Realtors noted some improve in exercise during the market for existing homes, although many buyers are still waiting for rates to come down further. Foreclosures continued to put downward pressure on fees. Nonresidential building also enhanced. Contacts noted a pick-up in industrial, healthcare and infrastructure building exercise. Commercial real estate circumstances were mixed by segment. Vacancy rates diminished for office and industrial properties, but contacts indicated that excess retail space continues to exist, especially big box stores and strip center/mall space. Commercial rents were flat, as was the available sublease space on the market.
Production
After a strong begin to the year, growth in making creation leveled off in late February and March. With an grow in quoting exercise and deepening order books, contacts remained cautiously optimistic that development would pick up again inside the coming quarters. The auto industry ongoing to be a source of strength. Automakers expected product sales to continue to increase over the year, but voiced concern that it would be challenging for production to rise much further above what is already planned given the capacity constraints faced by their suppliers. Confirming this production limit, several auto suppliers reported that they have already been asked by their customers to enhance capacity. Capacity utilization from the steel industry was steady, but an industry contact expected to see some acceleration in production within the near term. Demand for heavy equipment was boosted by the need to replace ageing equipment. Exporters continued to benefit from advantageous terms of trade; and despite some softening in demand from Western Europe, again reported robust orders from Asia and Latin America.
Banking/finance
Credit rating circumstances were somewhat enhanced from the prior reporting period. Volatility and risk premia edged lower and concerns about European sovereign debt ongoing to subside. Several contacts noted an enhance in risk appetite, pointing to higher demand for equities and real estate. Banking contacts indicated that enterprise loan development remained average, with their larger corporate clients continuing to cite policy uncertainty as a reason for caution in borrowing. In contrast, buyer loan progress selected up, with credit card usage increasing. Credit history availability for households enhanced, particularly for auto loans and credit history cards, where greater competition was leading to more favorable terms for borrowers. However, credit score problems remained tight for homebuilders and small businesses.Stone Crusher
Prices/costs
Cost pressures enhanced in late February and March. Contacts noted higher vitality charges, particularly for gasoline, although natural gas selling prices remained at historic lows. Charges for chemicals, steel, and non-ferrous metals also edged up. Wholesale selling prices elevated; however, retail contacts indicated that it had become increasingly difficult to pass on higher wholesale costs to consumers. Wage pressures elevated, but continued to be moderate. Contacts expected that wage and benefit improves this year would not exceed inflation. However, a shortage of skilled production workers contributed to upward pressure on wages to attract qualified candidates as well as improved benefit packages to retain current employees.Stone Crusher Plants
Agriculture
Unseasonably heat weather has jumpstarted field work and corn planting inside the District. There were reports of tight supplies of some agricultural chemicals, as well as some types of corn seed. Most with the District has sufficient moisture for a strong begin to the corn crop. With spring planting taking place up to a month early, some corn will be harvested in August; combined with the potential of a record corn crop, concerns about corn stocks being low before the traditional harvest time diminished and corn selling prices moved lower. Soybean costs have risen in response to lower-than-expected harvests in South America. The boost in soybean costs relative to corn fees, as well as some acreage being removed from environmental protection restrictions, resulted in an raise inside the number of acres that famers expect to plant in soybeans. Milk and hog prices lessened, although cattle prices continued to rise.