EconomyxAI · Sector Watch February 2002Released March 6, 2002 |
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Conditions index −0.04 avg of 11 sectors, −2 to +2 |
| Outlook index +0.04 sectors with an outlook |
| Districts growing 4/12 per National Summary |
| Positive momentum 7/11 sectors improving |
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This release in brief The read | ■ | Released March 6, 2002, cover dated February 2002, with information collected before February 26. | | ■ | A majority of districts report some signs of improvement; Boston, Philadelphia, Richmond, Atlanta, Minneapolis and San Francisco note a pickup, while Dallas reports continued weak activity. | | ■ | Manufacturing is generally weak but improving in some industries, with Philadelphia and Richmond reporting moderate to solid gains in shipments and orders. | | ■ | Retail sales improved modestly from late 2001; residential real estate stayed strong while commercial markets were almost universally weak. | | ■ | Labor markets remain slack but temp firms say the worst is over; wages and prices are subdued apart from health insurance. |
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Sector prospects Where the 3–12 month view points Strongest prospects Information Technology
XLK
▲ Improving | +0.58 |
| Communication Services
XLC
▲ Improving | +0.42 |
| Consumer Discretionary
XLY
▲ Improving | +0.39 |
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| Weakest prospects Energy
XLE
▲ Turning up | −0.47 |
| Financials
XLF
▶ Steady | −0.22 |
| Real Estate
XLRE
▶ Steady | −0.14 |
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All 11 GICS sectors, ranked Sector scoreboard | # | Sector | −1 0 +1 | Score | Signal | Now | Outlook | Mom. |
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| 1 | Information Technology
XLK | | +0.58 | Favorable | +0.64 | +0.21 | ▲ +1.06 | | 2 | Communication Services
XLC | | +0.42 | Leaning Favorable | +0.40 | +0.50 | ▲ +0.64 | | 3 | Consumer Discretionary
XLY | | +0.39 | Leaning Favorable | +0.17 | +0.50 | ▲ +0.83 | | 4 | Industrials
XLI | | +0.16 | Leaning Favorable | −0.29 | +0.47 | ▲ +0.57 | | 5 | Materials
XLB | | +0.15 | Neutral | −0.03 | −0.33 | ▲ +0.49 | | 6 | Health Care
XLV | | +0.02 | Neutral | +0.08 | n/a | ▶ −0.06 | | 7 | Utilities
XLU | | −0.01 | Neutral | +0.00 | n/a | ▶ +0.00 | | 8 | Consumer Staples
XLP | | −0.03 | Neutral | +0.00 | n/a | ▶ −0.07 | | 9 | Real Estate
XLRE | | −0.14 | Neutral | −0.38 | +0.09 | ▶ +0.12 | | 10 | Financials
XLF | | −0.22 | Leaning Unfavorable | −0.35 | −0.08 | ▶ −0.02 | | 11 | Energy
XLE | | −0.47 | Leaning Unfavorable | −0.71 | −1.00 | ▲ +0.56 |
Prospect Score blends current conditions, district outlooks, momentum, a sector-specific macro tilt and margins. Now = weighted current conditions; Outlook = n/a when too few districts gave one; Mom. = change vs the average of the two prior releases. |
National Summary, scored −2 to +2 Macro backdrop | Overall Economic Activity | | +0.00 |
A majority of districts report signs of improvement, though Kansas City, St. Louis and Dallas remain weak and Cleveland and New York are flat to mixed. | Labor markets slack with frozen wages and skipped raises, but temp firms suggest employment is bottoming and layoffs have subsided. | | Inflation Pressure (higher = headwind) | | −0.25 |
Wage and price pressures 'subdued' to 'largely nonexistent'; some upward pressure on services prices (Dallas) and steel spot prices (Cleveland), while chemicals and paper fell. | Loan demand mixed: falling in New York, Kansas City, Dallas and San Francisco but picking up in St. Louis and Chicago; standards stricter in three districts. | Manufacturers in several districts expect higher shipments; retailers expect flat to slightly higher sales in the first half and modest growth in the second. |
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Current conditions in each Fed district District by sector | BOS | NY | PHL | CLE | RIC | ATL | CHI | STL | MIN | KC | DAL | SF |
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| Information TechnologyXLK | +1 | · | · | · | +1 | · | +1 | · | · | · | · | +1 | | Health CareXLV | +1 | · | · | · | · | · | · | · | · | · | · | · | | FinancialsXLF | · | −1 | · | · | · | · | +1 | +1 | · | −1 | · | −1 | | Consumer DiscretionaryXLY | +1 | · | +1 | · | +1 | +1 | −1 | · | · | · | · | · | | Communication ServicesXLC | · | · | · | · | · | · | · | · | · | · | · | +1 | | IndustrialsXLI | · | · | +1 | · | +1 | · | · | −1 | · | −1 | −1 | −1 | | Consumer StaplesXLP | · | · | · | · | · | · | · | · | · | · | · | · | | EnergyXLE | · | · | · | · | · | · | · | · | −1 | · | −1 | −1 | | UtilitiesXLU | · | · | · | · | · | · | · | · | · | · | · | · | | Real EstateXLRE | · | · | · | +1 | · | · | · | · | · | −1 | −1 | −1 | | MaterialsXLB | · | · | · | · | +1 | · | +1 | −1 | · | · | −1 | · |
| Contraction | −2 | −1 | 0 | +1 | +2 | Expansion |
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Top highlights What moved the scores Information Technology +1 San Francisco Demand for high-tech manufactured goods strengthened further, with improvements in sales and orders. Why it matters: San Francisco carries the largest IT weight, so this +1 drives IT to the top of the ranking. | Information Technology +1 Boston A majority of technology respondents are beginning to see improving demand for software. Why it matters: Boston is a large IT district; together with San Francisco it turns the sector positive. | Industrials +1 Philadelphia, Richmond Manufacturers reported moderate gains; Richmond shipments grew more rapidly and new orders increased substantially. Why it matters: The first positive Industrials readings in months, partly offsetting weakness in the west. | Industrials −1 San Francisco, Dallas, Kansas City, St. Louis Aerospace weakness spreading to aircraft and parts employment; Kansas City factory activity declined again. Why it matters: Heavy-weight districts negative keep Industrials below zero. | Consumer Discretionary +1 Boston, Philadelphia, Richmond, Atlanta Retail sales improved in early 2002, above year-earlier levels in several districts. Why it matters: Four positive readings lift Discretionary into positive territory for the first time since 2000. | Financials −1 New York, San Francisco Loan demand receded, standards tightened further, and stricter terms priced some businesses out. Why it matters: New York's heavy Financials weight keeps the sector near neutral despite St. Louis and Chicago gains. |
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Twelve Fed districts District roundup Boston Growing +1.0 Outlook ▲ Business conditions are improving. |
| New York Flat Outlook ▲ Conditions mixed; hiring weak but housing strong. |
| Philadelphia Growing +1.0 Outlook ▲ Some signs of improvement in February. |
| Cleveland Flat Outlook ▲ Much the same as late 2001; modest improvement emerging. |
| Richmond Growing +1.0 Outlook ▲ Activity advanced at a moderate pace. |
| Atlanta Growing +1.0 Outlook ▲ Improved conditions in many sectors; cautious optimism. |
| Chicago Flat Outlook ▲ Mixed but overall tone more positive. |
| St. Louis Contracting −1.0 Outlook ▶ Activity continues to be weak despite some bright spots. |
| Minneapolis Flat Outlook ▲ Overall activity appears to have edged up. |
| Kansas City Contracting −1.0 Outlook ▲ Very sluggish but some small signs of improvement. |
| Dallas Contracting −1.0 Outlook ▼ Activity remained weak. |
| San Francisco Flat Pickup in economic activity in January and early February. |
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Where the signal is thin or split Divergences to watch | Information Technology — San Francisco and Boston, two heavy IT districts, both +1, so the weighted IT score is well above the simple average.
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| | Real Estate — Residential strength and commercial weakness offset in most districts; the large western districts (Dallas, San Francisco) negative, pulling the weighted score below zero.
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| | Communication Services & Utilities — Thin coverage; only San Francisco's communications services pickup scored.
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| | District validation: Boston rated +1 overall on improving retail and software while most sectors were flat.
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How to read this. Each Fed district’s report is scored −2 (strong contraction) to +2 (strong expansion) for each GICS sector, then weighted by the district’s share of that sector’s activity. The Prospect Score blends current conditions (25%), district outlooks (35%), momentum (20%), a sector-specific macro tilt (10%) and margin pressure (10%). The Beige Book describes regional activity, not earnings or valuations. Weights and sensitivities are illustrative. This newsletter is for information only and is not investment advice. Source: Federal Reserve Beige Book · Scored by EconomyxAI |