EconomyxAI · Sector Watch February 2008Released March 5, 2008 |
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Conditions index −0.09 avg of 11 sectors, −2 to +2 |
| Outlook index −0.32 sectors with an outlook |
| Districts growing 2/12 per National Summary |
| Positive momentum 4/11 sectors improving |
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This release in brief The read | ■ | Released March 5, 2008, with information collected before February 25, 2008. | | ■ | Growth slowed since the start of the year; two-thirds of districts cited softening or weakening, and Minneapolis said its economy contracted slightly. | | ■ | Retail activity was weak or softening in most districts and auto sales sluggish; tourism kept expanding, helped by foreign visitors and the weaker dollar. | | ■ | Manufacturing was sluggish or slower in about half the districts, with steel, aircraft, energy equipment and exports strong but housing-related goods weak; housing stayed weak and commercial real estate slowed. | | ■ | Banks reported tight or tightening standards and stable or weaker loan demand; materials and energy costs pushed prices up while labor markets loosened and wage pressure stayed modest. |
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Sector prospects Where the 3–12 month view points Strongest prospects Consumer Staples
XLP
▶ Steady | +0.23 |
| Health Care
XLV
▶ Steady | +0.23 |
| Materials
XLB
▲ Improving | +0.21 |
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| Weakest prospects Real Estate
XLRE
▼ Weakening | −0.74 |
| Financials
XLF
▼ Turning down | −0.65 |
| Consumer Discretionary
XLY
▼ Weakening | −0.43 |
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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 | Consumer Staples
XLP | | +0.23 | Leaning Favorable | +0.21 | n/a | ▶ +0.21 | | 2 | Health Care
XLV | | +0.23 | Leaning Favorable | +0.53 | n/a | ▶ +0.01 | | 3 | Materials
XLB | | +0.21 | Leaning Favorable | +0.09 | n/a | ▲ +0.32 | | 4 | Information Technology
XLK | | +0.14 | Neutral | +0.44 | n/a | ▶ +0.00 | | 5 | Communication Services
XLC | | −0.01 | Neutral | +0.05 | n/a | ▶ +0.05 | | 6 | Utilities
XLU | | −0.03 | Neutral | +0.00 | n/a | ▶ +0.00 | | 7 | Energy
XLE | | −0.12 | Neutral | +0.25 | −0.20 | ▼ −0.87 | | 8 | Industrials
XLI | | −0.14 | Neutral | +0.05 | −0.09 | ▶ −0.07 | | 9 | Consumer Discretionary
XLY | | −0.43 | Leaning Unfavorable | −0.76 | −0.26 | ▼ −0.30 | | 10 | Financials
XLF | | −0.65 | Unfavorable | −0.83 | −0.50 | ▼ −0.33 | | 11 | Real Estate
XLRE | | −0.74 | Unfavorable | −1.04 | −0.56 | ▼ −0.40 |
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 | | −0.50 |
Growth slowed; two-thirds of districts cited softening or weakening, the rest subdued, slow or modest growth; Minneapolis contracted slightly. | Hiring pace slowed and labor markets loosened somewhat; layoffs, reduced hours and hiring freezes more prevalent in four districts; skilled shortages persist. | | Inflation Pressure (higher = headwind) | | −1.00 |
Upward pressure from rising materials and energy prices in almost all districts; New York prices paid most widespread in over a year. | Tight or tightening standards and stable or weaker loan demand; deteriorating credit quality in Kansas City, Chicago and Cleveland; refinancing up on lower rates. | All districts commenting on manufacturing outlook cited caution; firms cutting hiring and capital plans; Dallas preparing for a possible downturn. |
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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 | | Health CareXLV | · | · | · | +1 | +1 | +1 | · | −1 | +1 | · | +1 | +1 | | FinancialsXLF | −1 | −1 | −1 | · | −1 | −1 | · | −1 | · | −1 | −1 | −1 | | Consumer DiscretionaryXLY | · | −1 | −1 | −1 | −1 | −1 | −1 | −1 | · | · | · | −1 | | Communication ServicesXLC | · | · | · | · | +1 | · | · | · | · | · | · | · | | IndustrialsXLI | · | −1 | −1 | · | −1 | · | +1 | +1 | · | · | −1 | +1 | | Consumer StaplesXLP | · | · | · | +1 | · | · | · | · | · | −1 | · | +1 | | EnergyXLE | · | · | · | +1 | · | +1 | · | · | +1 | +1 | · | · | | UtilitiesXLU | · | · | · | · | · | · | · | · | · | · | · | · | | Real EstateXLRE | −1 | −1 | −1 | · | −2 | −1 | −1 | −1 | −2 | −1 | −1 | −1 | | MaterialsXLB | · | · | −1 | +1 | −1 | +1 | +1 | · | +1 | · | −1 | · |
| Contraction | −2 | −1 | 0 | +1 | +2 | Expansion |
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Top highlights What moved the scores Real Estate −2 Richmond, Minneapolis D.C. home sales down 41 percent; Twin Cities permits down 59 percent. Why it matters: Deepest Real Estate readings since scoring began. | Financials −1 broad−based Nine districts Tightening credit standards across the board; worsening loan quality. Why it matters: Financials near the bottom. | Consumer Discretionary −1 broad−based Eight districts Retail sales below plan or down from a year ago; autos sluggish. Why it matters: Discretionary negative. | Industrials −1 New York, Philadelphia, Richmond, Dallas Manufacturing activity weakened noticeably. Why it matters: Industrials negative in large districts. | Industrials +1 Chicago, St. Louis, San Francisco Heavy equipment robust; aircraft growth; new St. Louis facilities. Why it matters: Industrials offset. | Materials +1 Cleveland, Chicago, Atlanta, Minneapolis Steel industry operating very close to full capacity. Why it matters: Materials positive. |
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Twelve Fed districts District roundup Boston Flat Revenues mostly as in recent reports, but downside risks more prominent. |
| New York Contracting −1.0 Economy softened; manufacturers report substantial weakening. |
| Philadelphia Contracting −1.0 Outlook ▼ Business activity weakening slightly; outlook less positive. |
| Cleveland Flat Activity slowed somewhat; steel shipments rose. |
| Richmond Contracting −1.0 Economy lost some additional momentum. |
| Atlanta Flat Economic activity subdued. |
| Chicago Growing +1.0 Continued to expand at a slow pace. |
| St. Louis Flat Pace slowed; manufacturing increased. |
| Minneapolis Contracting −1.0 Economy appears to have contracted slightly. |
| Kansas City Flat Outlook ▶ Growth slowed to a very modest pace; energy solid. |
| Dallas Flat Outlook ▼ Continued to soften; preparing for a possible downturn. |
| San Francisco Growing +1.0 Grew modestly; manufacturing expanded slightly. |
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Where the signal is thin or split Divergences to watch | Full Reports Resume — From this release the PDFs include all twelve district reports, so scores are more district-specific than the 2003-January 2008 summary-based workbooks.
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| | Real Estate — Two -2 readings (Richmond, Minneapolis) as year-over-year home sales fall 20-41 percent.
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| | Financials — Tightening now spreads to business and consumer credit.
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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 |